WSFL Woodstock Holdings Inc (CE)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2008

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                    to ________

Woodstock Financial Group, Inc.

(Exact name of registrant as specified in its charter)

Georgia		6211		58-2161804
(State of Jurisdiction of Incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

117 Towne Lake Pkwy, Ste 200 Woodstock, Georgia		30188
(Address of principal executive offices)		(Zip Code)

770-516-6996

(Telephone Number)

Raike Financial Group, Inc.

(Former name)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      YES   S      NO   £

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or small reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	£		Accelerated filer	£
Non-accelerated filer	£		Smaller reporting company	S
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act).

Yes £  No S

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 17,619,028 shares of common stock, $.01 par value per share, issued and outstanding as of November 6, 2008.

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  WOODSTOCK FINANCIAL GROUP, INC.

INDEX

			Page No.
PART I	FINANCIAL STATEMENTS
Item 1.	Financial Statements		3
	Balance Sheets (unaudited) at September 30, 2008 and (audited) at December 31, 2007		3
	Statements of Operations (unaudited) for the Three Months And Nine Months Ended September 30, 2008 and 2007		4
	Statements of Cash Flows (unaudited) for the Nine Months Ended  September 2008 and 2007		5
	Notes to Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		11
Item 4.	Controls and Procedures		11
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		11
Item 1A.	Risk Factors		11
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		11
Item 3.	Defaults Upon Senior Securities		11
Item 4.	Submission of Matters to a Vote of Security Holders		11
Item 5.	Other Information		11
Item 6.	Exhibits		11

This Report contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements appear in a number of places in this Report and include all statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (1) the Company’s financing plans; (2) trends affecting the Company’s financial condition or results of operations; (3) the Company’s growth strategy and operating strategy; and (4) the declaration and payment of dividends. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors discussed herein and those factors discussed in detail in the Company’s filings with the Securities and Exchange Commission.

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PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

WOODSTOCK FINANCIAL GROUP, INC.

Balance Sheets

		September 30,		December 31,
		2008		2007
		(unaudited)		(audited)
Cash and cash equivalents	$	1,081,236		1,118,542
Clearing deposit		130,669		128,968
Commissions receivable		505,339		522,658
Furniture, fixtures, and equipment, at cost, net of accumulated
depreciation of $153,528 and $139,980, respectively		30,150		38,909
Building, net of accumulated depreciation of $95,141 and $67,813 respectively		1,182,146		1,209,479
Other assets		19,057		12,604
	$	2,948,597		3,031,160
Liabilities:
Accounts payable	$	24,116		40,958
Commissions payable		372,676		450,930
Preferred dividends payable		15,137		30,274
Other liabilities		17,226		3,564
Long term mortgage payable		970,990		980,848
Total Liabilities		1,400,145		1,506,574
Shareholders’ Equity:
Series A preferred stock of $.01 par value; 5,000,000 shares authorized,
86,500 shares issued and outstanding (liquidation value of $865,000)		865		865
Common stock of $.01 par value; 50,000,000 shares authorized;
17,941,772 shares issued		179,418		179,418
Additional paid-in capital		3,689,778		3,689,778
Accumulated deficit		(2,165,654)		(2,189,520)
Treasury stock 322,744 shares, carried at cost		(155,955)		(155,955)
Total Shareholders’ Equity		1,548,452		1,524,586
	$	2,948,597		3,031,160

See accompanying notes to unaudited financial statements.

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WOODSTOCK FINANCIAL GROUP, INC.

Statements of Operations

(unaudited)

For the Three Months and Nine Months Ended September 30, 2008 and 2007

		Three Months				Nine Months
		Ended September 30		Ended September 30
		2008		2007		2008		2007
Operating income:
Commissions	$	1,639,227		1,653,636		5,439,703		5,063,885
Interest income		5,585		87,748		129,653		275,916
Other fees		186,592		179,823		621,761		523,196
Total operating income		1,831,404		1,921,207		6,191,117		5,862,997
Operating expenses:
Commissions to brokers		1,343,853		1,376,441		4,517,363		4,345,324
Clearing costs		34,192		42,191		108,622		103,539
Selling, general and administrative expenses		485,014		833,709		1,495,856		1,812,316
Total operating expenses		1,863,059		2,252,341		6,121,841		6,261,179
Net income (loss)	$	(31,655)		(331,134)		69,276		(398,182)
Basic and diluted earnings (loss) per share	$	0.00		(0.02)		0.00		(0.02)

See accompanying notes to unaudited financial statements.

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WOODSTOCK FINANCIAL GROUP, INC.

Statements of Cash Flows

(unaudited)

For the Nine Months Ended September 30, 2008 and 2007

		2008		2007
Cash flows from operating activities:
Net income (loss)	$	69,276		(398,182)
Adjustments to reconcile net earnings to net cash used
by operating activities:
Depreciation		40,108		47,921
Change in commissions and fees receivable		17,319		66,952
Compensation expense related to stock options		-		338,550
Change in other assets		(8,154)		3,191
Change in accounts payable		(16,842)		2,341
Change in commissions payable		(78,254)		(48,583)
Change in other liabilities		13,662		19,475
Net cash provided - by operating activities		37,115		31,665
Cash flows used by investing activities consisting of
purchases of furniture, fixtures and equipment		(4,016)		(3,748)
Cash flows used by financing activities:
Cash dividends paid on preferred stock		(60,547)		(60,548)
Repayment of borrowings		(9,858)		(9,266)
Net cash used by financing activities		(70,405)		(69,814)
Net change in cash		(37,306)		(41,897)
Cash at beginning of period		1,118,542		1,048,952
Cash at end of period	$	1,081,236		1,007,055
Supplemental cash flow information:
Cash paid for interest	$	62,922		63,940

See accompanying notes to unaudited financial statements.

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WOODSTOCK FINANCIAL GROUP, INC.

Notes to Financial Statements

(1)

Organization

Woodstock Financial Group, Inc. (the “Company”) is a full service securities brokerage firm, which has been in business since 1995.  During 2006, the Company changed its name from Raike Financial Group, Inc. to Woodstock Financial Group, Inc.  The Company is registered as a broker-dealer with the Financial Industry Regulatory Authority (“FINRA”) in 49 states, Puerto Rico, Washington D.C. and also as a municipal securities dealer with the Municipal Securities Regulation Board (“MSRB”).  The Company is subject to net capital and other regulations of the U.S. Securities and Exchange Commission (“SEC”). The Company offers full service commission and fee-based money management services to individual and institutional investors.  The Company maintains a custody-clearing relationship with Southwest Securities, Inc.  In 2005, the Company, as a registered investment advisor, created a managed account program named “RFG Stars”.  Through the RFG Stars Program, the Company provides investment advisory services to clients.  All RFG Stars Program client accounts are maintained with Fidelity Registered Investment Advisor Group (“FRIAG”), an arm of Fidelity Investments.  FRIAG provides brokerage, custody, and clearing services to RFG Stars Program clients.

The interim financial statements included herein are unaudited but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the interim period presented.  All such adjustments are of a normal recurring nature.  The results of operations for the period ended September 30, 2008 are not necessarily indicative of the results of a full year’s operations.

The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America (GAAP).  In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts in the financial statements.  Actual results could differ significantly from those estimates.

(2)

Stock-Based Compensation

The Company sponsors a stock-based incentive compensation plan for the benefit of certain employees.

The Company did not grant any options during the first, second or third quarter of 2008 and did not recognize any related expense during the period.

During July 2007, the Company granted a total of 2,257,000 options to certain brokers with a strike price of $.01 where the market value of the Company’s stock was $.15 per share at the time of grant.  These options vested immediately, and the Company recognized expense related to these options of $338,550.  The fair value of these options, using the Black-Scholes pricing model was $.15 per share.

(3)

Fair Value

On January 1, 2008, we adopted the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 157 (SFAS No. 157), “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands the disclosures about fair value measurements.  This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company elected not to adopt the Statement of Financial Accounting Standards No. 159 (SFAS No. 159), Fair Value Option for Financial Assets and Financial Liabilities including an amendment of FASB Statement No. 115.

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WOODSTOCK FINANCIAL GROUP, INC.

Notes to Financial Statements, continued

(3)

Fair Value, continued

Fair Value Hierarchy

Under SFAS 157, the Company values assets and liabilities recorded or disclosed at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1		Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2		Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3		Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Because the Company has no assets or liabilities recorded or disclosed based on their fair values, the adoption of SFAS No 157 had no impact on the Company’s financial statements as of September 30, 2008.

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Item 2.

WOODSTOCK FINANCIAL GROUP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

For the Quarters and Nine Months Ended September 30, 2008 and 2007

OVERVIEW

The following discussion should be read in conjunction with the Financial Statements of the Company and the Notes thereto appearing elsewhere herein.

FORWARD-LOOKING STATEMENTS

The following is our discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements.  This commentary should be read in conjunction with the financial statements and the related notes and the other statistical information included in this report.

This report contains “forward-looking statements” relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of management, as well as assumptions made by and information currently available to management.  The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements.  Our actual results may differ materially from the results discussed in the forward-looking statements, and our operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in our filings with the Securities and Exchange Commission, including, without limitation:

·

significant increases in competitive pressure in the financial services industries;

·

changes in political conditions or the legislative or regulatory environment;

·

general economic conditions, either nationally or regionally and especially in our primary service area, becoming less favorable than expected;

·

changes occurring in business conditions and inflation;

·

changes in technology;

·

changes in monetary and tax policies;

·

changes in the securities markets; and

·

other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission.

OVERVIEW AND GENERAL INDUSTRY CONDITIONS

Our primary sources of revenue are commissions earned from brokerage services. Our principal business activities are, by their nature, affected by many factors, including general economic and financial conditions, movement of interest rates, security valuations in the marketplace, regulatory changes, competitive conditions, transaction volume and market liquidity. Consequently, brokerage commission revenue and investment banking fees can be volatile. While we seek to maintain cost controls, a significant portion of our expenses is fixed and does not vary with market activity. As a result, substantial fluctuations can occur in our revenue and net income from period to period.

The Company is a licensed insurance broker and we receive commission revenue as a result of our insurance operations.  The Company continues to grow this business; however does not regard insurance revenue as material at this time.

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Item 2.

WOODSTOCK FINANCIAL GROUP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS, continued

For the Quarters and Nine Months Ended September 30, 2008 and 2007

RESULTS OF OPERATIONS – QUARTERS ENDED SEPTEMBER 30, 2008 AND 2007

Total revenue for the quarter ended September 30, 2008 decreased by $89,804 or by 5% to $1,831,403 from $1,921,207 for the comparable period in 2007.  

Commission revenue slightly decreased by $14,409 or 1% to $1,639,227 from $1,653,636 for the comparable period in 2007.  

Interest income decreased by $82,163 or 94% during the quarter ended September 30, 2008 compared to the same period in 2007.  This decrease is due to the clearing agent having inadvertently paid the Company interest in the second quarter that it was not entitled to of approximately $40,000.  The error was corrected in the third quarter when funds were returned to clearing agent.  

Fees from clearing transaction charges and other income increased by $6,768 or 4% for the quarter ended September 30, 2008 compared to the same period in 2007.  This increase is due to an increase in the ticket charges for transactions charged to brokers.

Total operating expenses for the quarter ended September 30, 2008 decreased by $389,283 or 17% to $1,863,058 from $2,252,341 for the same period in 2007.  The decreased expense was due primarily to the decrease in selling, general and administrative expenses.

Commissions to brokers decreased by $32,588 or 2% to $1,343,853 for the quarter ended September 30, 2008 from $1,376,441 in the prior year.  This decrease coincides with the decrease in commission revenue during the quarter.

Clearing costs were $34,192 for the quarter ended September 30, 2008 from $42,191 the prior year .   As a percentage of commission income clearing costs were 2.1% in 2008 compared to 2.6% in 2007.    

Selling, general and administrative expense decreased $348,695 or 42% to $485,014 for the quarter ended September 30, 2008 from $833,709 in the prior year.  This decrease was due primarily to $338,550 in stock option expense recognized in the third quarter of 2007.  There have been no stock options granted during 2008, and therefore no related compensation expense.  

Net loss was $31,655 for the quarter ended September 30, 2008 compared to a net loss of $331,134 for the comparable period in prior year.  

RESULTS OF OPERATIONS – NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

Total revenue for the nine months ended September 30, 2008 increased by $328,120 or by 6% to $6,191,117 from $5,862,997 for the comparable period in 2007.  

Commission revenue increased by $375,818 or 7% to $5,439,703 from $5,063,885 for the comparable period in 2007.  This increase was principally due to an increase in insurance and mutual fund business in the first and second quarters of 2008.

Interest income decreased by $142,263 or 53% during the nine months ended September 30, 2008 compared to the same period in 2007.  This decrease in interest earned from margin accounts and customer accounts held by our clearing agent is due primarily to a decrease in the Company’s marginal rate received on these accounts and the overall declining short-term rates in the market place. Also, during the second quarter the clearing agent inadvertently paid the Company interest that it was not entitled to.  The error was corrected in the third quarter when funds were returned to clearing agent.  

Fees from clearing transaction charges and other income increased by $98,565 or 19% for the nine months ended September 30, 2008 compared to the same period in 2007.  This increase is also due to the increase in transactional fees.

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Total operating expenses for the nine months ended September 30, 2008 decreased by $139,338 or 2% to $6,121,841 from $6,261,179 for the same period in 2007.  The decreased expense was due primarily to the decrease in selling, general and administrative expenses.

Commissions to brokers increased by $280,661 or 6% to $4,625,985 for the nine months ended September 30, 2008 from $4,345,324 in the prior year.  This increase coincides with the increase in commission revenue during the quarter first and second quarter.

Clearing costs increased by $5,083 or 5% to $108,622 for the nine months ended September 30, 2008 from $103,539 in the prior year.   As a percentage of commission income clearing costs were 2.0% in 2008 compared to 2.0% in 2007.    The Company received a one-time credit of $57,871in the second quarter of 2007, as a result of certain transactions that were inadvertently charged twice due to a system programming error at the clearing house.  This issue has since been rectified.

Selling, general and administrative expense decreased $425,081 or 23% to $1,387,235 for the nine months ended September 30, 2008 from $1,812,316 in the prior year.  This decrease was due primarily to $338,550 in stock option expense recognized in the third quarter of 2007.  There have been no stock options granted during 2008, and therefore no related compensation expense.

Net income was $69,276 for the nine months ended September 30, 2008 compared to a net loss of $398,182 for the comparable period in prior year.  

LIQUIDITY AND CAPITAL RESOURCES

Our assets are reasonably liquid with a substantial majority consisting of cash and cash equivalents, and receivables from other broker-dealers and our clearing agent, all of which fluctuate depending upon the levels of customer business and trading activity. Receivables from broker-dealers and our clearing agent turn over rapidly.  Both our total assets as well as the individual components as a percentage of total assets may vary significantly from period to period because of changes relating to customer demand, economic, market conditions and proprietary trading strategies.  Our total net assets at September 30, 2008 were $1,548,452 of which $1,081,236 is cash.

As a broker-dealer, we are subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule15c3-1).  The Rule requires maintenance of minimum net capital and that we maintain a ratio of aggregate indebtedness (as defined) to net capital (as defined) not to exceed 15 to 1.  Our minimum net capital requirement is $100,000.  Under the Rule we are subject to certain restrictions on the use of capital and its related liquidity.  Our net capital position at September 30, 2008 was $1,288,088 and our ratio of aggregate indebtedness to net capital was .33 to 1.

Historically, we have financed our operations through cash flow from operations and the private placement of equity securities. We have not employed any significant leverage or debt to fund operating needs.

We believe that our capital structure is adequate for our current operations.  We continually review our overall capital and funding needs to ensure that our capital base can support the estimated needs of the business.  These reviews take into account business needs as well as the Company's regulatory capital requirements.  Based upon these reviews, to take advantage of strong market conditions and to fully implement our expansion strategy, we will continue to pursue avenues to decrease costs and increase our capital position.

The Company's cash and cash equivalents decreased by $37,306 to $1,081,236 as of September 30, 2008, from $1,118,542 as of December 31, 2007.  This overall decrease was due to net cash provided by operating activities of $37,116, offset by cash used in investing activities of $4,016, and in financing activities of $70,406.

EFFECTS OF INFLATION AND OTHER ECONOMIC FACTORS

Market prices of securities are generally influenced by changes in rates of inflation, changes in interest rates and economic activity generally.  Our revenues and net income are, in turn, principally affected by changes in market prices and levels of market activity.  Moreover, the rate of inflation affects our expenses, such as employee compensation, occupancy expenses and communications costs, which may not be readily recoverable in the prices of services offered to our customers.  To the extent inflation, interest rates or levels of economic activity adversely affect market prices of securities, our financial condition and results of operations will also be adversely affected.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company does not invest or trade in market sensitive instruments.

Item 4.  

Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them to material information relating to the Company that is required to be included in the Company’s periodic filings with the Securities and Exchange Commission.  There have been no significant changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.

Legal Proceedings

Currently, the Company has no pending claims by retail customers. We are the subject of routine examinations by self-regulatory organizations including the SEC, FINRA and individual states and are not aware of any regulatory examinations at this time that would have a material impact on the company’s financial position.

Item 1A.    Risk Factors

None

     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Submission of Matters to a Vote of Security Holders

On March 27, 2008 at the company’s annual meeting, a majority of the outstanding shares of common stock re-elected the current Board Members.

Item 5.

Other Information

None.

Item 6.

Exhibits

31.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  November 6, 2008

Date:  November 6, 2008

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