NOTE 4- SUPLIMENTAL DISCLOSURES TO FINANCIAL STATEMENTS The following information sets forth additional information which we feel is important to understanding and interpreting the financial statements, namely: 1. On May 24, 2010, Capital Financial, LLC (CF) was formed as a wholly owned subsidiary of Capital Financial Global, Inc. 2. On May 24, 2010, the Company, through its wholly owned subsidiary Capital Financial, LLC, entered into a certain “Asset Purchase and Sale Agreement” by which Capital Financial, LLC acquired the assets of Capital Financial Services, Inc., a Utah corporation. The price paid by the Company consisted of (a) 5,000,000 restricted shares of its common stock, which were issued to Capital Financial Services, Inc. on 8/12/2010, and (b) 100 shares of series A preferred stock, which were created on May 24, 2010 and issued to shareholders of Capital Financial Services, Inc. As offsetting booking entries, $8,000 was recorded as “Office equipment” and $92,000 was recorded as “Goodwill.” 3. The Company’s series A preferred shares have a par value of $0.001 and are convertible to an amount that is equal to 105% of the outstanding common stock at the time of conversion. Conversion is allowed only after the Company achieves certain milestones, which are, (1) twenty- four months shall pass from the date of issue, which is May 24, 2010; or (2) the operating subsidiary Capital Financial, LLC shall produce at least $5,000,000 in gross revenue annually; or (3) the operating subsidiary Capital Financial, LLC shall increase its assets by at least $5,000,000. All of these milestones have been met and the shares are eligible for conversion. 4. On June 29, 2010: Adrian Harvey resigned as a director and President; Chad Bawden resigned as a director; Michael Doron resigned as Secretary and Chief Operating Officer; and Paul Edward Norat was appointed as a director and as President and Chief Executive Officer. 5. On June 30, 2010, Paul Edward Norat was appointed President and Manager of Capital Financial, LLC. 6. On July 9th, 2010 Joseph Benowitz resigned as Treasurer and Chief Financial Officer, and Paul Edward Norat was appointed as Treasurer. 7. On July 29, 2010, a new class of preferred stock designated as series B was created. The class has a par value of $0.001 and allows for automatic conversion of each series B preferred share to two shares (2:1) of the Company’s common stock if the common stock reaches the trigger price of $1.00 per share. On July 29, 2010, 1,000,000 series B preferred shares were sold for $1,000,000, or $1.00 per share. In March of 2011, the Company repurchased 500,000 of these same shares and canceled them (see note 4.13) 8. On August 1, 2010, Michael Doron resigned from the board of directors and Stacey Jenkins was appointed a director in his place. 9. On August 13, 2010, the Company entered into a stock purchase agreement with National Gold, Inc. (NGI) as part of a secured financing arrangement wherein the Company exchanged 10,000,000 shares of its common stock for 100,000 shares of NGI’s class B stock (CUSIP 63624H 106; ISIN US63624H 1068), which have a par value of $1,000.00 per share and are redeemable after November 13, 2010 for one troy ounce of refined gold bullion per share. Based on guidance contained in APB-29 Accounting for Nonmonetary Transactions (ASC 845) and FAS-153 Exchange of Nonmonetary Assets, the transaction was entered using it’s book value and shown on the Consolidated Statements of Financial Condition in “Derivative asset” with offsetting entries in “Additional pain-in capital.” There exists a certain level of counterparty risk in that NGI could default on its obligation to convert the shares. 10. On October 1, 2010, the board of directors authorized the issuance of 10,000,000 shares of common stock in exchange for the relief of $75,000 of the Company’s debt. 11. On December 8, 2010, the board of directors authorized the issuance of 18,000,000 shares of common stock in exchange for the relief of $135,000 of the Company’s debt. 12. On March 25, 2011, two loans held for sale in the amount of $220,000 and $280,000 together with interest were repaid to the Company. As of March 31, 2012 these loans were paid off. 13. On March 25, 2011, the Company repurchased 500,000 shares of its Series B Preferred stock at the par price of $1.00 per share. 14. On April 29, 2011, the Company filed restated articles of incorporation changing its name from Toyshare, Inc. to Capital Financial Global, Inc., changing its ticker symbol to OTC:CFGX, and increased its authorized shares of common stock to 500,000,000. 15. On June 29, 2011, the Company executed an Asset Purchase and Sale Agreement wherein it acquired 100% interest in 85.5 acres of land containing 5 lode mining claims composing the St. Louis Mine, in Clark County, Nevada. The purchase price consisted of $20,000 cash, $250,000 in an assumed note, and a new note of $730,000, zero percent interest, due and payable in (36) thirty six months. 16. The Company is holding the majority of its $749,084 in cash reserves at Bank of America Merrill Lynch in the form of cash, US Treasury Bonds, and investment grade municipal bonds. The Company employs leverage in its reserve strategy which uses these funds as collateral for a margin line of credit. As of March 31, 2012, there was an outstanding balance on this margin line in the amount of $614,663. This balance would need to be paid off in order to access the cash held in the account up to approximately 85% of the portfolio value. Any value above the 85% maintenance requirement is accessible to the Company at any time, without any restrictions. However, if the portfolio has a significant drop in value, it is possible that the Company will have a margin call. 17. In December of 2011, the Company attempted to convert 100 shares of its NGI class B stock for 100 troy ounces of gold, as its rights provide, but National Gold was unable to make good on delivery. Accordingly, the Board of Directors of Capital Financial Global, Inc. has decided to voluntarily write down its derivative asset on its books from $100,000,000 to $10,000, which is the par value (.001) of the 10MM shares of our common stock that were exchanged in the original August 13, 2010 transaction. Management will continue to evaluate whether or not National Gold will be able to deliver on future conversions, and will further adjust this lowered $10,000 value as is necessary and appropriate. NOTE 5- LEGAL PROCEEDINGS The Company is not aware of any legal claims against it at this time.
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