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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2013

Commission file number 33-37809-NY

CASTLE HOLDING CORP.
(Exact Name of Registrant as Specified in Its Charter)
 
Nevada   77-0121957
(State or Other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer Identification No.)
 
18 East Sunrise Highway, Suite 311
Freeport, NY 11520
(516)-378-1000
(Address of Principal Executive Offices, Zip Code & Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to section 15(d) of the Act:
Common Stock, $0.0025 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
(Do not check if a smaller reporting company)      
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of January 22, 2014, the registrant had 37,629,510 shares of common stock issued and 37,073,010 shares of common stock outstanding, as well as 699,250 Class A Convertible preferred shares issued and outstanding.



 
 

 
Castle Holding Corp.
 
TABLE OF CONTENTS
Quarterly Period Ended December 31, 2013
 
      Page No.  
PART I – Financial Information      
         
Item 1. Financial Statements      3  
           
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operaions     14  
           
Item 3. Quantitative and Qualitative Disclosures About Market Risk      15  
           
Item 4. Controls and Procedures      15  
           
PART II – Other Information        
           
Item 1. Legal Proceedings     16  
           
Item 1A. Risk Factors      16  
           
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     16  
           
Item 3. Defaults Upon Senior Securities     16  
           
Item 4. Mine Safety Disclosures     17  
           
Item 5. Other Information     17  
           
Item 6. Exhibits     17  
           
SIGNATURES     18  
 
 
2

 
 
PART I

ITEM 1. FINANCIAL STATEMENTS
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Consolidated Statements of Financial Condition
(Unaudited and Unreviewed)
 
   
December 31,
2013
   
September 30,
2013
 
Assets
           
Cash and cash equivalents
  $ 3,423     $ 993  
Marketable securities, at market value
    83       226  
Restricted cash and securities, at market value (note 3)
    388,937       380,938  
Other assets
    2       2  
                 
Total assets
  $ 392,445     $ 382,159  
                 
Liabilities and Stockholders' Equity
               
Liabilities:
               
Accounts payable and accrued expenses
  $ -     $ 116  
Loans payable to affiliates
    3,081       500  
                 
Total liabilities
    3,081       616  
                 
Stockholders' equity (note 5):
               
Preferred stock, $.01 par value; authorized
               
9,000,000 shares, none issued and outstanding
    -       -  
Class A Convertible Preferred stock, $.01 par value;
               
authorized 1,000,000 shares, issued and outstanding
               
699,250 and 699,250 shares, respectively; liquidation
               
preference of $699,250 and $699,250, respectively (note 5)     6,993       6,993  
Common stock, $.0025 par value; authorized
               
100,000,000 shares, issued 37,629,510 and
               
37,629,510 shares, respectively (net of 261,000 shares
               
"stopped" and requested to be cancelled)
    94,074       94,074  
Common stock held in the FBO Account as treasury
         
stock - 556,500 and 551,000 shares, respectively - at cost (note 3)
    (26,452 )     (24,809 )
Additional paid-in capital
    1,516,142       1,516,142  
Accumulated deficit
    (1,201,393 )     (1,210,857 )
                 
Total stockholders' equity
    389,364       381,543  
                 
Total liabilities and stockholders' equity
  $ 392,445     $ 382,159  
 
See notes to consolidated financial statements.
 
 
3

 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Consolidated Statements of Operations
(Unaudited and Unreviewed)
 
   
Three Months Ended
December 31,
   
Period October 1, 2005 (Inception of Development Stage) to
December 31,
 
   
2013
   
2012
   
2013
 
Revenues:
                 
 Net gain (loss) on marketable securities
  $ 6,959     $ (60,653 )   $ (5,679 )
 Interest and dividends
    2,539       8,377       128,457  
                         
 Total revenues
    9,498       (52,276 )     122,778  
                         
Expenses:
                       
 General and administrative
    34       1,441       11,532  
                         
 Total expenses
    34       1,441       11,532  
                         
Income (loss) from continuing operations
    9,464       (53,717 )     111,246  
Discontinued operations
    -       -       103,789  
                         
Net income (loss)
  $ 9,464     $ (53,717 )   $ 215,035  
                         
Net income (loss) per common share:
                       
 Basic
  $ 0.00     $ (0.00 )        
 Diluted
  $ 0.00     $ (0.00 )        
                         
Weighted average number of
                       
 common shares outstanding:
                       
 Basic
    37,517,869       37,580,110          
 Diluted
    38,217,119       38,279,360          
 
See notes to consolidated financial statements.
 
 
4

 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Consolidated Statements of Changes in Stockholders' Equity
For the Period October 1, 2005 (Inception of Development Stage) to December 31, 2013
(Unaudited and Unreviewed)
 
    Class A Convertible
Preferred Stock, $.01 Par Value
   
Common Stock, $.0025 Par Value
    Treasury
Common Stock, $.0025 Par Value
   
Additional
Paid-in
   
Accumulated
   
Total
Stock-
holders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Equity
 
                                                       
Balances, September 30, 2005
    706,750     $ 7,068       37,379,510     $ 93,449       -     $ -     $ 1,515,192     $ (1,416,428 )   $ 199,281  
                                                                         
Sale of common shares in
                                                                       
 October 2005
    -       -       200,000       500       -       -       1,500       -       2,000  
                                                                         
Purchase of preferred shares in                                                                        
 June 2006
    (2,500 )     (25 )     -       -       -       -       (375 )     -       (400 )
                                                                         
Net income
    -       -       -       -       -       -       -       107,392       107,392  
                                                                         
Balances, September 30, 2006
    704,250       7,043       37,579,510       93,949       -       -       1,516,317       (1,309,036 )     308,273  
                                                                         
Sale of common shares in
                                                                       
 January 2007
    -       -       50,000       125       -       -       425       -       550  
                                                                         
Purchase of preferred shares in
                                                                       
 October 2006
    (2,500 )     (25 )     -       -       -       -       (375 )     -       (400 )
                                                                         
Net income
    -       -       -       -       -       -       -       21,735       21,735  
                                                                         
Balances, September 30, 2007
    701,750       7,018       37,629,510       94,074       -       -       1,516,367       (1,287,301 )     330,158  
                                                                         
Net income
    -       -       -       -       -       -       -       30,275       30,275  
                                                                         
Balances, September 30, 2008
    701,750       7,018       37,629,510       94,074       -       -       1,516,367       (1,257,026 )     360,433  
                                                                         
Purchase of preferred shares in
                                                                       
 September 2009
    (2,500 )     (25 )     -       -       -       -       (225 )     -       (250 )
 
 
5

 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Consolidated Statements of Changes in Stockholders' Equity
For the Period October 1, 2005 (Inception of Development Stage) to December 31, 2013
(Unaudited and Unreviewed)
 
   
Class A Convertible
Preferred Stock,
$.01 Par Value
   
Common Stock,
$.0025 Par Value
   
Treasury
Common Stock,
$.0025 Par Value
   
Additional
Paid-in
   
Accumulated
   
Total
Stock-
holders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Equity
   
Capital
   
Deficit
   
Equity
 
                                                       
Net income
    -       -       -       -       -       -       -       17,579       17,579  
                                                                         
Balances, September 30, 2009
    699,250       6,993       37,629,510       94,074       -       -       1,516,142       (1,239,447 )     377,762  
                                                                         
Net income
    -       -       -       -       -       -       -       3,630       3,630  
                                                                         
Balances, September 30, 2010
    699,250       6,993       37,629,510       94,074       -       -       1,516,142       (1,235,817 )     381,392  
                                                                         
Net income
    -       -       -       -       -       -       -       6,555       6,555  
                                                                         
Balances, September 30, 2011
    699,250       6,993       37,629,510       94,074       -       -       1,516,142       (1,229,262 )     387,947  
                                                                         
Purchase of treasury stock
    -       -       -       -       49,400       (2,509 )     -       -       (2,509 )
                                                                         
Net income
    -       -       -       -       -       -       -       80,453       80,453  
                                                                         
Balances, September 30, 2012
    699,250       6,993       37,629,510       94,074       49,400       (2,509 )     1,516,142       (1,148,809 )     465,891  
                                                                         
Purchase of treasury stock
    -       -       -       -       501,600       (22,300 )     -       -       (22,300 )
                                                                         
Net loss
    -       -       -       -       -       -       -       (62,048 )     (62,048 )
                                                                         
Balances, September 30, 2013
    699,250       6,993       37,629,510       94,074       551,000       (24,809 )     1,516,142       (1,210,857 )     381,543  
                                                                         
Purchase of treasury stock
    -       -       -       -       5,500       (1,643 )     -       -       (1,643 )
                                                                         
Net Income
    -       -       -       -       -       -       -       9,464       9,464  
                                                                         
Balances, December 31, 2013
    699,250     $ 6,993       37,629,510     $ 94,074       556,500     $ (26,452 )   $ 1,516,142     $ (1,201,393 )   $ 389,364  
 
See notes to consolidated financial statements.
 
 
6

 
 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Consolidated Statements of Cash Flows
(Unaudited and Unreviewed)
 
   
Three Months Ended
December 31,
   
Period October 1, 2005 (Inception of Development Stage) to
December 31,
 
   
2013
   
2012
   
2013
 
Cash flows from operating activities:
                 
Net income (loss)
  $ 9,464     $ (53,717 )   $ 215,035  
Adjustments to reconcile net income (loss) to net
                       
cash provided by (used in) operating activities:
                       
 Depreciation
    -       -       263  
Changes in operating assets and liabilities:
                       
 Marketable securities
    143       83       117  
 Restricted cash and securities
    (7,999 )     54,341       (90,992 )
 Other assets
    -       (116 )     693  
 Accounts payable and accrued expenses
    (116 )     -       (74,674 )
                         
Net cash provided by (used in) operating activities
    1,492       591       50,442  
                         
Cash flows from investing activities
    -       -       -  
                         
Cash flows from financing activities:
                       
Acquisition of treasury stock
    (1,643 )     (448 )     (26,452 )
Proceeds from sale of common shares
    -       -       2,550  
Proceeds of loans from affiliates
    2,581       -       3,081  
Repayment of loans payable to related parties
    -       -       (26,015 )
Repurchase of preferred shares
    -       -       (1,050 )
                         
Net cash used in financing activities
    938       (448 )     (47,886 )
                         
Net increase (decrease) in cash and cash equivalents
    2,430       143       2,556  
Cash and cash equivalents, beginning of year
    993       1,093       867  
                         
Cash and cash equivalents, end of period
  $ 3,423     $ 1,236     $ 3,423  
                         
Supplemental disclosures of cash flow information:
         
Interest paid
  $ -     $ -     $ -  
Income taxes paid
  $ -     $ -     $ -  
 
See notes to consolidated financial statements.
 
 
7

 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2013 and 2012 and Period October 1, 2005 (Inception of Development Stage) to December 31, 2013
(Unaudited and Unreviewed)
 
1. ORGANIZATION

Castle Holding Corp. (“CHC”) is a holding company which was incorporated in Nevada on June 13, 1986. The subsidiaries of CHC are as follows:

1.  
Beverage King, Ltd. (incorporated in Delaware January 2, 1990) - leased automobiles for Company employees; no operations since October 31, 2005.
2.  
Church Street Securities Corp. (incorporated in New York April 11, 1991) – operated a securities broker-dealer from October 26, 1995 to January 6, 2005; decided to cease operations on January 6, 2005.
3.  
Castle Advisors, Inc. (incorporated in New York December 23, 1993) - acts as a financial consultant; no revenues in years ended September 30, 2013 and 2012.
4.  
Wall Street Indians, Ltd. (incorporated in New York May 27, 1994) - provided office services and supplies to the Company to October 31, 2005; no operations since.
5.  
The Unlisted Stock Market Corporation (incorporated in New York December 9, 1999) – no operations from inception.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim financial statements – The accompanying unaudited interim financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual audited financial statements. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments considered necessary for a fair presentation.

The results of operations for the three months ended December 31, 2013 are not necessarily indicative of the results to be expected for the year ending September 30, 2014. The accompanying unaudited interim financial statements should be read in conjunction with the Company’s financial statements and notes related thereto for the years ended September 30, 2013 and 2012 included in our Form 10-K filed with the SEC.

Principles of consolidation – The consolidated financial statements include the accounts of CHC and its subsidiaries (collectively, the “Company”). Castle Securities Corp., a former subsidiary that operated a securities broker-dealer from November 1, 1985 to October 31, 2003, dissolved in September 2009. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation – The accompanying consolidated financial statements are presented in accordance with the guidance provided by Accounting Standards Codification ("ASC") topic no. 915, "Development Stage Entities". We have used fiscal year ended September 30, 2006 as the inception of our development stage. Since cessation of the operations of Church Street Securities Corp. in January 2005, the Company has had no business operations or operating revenues.

 
8

 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2013 and 2012 and Period October 1, 2005 (Inception of Development Stage) to December 31, 2013
(Unaudited and Unreviewed)
 
Use of estimates – The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and cash equivalents - The Company considers highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Marketable securities and restricted cash and securities - Marketable securities and restricted cash and securities consist primarily of trading securities valued at market. All fair value measurements are based on Level 1 inputs (i.e., closing trading prices of respective marketable securities). Unrealized gains and losses are reflected in income ($5,177 and $(72,300) for the three months ended December 31, 2013 and 2012, respectively).
 
Income taxes – Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Net income (loss) per common share – Basic net income (loss) per common share is calculated based upon the weighted average number of common shares outstanding. Diluted net income (loss) per common share is calculated based upon the weighted average number of common shares outstanding and dilutive convertible preferred shares outstanding.
 
3. RESTRICTED CASH AND SECURITIES, AT MARKET VALUE

At December 31, 2013 and September 30, 2013, restricted cash and securities consist of:

   
December 31,
2013
   
September 30,
2013
 
             
Uninvested cash
  $ 388,307     $ 23,398  
Marketable securities:
               
556,500 and 551,000 shares, respectively, Castle Holding Corp. (CHOD)
         
(reflected as treasury stock in the consolidated balance sheet)
    119,369       275,500  
90,000 and 60,000 shares, respectively, Liberty Pete Corp. (LBPE)
    630       420  
0 and 24,000 shares, respectively, Medallion Financial Group (TAXI)
    -       357,120  
                 
Subtotal
    508,306       656,438  
                 
Less Castle Holding Corp. (CHOD) shares treated as treasury stock
    (119,369 )     (275,500 )
                 
Net
  $ 388,937     $ 380,938  
 
 
9

 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2013 and 2012 and Period October 1, 2005 (Inception of Development Stage) to December 31, 2013
(Unaudited and Unreviewed)

Except for 375,000 shares Castle Holding Corp. held in safekeeping at December 31, 2013, the restricted cash and securities are held at an account with TD Ameritrade Inc. (the “FBO Account”) which was established in 2001 to secure payment of the investment in the Class A Convertible Preferred Shares in the event of liquidation of CHC (see Note 5).
 
In 2001, as a provision of the private offering (see Note 5), CHOD purchased a total of $380,000 face value of United States Treasury Strips (the “Strips”) maturing August 15, 2011 for a total of approximately $233,000. On August 15, 2011, the Strips matured and the FBO Account was credited $380,000. Since August 15, 2011, the FBO Account has acquired and sold a variety of marketable equity securities.
 
On November 14, 2013, TD Ameritrade notified us to transfer the FBO Account to another brokerage firm and restricted us to liquidating transactions only. On November 20, 2013, we opened an account at Scottrade and requested delivery of the FBO Account there. Scottrade then informed us that they will not accept delivery of the FBO Account (including 181,500 shares of Castle Holding Corp. common stock) until such time as more public information regarding Castle Holding Corp. is available. We are currently working on satisfying Scottrade’s conditions.
 
Had CHC required conversion of the 699,250 shares of the Class A Convertible Preferred Shares into 699,250 shares of CHOD Common Stock and paid the Class A Convertible Preferred stockholders $0.50 per Preferred Share (or $349,625 total) at December 31, 2013 (see Note 5), the remaining restricted cash and securities available to CHC at December 31, 2013 would have been $39,312.
 
4. OTHER ASSETS
 
Other assets consist of:
 
   
December 31,
2013
   
September 30,
2013
 
9% equity ownership of Castle Trucking Corp.
  $ 1     $ 1  
9% equity ownership of U Trade Inc.
    1       1  
                 
Total
  $ 2     $ 2  
 
 
10

 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2013 and 2012 and Period October 1, 2005 (Inception of Development Stage) to December 31, 2013
(Unaudited and Unreviewed)
 
5. STOCKHOLDERS’ EQUITY
 
Class A Convertible Preferred Stock

From March 2001 to September 2001, CHC sold 706,750 shares of Class A Convertible Preferred Stock for gross proceeds of $706,750.

Each share of Class A Convertible Preferred Stock is convertible at any time into one share of the Company’s Common Stock at the election of the Class A Convertible Preferred Stockholder. At any time, CHC may require conversion of the Class A Convertible Preferred Shares provided that CHC Common Stock closes at a price of $1.50 per share or higher for more than 20 consecutive business days. At any time after one year from the issue date of the Class A Convertible Preferred Shares, CHC may require conversion of the Class A Convertible Preferred Shares provided that CHC pay the Class A Convertible Preferred Stockholder $0.50 per Class A Convertible Preferred Share.

The Class A Convertible Preferred Shares are non-voting and will have a first priority, up to $1.00 per Class A Convertible Preferred Share, in the event of liquidation of CHC.

As a provision of the private offering, CHC used 33% of the gross proceeds of the offering to purchase $380,000 face value of U.S. Treasury Strips (the “Strips”) maturing August 15, 2011 (see Note 3).

The proceeds from the Strips are available to holders of the Class A Convertible Preferred Shares and are in addition to the other assets of CHC. The Strips, and upon maturity, subsequent investments purchased from such proceeds, are to be held by CHC to secure payment of the investment in the Class A Convertible Preferred Shares in the event of liquidation of CHC. The protection afforded by the Strips are to terminate upon the conversion of the Class A Convertible Preferred Shares and the Strips, or their proceeds, are to thereafter be available to CHC.

In the years ended September 30, 2006 and 2007, CHC repurchased a total of 5,000 shares of Class A Convertible Preferred Stock. In the year ended September 30, 2009, CHC repurchased 2,500 shares of Class A Convertible Preferred Stock. Accordingly, the proportionate share (approximately 1.06%) of the FBO Account (or approximately $4,123 market value at December 31, 2013) may be available to CHC.

Common Stock

In October 2005, CHC sold 200,000 shares of common stock to a CHC affiliate for $2,000 ($0.01 per share).

In January 2007, CHC sold 50,000 shares of common stock to a former employee for $550 ($0.011 per share).
 
 
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CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2013 and 2012 and Period October 1, 2005 (Inception of Development Stage) to December 31, 2013
(Unaudited and Unreviewed)
 
6. INCOME TAXES

CHC files a consolidated income tax return with its subsidiaries for federal reporting purposes. CHC and its subsidiaries file separate income tax returns for state reporting purposes.
 
The provisions for (benefit from) income taxes consisted of:
   
Three Months Ended
December 31,
 
   
2013
   
2012
 
Current:
           
 Federal
  $ -     $ -  
 State
    -       -  
                 
 Total
    -       -  
                 
Deferred:
               
 Federal
    3,009       (17,077 )
 State
    615       (3,492 )
 Change in valuation allowance
    (3,624 )     20,569  
                 
 Total
    -       -  
                 
Provision for income taxes
  $ -     $ -  
 
 
12

 
 
CASTLE HOLDING CORP. AND SUBSIDIARIES
(A Development Stage Entity)
Notes to Consolidated Financial Statements
Three Months Ended December 31, 2013 and 2012 and Period October 1, 2005 (Inception of Development Stage) to December 31, 2013
(Unaudited and Unreviewed)
 
The Company’s effective tax rate differed from the United States Federal income tax rate for the following reasons:

   
Three Months Ended
December 31,
 
   
2013
   
2012
 
             
Computed Federal income tax at 34%
  $ 3,218     $ (18,264 )
Computed state income tax, net of Federal tax effect
    406       (2,305 )
Change in valuation allowance
    (3,624 )     20,569  
                 
Provision for income taxes
  $ -     $ -  

Based on management's present assessment, the Company has not yet determined it to be more likely than not that a deferred tax asset of $403,594 as of December 31, 2013 attributable to the future utilization of $1,135,712 of prior year net operating loss carryforwards and $51,330 of capital loss carryforwards will be realized. Accordingly, the Company has maintained a 100% allowance against the deferred tax asset in the financial statements at December 31, 2013. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforwards expire as follows: $14,542 in year 2019, $185,653 in year 2021, $694,345 in year 2022, $135,943 in year 2023, $66,021 in year 2024, and $39,208 in year 2025. The capital loss carryforward of $51,330 expires in year 2018.
 
Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.

7. COMMITMENTS AND CONTINGENCIES
 
Since December 2005, the Company has been using space provided by a public accounting firm owned by the Company’s treasurer at no cost to the Company.
 
 
13

 
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
General
 
Castle Holding Corp. (“CHOD”) is a holding company which was incorporated in Nevada on June 13, 1986. On September 30, 1987, CHOD acquired Castle Securities Corp., a New York corporation which operated as a securities broker dealer from November 1, 1985 to October 31, 2003. On April 11, 1991, CHOD formed Church Street Securities Corp., a New York corporation which operated as a securities broker dealer from October 26, 1995 to January 6, 2005. Since January 2005, CHOD and its subsidiaries have had no business operations or operating revenues. Our current plan is to acquire an operating company in a reverse acquisition transaction involving the exchange of capital stock.
 
Results of Operations – Three months ended December 31, 2013 compared to Three months ended December 31, 2012.
 
For the three months ended December 31, 2013, we incurred a net gain from investment of marketable securities of $9,498 compared to a net loss of $60,653 for the three months ended December 31, 2012. Substantially all of the marketable securities are held in an account with TD Ameritrade Inc. (the “FBO Account”) which was established in 2001 to secure payment of the Class A Convertible Preferred Shares in the event of liquidation of CHOD.
 
On November 14, 2013, TD Ameritrade notified us to transfer the FBO Account to another brokerage firm and restricted us to liquidating transactions only. On November 20, 2013, we opened an account at Scottrade and requested delivery of the FBO Account there. Scottrade then informed us that they will not accept delivery of the FBO Account (including 181,500 shares of Castle Holding Corp. common stock) until such time as more public information regarding Castle Holding Corp. is available. We are currently working on satisfying Scottrade’s conditions.
 
Interest and dividends revenues decreased $5,838 from $8,377 in 2012 to $2,539 in 2013.
 
Expenses decreased $1,407 from $1,441 in 2012 to $34 in 2013.
 
Net income (loss) increased $63,181 from a net loss of $53,717 in 2012 to net income of $9,464 in 2013. The $63,181 increase was due to (1) the $67,612 positive change in net gain (loss) on marketable securities, (2) the $5,838 decrease in interest and dividends revenues, and (3) the $1,407 decrease in expenses.
 
Liquidity and Capital Resources
 
At December 31, 2013, the Company had cash and cash equivalents of $3,423, total assets of $392,445, total liabilities of $3,081, and total stockholders’ equity of $389,364. Of the $392,445 total assets at December 31, 2013, $388,937 represents cash and marketable securities held in the FBO Account to secure payment of the Class A Convertible Preferred Shares in the event of liquidation of CHOD.
 
 
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Cash and cash equivalents increased $2,430 from $993 at September 30, 2013 to $3,423 at December 31, 2013. The $2,430 increase was due to the $2,581 loan from an affiliate and the $1,492 provided by operating activities, offset by $1,643 used to acquire treasury stock.
 
The Company currently has no other agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
 
We currently have no commitments with any person for any capital expenditures.
 
We have no off-balance sheet arrangements.
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Since year ended September 30, 2002, Castle Holding Corp. has had no principal accountant. Accordingly, there has been no disagreements with accountants on accounting and financial disclosure.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
As a “smaller reporting company” as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item 3.
 
ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to our company, particularly during the period when this report was being prepared.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 
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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

ITEM 1A. RISK FACTORS

As a “smaller reporting company” as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item 1A.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Recent Sales of Unregistered Securities – None.
(b) Issuer Purchases of Equity Securities:
 
For the three months ended December 31, 2013, we purchased our common stock as follows:
 
Period
 
(a)
Total number of shares purchased
   
(b)
Average price paid per share
   
(c)
Total number of shares (purchased as part of publicly announced plans or programs)
   
(d)
Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
 
October 1, 2013 to October 31, 2013
    5,500     $ 0.30       0       0  
November 1, 2013 to November 30, 2013
    0     $ -       0       0  
December 1, 2013 to December 31, 2013
    0     $ -       0       0  
Total
    5,500     $ 0.30       0       0  

For the three months ended December 31, 2013, we did not purchase any of our Class A Convertible Preferred Stock.

We presently have no publicly announced repurchase plan or program to purchase our Common Stock or Series A Convertible Preferred Stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

 
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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.
 
ITEM 6. EXHIBITS
 
The following exhibits are including with this filing:
 
3.1*   Articles of Incorporation (Form S-18 Registration No. 33-8395-LA, effective November 14, 1986)
     
3.2*   Amendment to Articles of Incorporation (Form S-18 Registration No. 33-37809-NY, effective February 11, 1991)
     
3.2*   Amendment to Articles of Incorporation filed August 15, 2001 (September 30, 2001 Form 10-K filed January 15, 2002)
     
3.3*   By-laws (Form S-18 Registration No. 33-8395-LA, effective November 14, 1986)
     
4.4*   Specimen Stock Certificate (Form S-18 Registration No. 33-37809-NY, effective February 11, 1991)
     
31.1   Sarbanes-Oxley Section 302 certification by George R. Hebert
     
31.2   Sarbanes-Oxley Section 302 certification by Michael T. Studer
     
32.1   Sarbanes-Oxley Section 906 certification by George R. Hebert
     
32.2   Sarbanes-Oxley Section 906 certification by Michael T. Studer
     
99.1*   Complaint for Injunctive and Other Relief (dated September 14, 1994) – Securities and Exchange Commission, Plaintiff (Form 8-K dated September 13, 1994)
 
101.INS **
 
XBRL Instance Document
     
101.SCH **
 
XBRL Taxonomy Extension Schema Document
     
101.CAL **
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **
 
XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **
 
XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **
 
XBRL Taxonomy Extension Presentation Linkbase Document
________________
* Previously filed and incorporated by reference.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
17

 
 
SIGNATURES
 
Pursuant to the requirements of Section 13(a) or 15(d) 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.
 
 
  Castle Holding Corp.  
       
Date: January 24, 2014
By:
/s/ George R. Hebert  
    George R. Hebert  
    President, Chief Executive Officer  
 
 
  Castle Holding Corp.  
       
Date: January 24, 2014
By:
/s/ Michael T. Studer  
    Michael T. Studer  
    Secretary, Treasurer, Chief Financial Officer  
 
 
 
 
 
 
 
 
 
18