INTEGRITY MUTUAL FUNDS INC (Form: 10QSB, Received: 11/10/2004 13:06:06)

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

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
U.S. SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-25958

INTEGRITY MUTUAL FUNDS, INC.

(Exact name of small business issuer as specified in its charter)

North Dakota	45-0404061
(State or other jurisdiction	(IRS Employer
of incorporation or organization)	Identification No.)

1 North Main, Minot, North Dakota, 58703

(Address of principal executive offices)

(701) 852-5292

(Issuer's telephone number)

(Former name, former address and former fiscal year, if changed since last report)

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

As of October 29, 2004, there were 13,054,043 shares of common stock of the registrant outstanding.

Transitional Small Business Disclosure Format (check one):

Yes

FORM 10-QSB

INTEGRITY MUTUAL FUNDS, INC.

INDEX

Part I	FINANCIAL INFORMATION	Page #


Item 1	Financial Statements

	Condensed Consolidated Balance Sheets -
	September 30, 2004 and December 31, 2003	3

	Condensed Consolidated Statements of Operations -
	Three months ended September 30, 2004 and 2003	5

	Condensed Consolidated Statements of Operations -
	Nine months ended September 30, 2004 and 2003	6

	Condensed Consolidated Statements of Cash Flows -
	Nine months ended September 30, 2004 and 2003	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3	Controls and Procedures	17


Part II	OTHER INFORMATION


Item 1	Legal Proceedings	17

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	18

Item 3	Defaults Upon Senior Securities	18

Item 4	Submission of Matters to a Vote of Security Holders	18

Item 5	Other Information	18

Item 6	Exhibits and Reports on Form 8-K	18

	Signatures	19

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS


			(Unaudited)
			September 30,				December 31,
			2004				2003

CURRENT ASSETS
	Cash and cash equivalents	$		1,501,631	$	2,581,360
	Securities available-for-sale			202		24,387
	Accounts receivable			1,109,509		1,047,491
	Prepaids			92,536		76,473

	Total current assets	$		2,703,878	$	3,729,711

PROPERTY AND EQUIPMENT		$		1,873,273	$	1,842,420
	Less accumulated depreciation			(647,983)		(584,908)

	Net property and equipment	$		1,225,290	$	1,257,512

OTHER ASSETS
	Deferred sales commissions	$		491,650	$	727,886
	Goodwill			9,425,606		9,531,434
	Other assets (net of accumulated amortization			376,653		397,017
	of $119,510 for 2004 and $108,669 for 2003)

	Total other assets	$		10,293,909	$	10,656,337

TOTAL ASSETS		$		14,223,077	$	15,643,560

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS’ EQUITY

				(Unaudited)
				September 30,				December 31,
				2004				2003

CURRENT LIABILITIES
	Service fees payable		$		98,222	$	103,498
	Accounts payable				88,169		84,073
	Other current liabilities				1,934,660		1,864,112
	Current portion of long-term debt				845,117		1,203,547

	Total current liabilities		$		2,966,168	$	3,255,230

LONG-TERM LIABILITIES
	Notes payable		$		1,403,953	$	1,584,434
	Subordinated debentures				595,000		595,000
	Corporate notes				-		962,000
	Subordinated commercial notes				561,000		561,000
	Convertible debentures				250,000		250,000
	Deferred tax liability				34,139		94,599
	Other long-term liabilities				-		469,993
	Less current portion of long-term debt				(845,117)		(1,203,547)

	Total long-term liabilities		$		1,998,975	$	3,313,479

TOTAL LIABILITIES			$		4,965,143	$	6,568,709

STOCKHOLDERS' EQUITY
	Series A preferred stock – 5,000,000 shares authorized, $.0001 par value;		$		305	$	305
		3,050,000 and 3,050,000 shares issued and outstanding, respectively
	Additional paid in capital – series A preferred stock				1,524,695		1,524,695
	Common stock – 1,000,000,000 shares authorized, $.0001 par value;				1,306		1,300
		13,060,843 and 12,995,812 shares issued and outstanding, respectively
	Additional paid in capital – common stock				8,523,530		8,539,032
	Receivable – unearned ESOP shares				(77,131)		(82,148)
	Preferred dividends declared				(71,675)		-
	Accumulated deficit				(643,092)		(907,560)
	Accumulated other comprehensive loss				(4)		(773)

Total stockholders' equity			$		9,257,934	$	9,074,851

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$		14,223,077	$	15,643,560

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

						(Unaudited)
						Three Months Ended
						September 30,

					2004					2003
OPERATING REVENUES
	Fee income		$	1,057,951			$		790,142
	Commissions			3,078,975					2,782,267

	Total revenue		$	4,136,926			$		3,572,409

OPERATING EXPENSES
	Compensation and benefits		$	572,264			$		500,374
	Commission expense			2,782,246					2,402,412
	General and administrative expenses			499,060					416,488
	Sales commissions amortized			75,018					89,349
	Depreciation and amortization			23,465					25,872

	Total operating expenses		$	3,952,053			$		3,434,495

OPERATING INCOME			$	184,873			$		137,914

OTHER INCOME (EXPENSES)
	Interest and other income		$	28,747			$		(4,578)
	Interest expense			(58,270)					(68,988)

	Net other expenses		$	(29,523)				$	(73,566)

INCOME BEFORE INCOME TAX EXPENSE			$	155,350			$		64,348

INCOME TAX EXPENSE				(61,724)					(9,991)

NET INCOME FROM CONTINUING OPERATIONS			$	93,626			$		54,357

DISCONTINUED OPERATIONS
	Loss from operation of discontinued internet segment (net of tax)		$	-			$		-
	Loss from disposal of internet segment (net of tax)			-					(4,316)

	Loss from discontinued operations (net of tax)		$	-			$		(4,316)

NET INCOME			$	93,626			$		50,041


NET INCOME (LOSS) PER SHARE:
	Basic earnings per share:
		Continuing operations	$	.01			$		.00
		Discontinued operations	$	-			$		(.00)
	Diluted earnings per share:
		Continuing operations	$	.01			$		.00
		Discontinued operations	$	-			$		(.00)

AVERAGE COMMON SHARES OUTSTANDING:
	Basic			13,070,139					13,962,551
	Diluted			13,070,139					14,477,703

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

						(Unaudited)
						Nine Months Ended
						September 30,

					2004					2003
OPERATING REVENUES
	Fee income		$	3,352,958			$		2,184,030
	Commissions			9,341,874					7,862,580

	Total revenue		$	12,694,832			$		10,046,610

OPERATING EXPENSES
	Compensation and benefits		$	1,754,768			$		1,346,701
	Commission expense			8,433,400					6,755,872
	General and administrative expenses			1,577,230					1,159,520
	Sales commissions amortized			236,152					290,880
	Depreciation and amortization			74,687					76,316

	Total operating expenses		$	12,076,237			$		9,629,289

OPERATING INCOME			$	618,595			$		417,321

OTHER INCOME (EXPENSES)
	Interest and other income		$	58,485			$		79,441
	Interest expense			(216,134)					(219,586)

	Net other expenses		$	(157,649)				$	(140,145)

INCOME BEFORE INCOME TAX EXPENSE			$	460,946			$		277,176

INCOME TAX EXPENSE				(196,477)					(132,321)

NET INCOME FROM CONTINUING OPERATIONS			$	264,469			$		144,855

DISCONTINUED OPERATIONS
	Loss from operation of discontinued internet segment (net of tax)		$	-			$		(19,178)
	Gain from disposal of internet segment (net of tax)			-					11,197

	Loss from discontinued operations (net of tax)		$	-			$		(7,981)

NET INCOME			$	264,469			$		136,874


NET INCOME (LOSS) PER SHARE:
	Basic earnings per share:
		Continuing operations	$	.02			$		.01
		Discontinued operations	$	-			$		(.00)
	Diluted earnings per share:
		Continuing operations	$	.02			$		.01
		Discontinued operations	$	-			$		(.00)

AVERAGE COMMON SHARES OUTSTANDING:
	Basic			13,045,831					13,588,661
	Diluted			13,045,831					14,103,813

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

					(Unaudited)
					Nine Months Ended
					September 30,
						2004				2003


CASH FLOWS FROM OPERATING ACTIVITIES

	Net income		$	264,469			$		136,874
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		73,915					118,542
		Sales commissions amortized/charged off		236,228					263,338
		Loss on sale of available-for-sale securities		938					13,243
		Minority interest		-					19,889
	(Increase) decrease in:
		Cash segregated for customers		-					319,275
		Accounts receivable		(62,018)					44,174
		Prepaids		(16,063)					26,800
		Deferred sales commissions capitalized, net of CDSC collected		7					64,639
		Other assets		9,523					(16,760)
	Increase (decrease) in:
		Service fees payable		(5,276)					3,615
		Accounts payable		(18,779)					24,562
		Deferred tax		(60,459)					(166,324)
		Other liabilities		56,091					(12,096)

	Net cash provided by operating activities		$	478,576			$		839,771


CASH FLOWS FROM INVESTING ACTIVITIES

	Purchase of property and equipment		$	(30,853)				$	(60,207)
	Purchase of available-for-sale securities			(5)					(761)
	Proceeds from sale of available-for-sale securities			24,019					98,419
	Proceeds from sale of subsidiary			-					337,875
	Purchase of goodwill			(31,932)					(1,146,497)

	Net cash used by investing activities		$	(38,771)				$	(771,171)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

					(Unaudited)
					Nine Months Ended
					September 30,
						2004				2003


CASH FLOWS FROM FINANCING ACTIVITIES

		Redemption of common stock	$	(18,219)				$	(24,526)
		Sale of common stock warrants		3,000					-
		Reduction of notes payable		(180,481)					(13,871)
		Repayments from ESOP		5,020					5,020
		Reduction of short-term borrowing		-					(555,592)
		Preferred dividends paid		(48,800)					-
		Short-term borrowing		300,000					-
		Loss on allocation of ESOP shares		(279)					(1,408)
		Redemption of corporate notes		(962,000)					-
		Long-term borrowing		-					900,025
		Reduction of other current liabilities		(617,775)					(250,000)

		Net cash provided (used) by financing activities	$	(1,519,534)				$	59,648

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			$	(1,079,729)				$	128,248

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			$	2,581,360					1,007,619

	CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	1,501,631			$		1,135,867


	SUPPLEMENTAL SCHEDULE OF NONCASH
	INVESTING AND FINANCING ACTIVITIES:

		Change in unrealized gain (loss) on securities available-for-sale	$	(4)				$	25,567
		Purchase of other assets with common stock		-					210,000
		Disposal of minority interest		-					335,482
		Increase (decrease) in goodwill		(137,760)					629,476
		Increase in other current liabilities		82,233					418,331
		Increase (decrease) in other long-term liabilities		(219,993)					211,145
		Preferred stock dividends declared		22,875					-

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

September 30, 2004 and 2003

NOTE 1 - BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of Integrity Mutual Funds, Inc., a North Dakota corporation, and its subsidiaries (collectively, the "Company"), included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Annual Report on Form 10-KSB for the year ended December 31, 2003, of Integrity Mutual Funds, Inc., as filed with the SEC. The condensed consolidated balance sheet at December 31, 2003, contained herein, was derived from audited financial statements, but does not include all disclosures included in the Form 10-KSB and applicable under accounting principles generally accepted in the United States of America. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, but not required for interim reporting purposes, have been condensed or omitted.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal, recurring nature) necessary for a fair presentation of the financial statements. The results of operations for the nine months ended September 30, 2004, are not necessarily indicative of operating results for the entire year.

NOTE 2 - INCOME TAXES

The Company sponsors several mutual funds. Deferred sales commissions relating to some of its sponsored mutual funds are amortized over 5 years for income tax purposes and amortized over 8 years for financial reporting purposes. The Company is expensing deferred sales commissions relating to other funds for income tax purposes, while amortizing these commissions over 12 months for financial reporting purposes. The effects of these differences will create timing differences between when the commissions are deducted for income tax purposes and expensed as amortization for financial reporting purposes. Deferred tax assets or deferred tax liabilities may result from these timing differences.

NOTE 3 - RECLASSIFICATION

Certain amounts in the 2003 condensed consolidated financial statements have been reclassified to conform with the 2004 presentation. These reclassifications had no effect on the Company's net income.

NOTE 4 – BUSINESS ACQUISITIONS

On December 19, 2003, the Company acquired the management rights to the Maine and New Hampshire Tax-Saver Bond Funds from Forum Financial Group. The two funds had combined assets of approximately $43 million at the time of acquisition. The purchase agreement called for total consideration of approximately $750,000. The majority of the purchase price, or approximately $425,000, was paid upon closing. The remaining consideration of approximately $325,000, which is subject to adjustment based on retention of assets in the funds, has been placed in an escrow account that will be paid out on the first anniversary of the closing date. The total purchase price was paid with cash generated from a private offering of preferred stock. In September of 2004, the liability for the one-year anniversary payment was reduced to $293,000 to reflect the current assets in the acquired funds.

On September 19, 2003, the Company acquired the management rights to the four stock funds in the Willamette Family of Funds. The four funds had combined assets of approximately $63 million at the time of acquisition. The purchase agreement called for total consideration of approximately $1,400,000. The majority of the purchase price, or approximately $900,000, was paid upon closing. The remaining consideration of approximately $500,000, which is subject to adjustment based on retention of assets in the funds, is to be paid as follows: $350,000 within five business days of the one-year anniversary of the closing date, and $150,000 within five business days of the two-year anniversary of the closing date. The total purchase price will be paid by utilizing a commercial bank loan and lines of credit, as well as available cash on hand. In September of 2004, the one-year anniversary payment of approximately $323,000 was paid and the liability for the two-year anniversary payment was reduced to $133,000 to reflect the current assets in the acquired funds.

On May 23, 2003, the Company acquired the management rights to the CNB Funds, which included the $13 million Canandaigua Equity Fund, a large-cap growth fund, and the $1 million Canandaigua Bond Fund. The purchase agreement called for total consideration of approximately $285,000. The majority of the purchase price, or approximately $160,000, was paid upon closing. The remaining consideration of approximately $125,000, which is subject to adjustment based on retention of assets in the funds, is to be paid as follows: $62,500 at the one-year anniversary of the closing date, and $62,500 at the two-year anniversary of the closing date. The total purchase price will be paid by using available cash on hand. In June of 2004, the one-year anniversary payment of approximately $44,000 was paid and the liability for the two-year anniversary payment was reduced to $44,000 to reflect the current assets in the acquired funds.

On May 30, 2003, the Company acquired 100% of the equity stock of Abbington Capital Management, Inc. The purchase consideration was comprised of 700,000 shares of unregistered $.0001 par value common stock of the Company determined to have a total value of $210,000. The common stock was issued pursuant to the following delivery schedule, in a private transaction, exempt from Federal Securities and Exchange Commission (“SEC”) or any state securities commission registration: 200,000 shares at closing; 200,000 shares on August 31, 2003; 200,000 shares on December 31, 2003; and 100,000 shares on April 30, 2004. As a part of the transaction, the Company received a license for the Portfolio Manager’s Stock Selection Matrix, a quantitative investment model for managing equity portfolios.

NOTE 5 – DISCONTINUED OPERATIONS

Effective June 26, 2003, the Company sold its 51% ownership in Magic Internet Services, Inc. The purchase consideration for the Company’s 51% ownership consisted of $337,875, which the Company received at closing, as well as an additional maximum payment of $36,975 to be received 90 days after closing. The additional payment was subject to adjustment based on terms of the contract. The Company received a final payment of $29,622 in October of 2003, resulting in a final adjusted gain (net of tax) from the sale of stock of subsidiary of $11,197.

The results of Magic Internet Services, Inc. are reported in the Company’s Consolidated Statements of Operations separately as discontinued operations. In accordance with GAAP, the Consolidated Balance Sheets have not been restated.

Summarized financial information for discontinued operations is as follows:

		June 26, 2003

Total revenues, net of interest expense	$		233,845

Loss from discontinued operations, net of tax	$		(19,178)
Gain from sale of stock of subsidiary, net of tax			11,197
Loss from discontinued operations, net of tax	$		(7,981)

Total assets	$	753,006
Total liabilities		68,532
Net assets of discontinued operations	$	684,474

NOTE 6 – GOODWILL

The changes in the carrying amount of goodwill for the nine-month period ended September 30, 2004, are as follows:

		Mutual Fund				Broker-Dealer
				Services				Services			Total
Balance as of January 1, 2004	$		7,071,584		$		2,459,850		$	9,531,434
Goodwill acquired during the period			-				18,902			18,902
Goodwill acquisition price adjustment during the period (see Note 4)			(124,730)				-			(124,730)
Impairment losses			-				-			-
Balance as of September 30, 2004	$		6,946,854		$		2,478,752		$	9,425,606

The above segments are tested for impairment on an annual basis in the second quarter and any impairment adjustments are reflected at that time. The segments were tested in the second quarter of 2004 and resulted in no impairment adjustments.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Integrity Mutual Funds, Inc., derives a portion of its revenues and net income from providing investment management, distribution, shareholder services, fund accounting, and related services to the open-end investment companies known as “Integrity Mutual Funds,” “Integrity Managed Portfolios,” and “The Integrity Funds,” hereinafter collectively referred to as “the Funds.” Integrity Mutual Funds currently consists of three open-end investment companies, including ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. Integrity Managed Portfolios consists of one open-end investment company containing six separate series, including the Kansas Municipal Fund, Kansas Insured Intermediate Fund, Nebraska Municipal Fund, Oklahoma Municipal Fund, Maine Municipal Fund, and New Hampshire Municipal Fund. The Integrity Funds consists of one open-end investment company containing eight separate series, including Integrity Equity Fund, Integrity Income Fund, Integrity Value Fund, Integrity Small Cap Growth Fund, Integrity Health Sciences Fund, Integrity Technology Fund, Integrity High Income Fund, and Integrity Municipal Fund. Capital Financial Services, Inc. (“CFS”), the Company’s broker-dealer subsidiary, provides another substantial portion of revenues through sales of mutual funds and variable and fixed insurance products.

The Company organizes its current business units into two reportable segments: mutual fund services and broker-dealer services. The mutual fund services segment provides investment advisory, distribution, and administrative services to the Funds. The broker-dealer services segment distributes securities and insurance products to retail investors through a network of registered representatives.

As disclosed in Note 5 – Discontinued Operations, the Company has classified the results of operations of Magic Internet Services, Inc., (the Internet Services segment), as discontinued operations. The information below has been revised to exclude the Internet Services segment related to Magic Internet Services, Inc.

The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. Most of the businesses were acquired as a unit and the management at the time of the acquisitions was retained.

Segment Information

For the	Mutual Fund		Broker-Dealer
Third Quarter Ended		Services		Services	Total

September 30, 2004

Revenues from external customers	$	1,220,468	$	2,916,458	$	4,136,926
Interest expense		58,270		-		58,270
Depreciation and amortization		21,056		2,409		23,465
Income (loss) from continued operations		(20,243)		113,869		93,626

September 30, 2003

Revenues from external customers	$	966,390	$	2,606,019	$	3,572,409
Interest expense		68,988		-		68,988
Depreciation and amortization		24,671		1,201		25,872
Income (loss) from continued operations		(121,368)		175,725		54,357

For the	Mutual Fund		Broker-Dealer
Nine Months Ended		Services		Services	Total

September 30, 2004

Revenues from external customers	$	3,772,421	$	8,922,411	$	12,694,832
Interest expense		216,134		-		216,134
Depreciation and amortization		67,511		7,176		74,687
Income (loss) from continued operations		(45,883)		310,352		264,469
Segment assets		12,950,061		1,351,408		14,301,469
Expenditures for segment assets		29,376		1,477		30,853

September 30, 2003

Revenues from external customers	$	2,768,384	$	7,278,226	$	10,046,610
Interest expense		218,825		761		219,586
Depreciation and amortization		72,760		3,556		76,316
Income (loss) from continued operations		(451,541)		596,396		144,855
Segment assets		12,704,772		1,492,905		14,197,677
Expenditures for segment assets		58,927		1,280		60,207

Reconciliation of Segment Information

				For the Three Months Ended
		September 30, 2004				September 30, 2003
Revenues
Total revenues for reportable segments	$		4,136,926		$		3,572,409

Profit
Total reportable segment profit	$		93,626		$		50,041

				For the Nine Months Ended
		September 30, 2004				September 30, 2003
Revenues
Total revenues for reportable segments	$		12,694,832		$		10,046,610

Profit
Total reportable segment profit	$		264,469		$		136,874

Assets
Total assets for reportable segments	$		14,301,469		$		14,197,677
Elimination of intercompany receivables			(78,392)				(801,864)
Consolidated assets	$		14,223,077		$		13,395,813

A substantial portion of the Company’s revenue depends upon the amount of assets under its management/service. Assets under management/service can be affected by the addition of new funds to the group, the acquisition of another investment management company, purchases and redemptions of mutual fund shares, and investment performance, which may depend on general market conditions.

ASSETS UNDER MANAGEMENT/SERVICE

By Investment Objective
In Millions

As of September 30,	2004	2003	% Change

FIXED INCOME
Tax-Free Funds	$	276.4	$	269.9	2.4 %
Taxable Funds (Corporate/Government)		10.1		1.0	910.0 %

TOTAL FIXED INCOME FUNDS	$	286.5	$	270.9	5.8 %

EQUITY
Fund of Funds	$	6.2	$	6.9	(10.1)%
Equity Funds		65.1		71.8	(9.3)%

TOTAL EQUITY FUNDS		71.3		78.7	(9.4)%

TOTAL ASSETS UNDER MANAGEMENT/SERVICE	$	357.8	$	349.6	2.3 %

Average for the nine month period	$	372.4	$	298.8	24.6 %

Assets under the Company's management/service were $357.8 million at September 30, 2004, a decrease of $36.5 million (-9.3%) from December 31, 2003, and an increase of $8.2 million (2.3%) from September 30, 2003.

RESULTS OF OPERATIONS

Unless otherwise noted, the following discussions relate only to results from continuing operations.

	Three months ended September 30,					Nine months ended September 30,
		2004		2003		2004			2003

Net income (loss) from continuing operations		$	93,626	$	54,357	$	264,469	$		144,855
Net income (loss) from discontinued operations		$	-	$	(4,316)	$	-	$		(7,981)
Net income		$	93,626	$	50,041	$	264,469	$		136,874
Earnings per share
Basic:
Continuing operations		$	0.01	$	0.00	$	0.02	$		0.01
Discontinued operations		$	-	$	(0.00)	$	-	$		(0.00)
Net income		$	0.01	$	0.00	$	0.02	$		0.01
Diluted:
Continuing operations		$	0.01	$	0.00	$	0.02	$		0.01
Discontinued operation		$	-	$	(0.00)	$	-	$		(0.00)
Net income		$	0.01	$	0.00	$	0.02	$		0.01

The Company reported net income for the quarter ended September 30, 2004, of $93,626, compared to net income of $50,041 for the same quarter in 2003. Net income for the nine months ended September 30, 2004, was $264,469, compared to $136,874 for the same period in 2003.

Operating revenues

Total operating revenues for the quarter ended September 30, 2004, were $4,136,926, an increase of 15.8% from September 30, 2003. Total operating revenues for the nine months ended September 30, 2004, were $12,694,832, an increase of 26.4% from September 30, 2003. The increases are the result of increased fee and commission income.

Fee income for the quarter ended September 30, 2004, increased 33.9% compared to September 30, 2003. Fee income for the nine months ended September 30, 2004, increased 53.5% over the same period in 2003. The increases in fee income are due primarily to three mutual fund acquisitions completed in 2003. The Company receives fees for providing investment advisory services to the Funds. Investment advisory fees constituted 9% of the Company’s consolidated revenues for the nine months ended September 30, 2004. The Company also receives fees from the Funds for providing transfer agency, fund accounting, and other administrative services. These fees constituted 10% of the Company’s consolidated revenues for the nine months ended September 30, 2004.

The Company earns Rule 12b-1 fees in connection with the distribution of Fund shares. A portion of these fees are paid out to other broker-dealers, with the remaining amount retained by the Company to pay for expenses related to the distribution of the Funds. These fees constituted 7% of the Company’s consolidated revenues for the nine months ended September 30, 2004.

Commission income includes CFS commissions and 12b-1 fees associated with the sale of mutual funds and insurance products. The Company pays the representatives a portion of this income as commission expense and retains the balance. Commission income also includes underwriting fees associated with sales of Fund shares subject to front-end sales loads (“FESLs”), as well as contingent deferred sales charges (“CDSCs”) earned in connection with redemptions of Fund shares subject to CSDCs, and the dealer commission associated with sales of Fund shares subject to FESLs, which is paid out to other broker-dealers as commission expense. Commission income increased 10.7%, to $3,078,975 for the quarter ended September 30, 2004, from $2,782,267 for the same period in 2003. Commission income increased 18.8%, to $9,341,874, for the nine months ended September 30, 2004, from $7,862,580, for the same period in 2003. The increases are primarily the result of improved market conditions as well as the recruitment of several new registered representatives in CFS. Commission revenues constituted 74% of the Company’s consolidated revenues for the nine months ended September 30, 2004.

Operating expenses

Total operating expenses for the third quarter and nine months ended September 30, 2004, were $3,952,053 and $12,076,237, respectively, representing increases of 15.1% and 25.4% compared to the same periods in 2003. The increases are a result of the net activity in the major expense categories, as described in the paragraphs that follow.

Compensation and benefits

Total compensation and benefits expense for the quarter ended September 30, 2004, was $572,264, an increase of 14.4% from September 30, 2003. Total compensation and benefits expense for the nine months ended September 30, 2004, was $1,754,768, an increase of 30.3% from the same period in 2003. The increases result primarily from the addition of several new employees to the Company over the past 12 months, as well as annual compensation and benefit increases for all employees.

In May of 2004, the Company implemented a restructuring of wholesaler compensation to a base salary plus incentive formula. At the time of implementation, five wholesalers were added to the Company. The primary function of the wholesalers is to market the Company’s Funds to registered representatives. Over the next 24 months, management expects to continue to expand the wholesaling staff. The Company’s compensation and benefits expense will continue to increase as a result of this effort.

Commission expense

Total commission expense for the quarter ended September 30, 2004, and the nine months ended September 30, 2004, was $2,782,246 and $8,433,400, an increase of 15.8% and 24.8%, respectively, as compared to the same periods in 2003. The increases are related to the increases in commission income.

General and administrative expenses

Total general and administrative expenses for the quarter ended September 30, 2004, were $499,060, an increase of 19.8% from September 30, 2003. Total general and administrative expenses for the nine months ended September 30, 2004, were $1,577,230, an increase of 36.0% from September 30, 2003. The increases are primarily attributable to expenses incurred relating to the new funds that were acquired during 2003, as well as increased travel and entertainment expenses relating to expanding the wholesaling staff.

Sales commissions amortized

Sales commissions paid to brokers and dealers in connection with the sale of shares of the Funds sold without a FESL are capitalized and amortized on a straight-line basis. The Company amortizes the sales commissions relating to some of the Company’s sponsored funds over eight years, which best approximates management’s estimate of the average life of investor’s accounts in these funds and coincides with conversion of Class B shares to Class A shares. CDSCs received by the Company are recorded as a reduction of unamortized deferred sales commissions. Amortization of deferred sales commissions for the quarter ended September 30, 2004, and the nine months ended September 30, 2004, decreased 16.0% and 18.8%, respectively, as compared to the same periods in 2003.

Depreciation and amortization

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142 – Goodwill and Other Intangible Assets. Under SFAS 142, the Company no longer amortizes its goodwill and certain other intangibles over their estimated useful life. Rather, they will be subject to at least an annual assessment for impairment by applying a fair-value based test. There were no impairment adjustments made during the quarter ended September 30, 2004.

Liquidity and capital resources

Net cash provided by operating activities was $478,576 during the nine months ended September 30, 2004, as compared to $839,771 during the nine months ended September 30, 2003. The 2003 activity included a reduction in the cash segregated for customers account due to the closing of the account.

Net cash used by investing activities for the nine months ended September 30, 2004, was $38,771, compared to net cash used by investing activities of $771,171 for the nine months ended September 30, 2003. The 2003 activity included proceeds received from the sale of the Company’s 51% ownership interest in its internet subsidiary as well as the acquisition of management rights to two CNB Funds and four stock funds in the Willamette Family of Funds.

Net cash used by financing activities during the nine months ended September 30, 2004, was $1,519,534. The major financing activities for the period were the payment of $250,000, in January of 2004, to repurchase 500,000 common shares, pursuant to the put privilege that was exercised by the previous owners of Capital Financial Services, Inc., the retirement of $962,000 of corporate notes that matured on June 30, 2004, a payment of $323,000, in September of 2004, relating to the acquisition of the management rights to the Willamette Funds, and the receipt of a $100,000 revolving bank line of credit and a $200,000 non-revolving bank line of credit in June of 2004.

At September 30, 2004, the Company held $1,501,631 in cash and cash equivalents, as compared to $2,581,360 at December 31, 2003. Liquid assets, which consist of cash and cash equivalents, securities available-for-sale and current receivables decreased to $2,611,342 at September 30, 2004, from $3,653,238 at December 31, 2003. The Company is required to maintain certain levels of cash and liquid securities in its broker-dealer subsidiaries to meet regulatory net capital requirements.

The Company has historically relied upon sales of its equity securities, debt instruments, and bank loans for liquidity and growth. In June of 2003, the Company borrowed $900,000 under a bank credit line, primarily to pay for the acquisition of the management rights to the four stock funds in the Willamette Family of Funds. In December of 2003, the Company borrowed the final $300,000 available under this bank credit line and issued $1,525,000 of Series A Convertible Preferred Shares in a private offering to fund its acquisition of the management rights to the Maine and New Hampshire Tax-Saver Bond Funds from Forum Financial Group and for working capital. On September 5, 2003, the Company paid off an interim bank loan of approximately $555,000 that was secured in September of 2002 to refinance maturing debentures.

The Company has had significant cash requirements to meet several liabilities that were due in the first nine months of 2004. In January of 2004, the Company repurchased 500,000 common shares for $250,000 under a put option related to its acquisition of CFS. In March of 2004, the Company paid approximately $160,000 in tax obligations for 2003. In early June of 2004, the Company made an additional payment of approximately $44,000, relating to the acquisition of the management rights to the Canandaigua Funds. On June 30, 2004, the Company retired $962,000 of corporate notes. In September of 2004, the Company made an additional payment of approximately $323,000, relating to the acquisition of the management rights to the Willamette Funds. In order to maintain required levels of regulatory net capital and to add to the current level of working capital, the Company received two new bank lines of credit. A $100,000 revolving operating line of credit was drawn down on June 23, 2004, as well as a $200,000 non-revolving line of credit, which was issued to bridge timing differences associated with the retirement of the corporate notes and the inflow of cash.

Management believes that the Company's existing liquid assets, together with the expected continuing cash flow from operations, will provide the Company with sufficient resources to meet its operating expenses during the next twelve months. Management has undertaken efforts to raise additional capital through the issuance of equity securities, debt securities, or other financing alternatives in order to service the current portion of long-term debt maturing over the next twelve months. Management expects that the Company’s principal needs for cash may be to advance sales commissions on Funds subject to CDSCs, acquire additional investment management or financial services firms, acquire the management rights to additional outside mutual funds, repurchase shares of the Company's common stock, and service current debt.

Sales of fund shares with FESLs provide current distribution revenue to the Company in the form of the Company's share of the FESLs, and distribution revenue, over time, in the form of 12b-1 payments. Sales of fund shares with CDSCs provide distribution revenue, over time, in the form of 12b-1 payments and, if shares are redeemed within 5 years, CDSCs. However, the Company pays commissions on sales of Fund shares subject to CDSCs, reflects such commissions as a deferred expense on its balance sheet and amortizes such commissions over a period of up to eight years, thereby recognizing distribution expenses. Therefore, to the extent that sales of Fund shares subject to CDSCs increases over time relative to sales of shares subject to FESLs, current distribution expenses may increase relative to current distribution revenues in certain periods, which would negatively impact the Company's cash flow in such periods. In addition, the Company may need to find additional sources of funding if existing cash flow and debt facilities are insufficient to fund commissions payable to selling broker-dealers on shares subject to CDSCs if sales of Fund shares subject to CDSCs increase significantly.

FORWARD-LOOKING STATEMENTS

When used herein, in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases, and in other Company-authorized written or oral statements, the words and phrases "can be," "expects," "anticipates," "may affect," "may depend," "believes," "estimate," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Such statements are subject to certain risks and uncertainties, including those set forth in this "Forward-Looking Statements" section, which could cause actual results for future periods to differ materially from those presently anticipated or projected. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statement to reflect events or circumstances after the date of such statements.

The Company derives substantially all of its revenues from two sources; commission revenue earned in connection with sales of shares of mutual funds, variable insurance products, and fixed insurance products; and fees relating to the management of, and provision of services to, the Funds. The fees earned by the Company are generally calculated as a percentage of assets under management/service. If the Company's assets under management/service decline, or do not grow in accordance with the Company's plans, fee revenues and earnings would be materially adversely affected. Assets under management/service may decline because redemptions of Fund shares exceed sales of Fund shares, or because of a decline in the market value of securities held by the Funds, or a combination of both.

In seeking to sell Fund shares and market its other services, the Company operates in the highly competitive financial services industry. The Company competes with approximately 8,000 open-end investment companies that offer shares to the investing public in the United States. The Company also competes with the financial services and other investment alternatives offered by stock brokerage and investment banking firms, insurance companies, banks, savings and loan associations, and other financial institutions, as well as investment advisory firms. Most of these competitors have substantially greater resources than the Company. The Company sells Fund shares principally through third-party broker-dealers. The Company competes for the services of such third party broker-dealers with other sponsors of mutual funds who generally have substantially greater resources than the Company. Banks in particular have increased, and continue to increase, their sponsorship of proprietary mutual funds distributed through third-party distributors. Many broker-dealer firms also sponsor their own proprietary mutual funds, which may limit the Company's ability to secure the distribution services of such broker-dealer firms. In seeking to sell Fund shares, the Company also competes with increasing numbers of mutual funds that sell their shares without the imposition of sales loads. No-load mutual funds are attractive to investors because they do not have to pay sales charges on the purchase or redemption of such mutual fund shares. This competition may place pressure on the Company to reduce the FESLs and CDSCs charged upon the sale or redemption of Fund shares. However, reduced sales loads would make the sale of Fund shares less attractive to the broker-dealers upon whom the Company depends for the distribution of Fund shares. In the alternative, the Company might itself be required to pay additional fees, expenses, commissions, or charges in connection with the distribution of Fund shares, which could have a material adverse effect on the Company's earnings.

The fact that the investments of some Funds are geographically concentrated within a single state makes the market value of such investments particularly vulnerable to economic conditions within that state. In addition, the states in which the investments of the Funds, as a group, are concentrated are themselves concentrated in certain regions of the United States. The Company's fee revenues may, therefore, be adversely affected by economic conditions within such regions.

The following factors, among others, could cause actual results to differ materially from forward-looking statements, and future results could differ materially from historical performance:

· General political and economic conditions which may be less favorable than expected;

· The effect of changes in interest rates, inflation rates, the stock markets, or other financial markets;

· Unfavorable legislative, regulatory, or judicial developments;

· Incidence and severity of catastrophes, both natural and man-made;

· Changes in accounting rules, policies, practices, and procedures which may adversely affect the business;

· Terrorist activities or other hostilities that may adversely affect the general economy.

Item 3.

CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective, as of September 30, 2004, and that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed and summarized, and reported within the time periods specified by the SEC’s rules and forms.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies or material weaknesses.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

The North Dakota Attorney General’s Office and the North Dakota Securities Commissioner raised issues concerning the Company’s status as a North Dakota venture capital corporation, including the method and manner of the Company’s compliance with reporting requirements respecting the sales of certain investments made by the Company in non-qualified entities under the venture capital corporation statute, the availability of the venture capital corporation exemption from registration for the sales of certain securities, and the subsequent use of offering circulars that allegedly omitted reference to information pertaining to the Company’s compliance with North Dakota’s venture capital corporation reporting requirements.

On March 22, 2004, the Company entered into a settlement agreement with the North Dakota Attorney General’s Office, which agreement includes the following:

· The Company will immediately start and diligently pursue a process to change its corporate structure from that of a venture capital corporation to a regular business corporation.

· The Company will fully and completely comply with all provisions of the N.D.C.C. Chapter 10-30.1, governing venture capital corporations, until the Company changes its corporate structure. This agreement includes not investing in non-qualified entities, seeking appropriate certification from the Secretary of State, and giving appropriate notices of investment to the Secretary of State.

· The Company agrees to pay a civil penalty in the amount of $10,000, in addition to any other penalties authorized by law, if the Company does not comply with the prior two conditions.

A change in the corporate structure to a regular business corporation required a meeting and consent of the Company’s shareholders in order to approve changes to the Company’s articles of incorporation. The Company received approval of corporate structure changes at its Annual Meeting of Shareholders that was held on May 28, 2004. The Company has now complied with the conditions of the settlement agreement and will not need to pay a civil penalty.

On March 15, 2004, the North Dakota Securities Commissioner issued an “Order for and Notice of Civil Penalty and Notice of Right to Request a Hearing” against Integrity Mutual Funds, Inc., ND Capital, Inc., and Robert E. Walstad, alleging that their failure to comply with the reporting requirements of North Dakota’s venture capital corporation statute negated their reliance on the venture capital corporation exemption from registration in North Dakota and resulted in omissions of disclosure in certain investment offering circulars in violation of North Dakota’s securities laws. The Company maintains that it has met all regulatory disclosure and reporting requirements, and will therefore contest this Order and Notice in appropriate administrative and judicial forums. The potential settlement charges range from zero to $286,000.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Small Business Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased	Average Price Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 2004	0	$.00	0	$612,381
August 2004	0	$.00	0	$612,381
September 2004	0	$.00	0	$612,381
Total	0	$.00	0	$612,381

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Submission of Matters to a Vote of Security Holders

None

Item 5.

Other Information

None

Item 6.

Exhibits and Reports on Form 8-K

(a) Exhibits

3.1	Restated Articles of Incorporation filed June 1, 2004 with North Dakota Secretary of State
3.2	Amended Bylaws
4.1	Form of Series “A” Preferred Stock Certificate
10.52	Employment Agreement between Integrity Mutual Funds, Inc., and Mark Anderson
10.53	Stock Purchase Agreement – ND Holdings, Inc. and Capital Financial Services, Inc.
31.1	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act and Rules 13a-14(a) and 15d-14(a) of the Exchange Act
31.2	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act and Rules 13a-14(a) and 15d-14(a) of the Exchange Act
32.1	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act and 18 U.S.C. Section 1350
32.2	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act and 18 U.S.C. Section 1350

(b) Reports on Form 8-K

None

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES

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 10, 2004	By /s/ Robert E. Walstad

		Robert E. Walstad
		Chief Executive Officer,
		Chairman, and Director
		(Principal Executive Officer)


Date:	November 10, 2004	By /s/ Heather Ackerman

		Heather Ackerman
		Chief Financial Officer

RESTATED ARTICLES OF INCORPORATION

INTEGRITY MUTUAL FUNDS, INC.

ARTICLE ONE

NAME

The name of the corporation is Integrity Mutual Funds, Inc.

ARTICLE TWO

CAPITAL STRUCTURE

Authorized Shares

The total number of shares of all classes which the corporation has authority to issue is one billion one hundred million (1,100,000,000), one billion (1,000,000,000) shares of which shall be a single class of common shares, par value $0.0001 per share, and one hundred million (100,000,000) shares of which shall be preferred shares, par value $0.0001 per share.

Preferred Shares

1. The preferred shares may be issued at any time and from time to time in one or more series or classes. The board of directors is hereby authorized to provide for the issuance of preferred shares in series or classes and by filing a certificate of designation pursuant to applicable provisions of the North Dakota Century Code (hereinafter referred to as a “Preferred Share Certificate of Designation”) to establish from time to time the number of shares to be included in each such series or class and to fix the designation, powers, preferences, and relative, participating, optional, or other rights of shares of each such series or class and the qualifications, limitations, and restrictions thereof, if any.

2. The authority of the board of directors with respect to each series or class of preferred shares shall include, but not be limited to, determination of the following:

a. The designation of the series or class, which may be by distinguishing number, letter, or title;

b. The number of shares of the series or class, which number the board of directors may thereafter (except where otherwise provided in the applicable Preferred Share Certificate of Designation) increase or decrease (but not below the number of shares thereof then outstanding);

c. Whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series or class;

d. Whether dividends, if any, shall be payable in cash, in kind, or otherwise;

e. The dates on which dividends, if any, shall be payable;

f. The redemption rights and price or prices, if any, for shares of the series or class;

g. The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series or class;

h. The amounts payable on shares of the series or class in the event of any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the corporation;

i. Whether the shares of the series or class shall be convertible or exchangeable into shares of any other series or class or any other security of the corporation or any other corporation and, if so, the specification of such other series or class or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible or exchangeable, and all other terms and conditions upon which such conversion or exchange may be made;

j, Restrictions on the issuance of shares of the same series or class or any other series or class; and

k. Whether or not the holders of the shares of such series or class shall have voting rights in addition to the voting rights provided by law and, if so, the terms of such voting rights, which may provide, among other things and subject to the other provisions of these articles of incorporation, that each share of such series or class shall carry one vote or more or less than one vote per share, that the holders of such series or class shall be entitled to vote on certain matters as a separate class (which for such purpose may be composed solely of such series or class or of such series or class and one or more other series or classes of shares of the corporation), and that all the shares of such series or class entitled to vote on a particular matter shall be deemed to be voted on such matter in the manner that a specified portion of the voting powers of the shares of such series or class or separate class is voted on such matter.

3. The common shares shall be subject to the express terms of the preferred shares and any series or class thereof.

Designation of Series A Convertible Preferred Shares

1. Name and Designation

The distinctive name and serial designation of this series of preferred shares is “Series A Convertible Preferred Shares” (the “Series A Preferred Shares”).

2. Number of Shares

The Series A Preferred Shares shall consist of five million (5,000,000) shares. The number of shares constituting such series may, unless prohibited by the articles of incorporation or by applicable law of the State of North Dakota, be increased or decreased from time to time by a resolution or resolutions of the board of directors; provided that no decrease shall reduce the number of Series A Preferred Shares to a number less than the number of shares then outstanding plus the number of shares issuable upon the exercise of outstanding options, rights, or warrants, or upon the conversion of any outstanding securities issued by the corporation convertible into Series A Preferred Shares. Series A Preferred Shares repurchased or redeemed by the corporation or surrendered for conversion shall be canceled and shall revert to authorized but unissued shares of preferred shares, undesignated as to series, subject to reissuance by the corporation as shares of preferred shares of any one or more series other than the Series A Preferred Shares.

3. Dividends

a. The holders of the Series A Preferred Shares shall be entitled to receive out of any assets legally available therefor cumulative dividends at the rate of 6.0% per year (of the initial issue price of $.50 per share), based upon a 360-day year (twelve 30-day months), accrued monthly and payable quarterly on the fifteenth day of the second month following the end of each calendar quarter (quarters ending March 30, June 30, September 30, and December 31) of each year in preference and priority to any payment of any dividend on the common shares. Such dividends shall accrue on any given share from the day of original issuance of such share and shall accrue from month to month whether or not earned or declared. Dividends will be due and payable only if and when declared by the board of directors. if at any time dividends on the outstanding Series A Preferred Shares at the rate set forth above shall not have been paid or declared and set apart for the payment with respect to all preceding periods, the amount of the deficiency shall be fully paid or declared and set apart for payment, but without interest, before any distribution, whether by way of dividend or otherwise, shall be declared or paid upon or set apart for the common shares of the corporation.

b. Any dividend payable on a dividend payment date shall be paid in cash and in United States dollars if the corporation has sufficient profitability and cash flow to pay a cash dividend or at the option of the board of directors may be paid in the form of Series A Preferred Shares at an issue price of $.50 per share.

c. Nothing contained herein shall be deemed to establish or require any payment or other charges in excess of the maximum permitted by applicable law. In the event that any payment required to be to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the corporation, the holder, and thus refunded to the corporation.

4. Liquidation Preference; Redemption

a. In the event of any liquidation, dissolution, or winding up of the corporation, either voluntary or involuntary, the holders of the Series A Preferred Shares shall be entitled to receive, prior and in preference to any distribution of any assets of the corporation to the holders of the common shares, the amount of $.50 per share plus any and all accrued but unpaid dividends (the “Liquidation Preference”).

b. A consolidation or merger of the corporation with or into any other corporation or corporations or a sale of all or substantially all of the assets of the corporation (other than a sale or transfer to a wholly-owned subsidiary of the corporation) shall not be deemed a liquidation, dissolution, or winding up within the mean of this Section 4.

c. In the event of a change in control of the corporation, the corporation shall have the right to redeem any or all of the shares of Series A Preferred Shares after a sixty-day notice upon payment in cash of the Liquidation Preference to the holders thereof. Holders of the Series A Preferred Shares shall have the right to convert the Series A Preferred Shares to common shares at the rate of one share of common shares for each share of Series A Preferred Shares during the sixty-day period.

d. For the purposes hereof, a “Change of Control Transaction” means the occurrence of any of:

(i) a replacement of more than one-half of the members of the corporation’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (ii) the merger of the corporation with or into another entity that is not wholly-owned by the corporation, consolidation, or sale of all or substantially all of the assets of the corporation in one or a series of related transactions, or (iii) the execution by the corporation of an agreement to which the corporation is a party or by which it is bound, providing for any of the events set forth above in (i) or (ii).

e. At any time after five years from issuance, the corporation shall have the right to redeem any or all of the shares of Series A Preferred Shares after a sixty-day notice upon payment in cash of the Liquidation Preference to the holders thereof. Holders of the Series A Preferred Shares shall have the right to convert the Series A Preferred Shares to common shares at the rate of one share of common shares for each share of Series A Preferred Shares during the sixty-day period.

5. Conversion to Common Shares

a. Series A Preferred Shares shall be convertible into the corporation’s $0.000l par value common shares at the rate of one share of $0.0001 par value common shares for each share of Series A Preferred Shares at any time after issuance at the option of the holder.

b. The corporation has the option to require the holders of all or any part of the Series A Preferred Shares to convert to the corporation’s $0.0001 par value common shares at the rate of one share of $0.0001 par value common shares for each share of Series A Preferred Shares at any time after one year from issuance, provided that the closing bid price of the corporation’s $0.000l par value common shares shall have been $1.00 or greater for the sixty days prior to the corporation’s exercising of its option to require conversion of the Series A Preferred Shares to the corporation’s $0.0001 par value common shares.

6. Voting Rights

In the event, and only in the event, that a declared dividend is in arrears for more than sixty days from the date of scheduled payment, the Series A Preferred Shares shall have the right to vote together with the holders of the corporation’s common shares on a one vote per share basis (and not as a separate class) on all matters presented to the holders of the common shares.

7. Attorney’s Fees

Any holder of Series A Preferred Shares shall be entitled to recover from the corporation the reasonable attorney’s fees and expenses incurred by such holder in connection with enforcement by such holder of any obligation of the corporation hereunder.

8. Additional Restrictions

For as long as any shares of the Series A Preferred Shares are outstanding, the corporation will not amend the terms of the Series A Preferred Shares without the consent of the holders of the Series A Preferred Shares.

9. Reacquired Shares

Any Series A Preferred Shares purchased or otherwise acquired by the corporation in any manner whatsoever shall constitute authorized but unissued preferred shares and may be reissued as part of a new series of the preferred shares by resolution or resolutions of the board of directors, subject to the conditions and restrictions on issuance set forth herein, in the articles of incorporation, or in any other certificate of designation, preferences, and rights creating a series of preferred shares or as otherwise required by law.

10. Consolidation, Merger, Exchange, Etc.

In case the corporation shall enter into any consolidation, merger, combination, statutory share exchange, or other transaction in which the common shares are exchanged for or changed into other shares or securities, money, and/or any other property, then in any such case the Series A Preferred Shares shall at the same time be similarly exchanged or changed into an amount per share (subject to the provision for adjustment hereinafter set forth) equal to one times the aggregate amount of shares, securities, money and/or any other property (payable in kind), as the case may be, into which or for which each share of common shares is changed or exchanged. In the event the corporation shall at any time after the consummation of the transactions contemplated by the transaction agreement declare or pay any dividend on common shares payable in common shares or effect a subdivision or combination or consolidation of the outstanding common shares (by reclassification or otherwise) into a greater or lesser number of shares of common shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series A Preferred Shares shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of common shares outstanding immediately alter such event, and the denominator of which is the number of shares of common shares that were outstanding immediately prior to such event.

11. Rank

The Series A Preferred Shares shall rank junior in terms of dividend and liquidation, dissolution, and winding up rights to all other series of the corporation’s preferred shares hereafter issued that specifically provide that they shall rank senior to the Series A Preferred Shares.

12. Fractional Shares

Series A Preferred Shares may be issued in fractions of a share that shall entitle the holder, in proportion to such holder’s fractional shares, to receive dividends, participate in distributions, and to have the benefit of all other rights of holders of Series A Preferred Shares.

13. No Adverse Actions

The corporation shall not in any manner, whether by amendment of the certificate of incorporation (including, without limitation, any Certificate of Designation), merger, reorganization, recapitalization, consolidation, sale of assets, sale of shares, tender offer, dissolution, or otherwise take any action or permit any action to be taken solely or primarily for the purpose of increasing the value of any class of shares of the corporation if the effect of such action is to reduce the value or security of the Series A Preferred shares.

ARTICLE THREE

PREEMPTIVE RIGHTS

Unless otherwise determined by the board of directors, no shareholder shall be entitled, as a matter of right, to purchase, subscribe for, or receive any right or rights to subscribe for any shares of any class that the corporation may issue or sell, whether or not exchangeable for any shares of the corporation of any class or classes, and whether or not of unissued shares authorized by the articles of incorporation as restated or by any amendment of the articles or out of shares of the corporation acquired by it after the issuance of the shares, and whether issued for cash, promissory notes, services, personal or real property, or other securities of the corporation, nor shall any holder of shares of the corporation be entitled to any right of subscription to any of such shares. Further, unless otherwise determined by the board of directors, no holder of any shares of the corporation is entitled, as a matter of right, to purchase or subscribe for any obligation which the corporation may issue or sell that shall be convertible into or exchangeable for any shares of the corporation of any class or classes or to which shall be attached or appurtenant any warrant or warrants or other instrument or instruments which confer on the holder or holders of the obligation the right to subscribe for or purchase from the corporation any shares of any class or classes.

ARTICLE FOUR

REGISTERED OFFICE; REGISTERED AGENT

The address of the registered office of the corporation is I Main Street North, Minot, North Dakota 58703, and the name of its registered agent at that address is Robert E. Walstad.

ARTICLE FIVE

RESTATED ARTICLES OF INCORPORATION

1. The shareholders adopted the restated articles at a meeting held on May 28, 2004.

2. The restated articles supersede the original articles and all amendments to them.

3. The restated articles have been adopted pursuant to Chapter 10-19.1 of the North Dakota Century Code.

Dated this 1 day of June, 2004.

INTEGRITY MUTUAL FUNDS, INC.

By /s/Robert E Walstad

Robert E. Walstad

Chairman of the Board of Directors

and Chief Executive Officer

INTEGRITY MUTUAL FUNDS, INC.

ARTICLE I

Offices

The principal office of the corporation in the State of North Dakota shall be located at 1 North Main in Minot, North Dakota. The corporation may have such other offices either within or without the State of North Dakota as the board of directors may designate or as the business of the corporation may require from time to time.

ARTICLE II

Shareholders

Section 1. Annual Meeting. The board of directors shall set the date, time and place of the annual meeting of the shareholders for the purpose of electing directors and for the transaction of such other busi-ness as may come before the meeting. If the election of directors shall not be held on the day designated herein for the annual meeting of the shareholders or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as convenient.

Section 2. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by statute, may be called by the president or by the board of directors and shall be called by the president at the request of the holders of not less than twenty-five percent of all outstanding shares of the corporation entitled to vote at the meeting.

Section 3. Place of Meeting. The board of directors may designate any place either within or without the State of North Dakota as the place of meeting for any annual meeting or for any special meeting called by the board of directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of North Dakota, as the place for the holding of such meeting. If no designation is made or if a special meeting be otherwise called, the place of meeting shall be the principal office of the corporation in the State of North Dakota.

Section 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the president or the secretary or the officer or the persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the share transfer books of the corporation with postage thereon prepaid.

Section 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend or in order to make a determination of shareholders for any other proper purpose, the board of directors of the corporation may provide that the share transfer books shall be closed for a stated period but not to exceed, in any case, fifty days. If the share transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the share transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty days, and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the share transfer books are not closed and no record date is fixed in advance for the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof or shareholders entitled to receive payment of any dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such divided is adopted, as the case may be, shall be the record date for such determination of shareholders entitled to vote at any meeting of shareholders or any adjournment thereof or entitled to receive payment of any such dividend.

Section 6. Quorum. A majority of the outstanding shares of the corporation entitled to vote represented in person or by proxy shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is present or represented, those present may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

Section 7. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.

Section 8. Voting of Shares. Subject to the provisions of Section 9 of this Article II, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders.

Shares of its own belonging to the corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time.

Section 9. Cumulative Voting. At each election for directors, every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote, or to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principle among any number of candidates.

Section 10. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders or any other action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.

ARTICLE III

Board of Directors

Section 1. General Powers. The business and affairs of the corporation shall be managed by its board of directors.

Section 2. Number, Tenure and Qualifications. The initial number of directors of the corporation shall be one; however, the board of directors shall have the power by majority vote to increase or decrease the number of directors; provided, however, that in the event of a decrease in the number of directors, any currently elected director may elect to continue to serve out the remainder of his term. Each director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected and qualified.

Section 3. Regular Meetings. A regular meeting of the board of directors shall be held without other written notice than this bylaw immediately after, and at the same place as, the annual meeting of shareholders. The board of directors may provide by resolution the time and place, either within or without the State of North Dakota, for the holding of additional regular meetings without other notice than this resolution.

Section 4. Special Meetings. Special meetings of the board of directors may be called by or at the request of the president or any three directors. The person or persons authorized to call special meetings of the board of directors may fix any place either within or without the State of North Dakota as the place for holding any special meeting of the board of directors called by them.

Section 5. Notice. Notice of any meeting shall be given at least three days previously thereto by written notice delivered personally or mailed to each director at his business address or by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business, because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

Section 6. Quorum. A majority of the number of directors fixed by the most recent resolution fixing the number of directors shall constitute a quorum for the transaction of business at any meeting of the board of directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.

Section 7. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors.

Section 8. Vacancies. Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at any annual meeting or at a special meeting of shareholders called for that purpose, except that the initial director may increase the size of the board to seven directors and appoint the persons to fill the six vacancies so created.

Section 9. Compensation. By resolution of the board of directors, the directors may be paid their expenses, if any, of attendance at each meeting of the board of directors. Any director may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as a director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

Section 10. Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

ARTICLE IV

Officers

Section l. Number. The officers of the corporation shall be a chairman of the board, a chief executive officer, a president, one or more vice presidents, a treasurer and such other officers as the board of directors shall determine, each of whom shall be elected by the board of directors. Any two or more offices may be held by the same person.

Section 2. Election and Term of Office. The officers of the corporation to be elected by the board of directors shall be elected annually at the first meeting of the board of directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until death or until he shall resign or have been removed in the manner hereinafter provided.

Section 3. Removal. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise may be filled by the board of directors for the unexpired portion of the term.

Section 5. Powers and Duties. The powers and duties of the several officers shall be as provided from time to time by resolution or other directive of the board of directors. In the absence of such provisions, the respective officers shall have the powers and shall discharge the duties customarily and usually held and performed by like officers of corporations similar in organization and business purposes to this corporation.

Section 6. Salaries. The salaries of the officers shall be fixed from time to time by the board of directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation.

ARTICLE V

Contracts, Loans, Checks and Deposits

Section l. Contracts. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

Section 2. Loans. No loans shall be contracted on behalf of the corporation, and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances.

Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents, of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors.

Section 4. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select.

ARTICLE VI

Certificates for Shares and Their Transfer

Section 1. Certificates for Shares. Certificates representing shares of the corporation shall be in such form as shall be determined by the board of directors. Such certificates shall be signed by the president or vice president and the secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued with the number of shares and date of issue shall be entered on the share transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled, and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe.

Section 2. Transfer of Shares. Transfer of shares of the corporation shall be made only on the share transfer books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation, and on surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.

ARTICLE VII

Waiver of Notice

Whenever any notice is required to be given to any shareholder or director of the corporation under the provisions of these bylaws or under the provisions of the articles of incorporation or under the provisions of the North Dakota Business Corporation Act, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

ARTICLE VIII

Fiscal Year

The fiscal year shall end on December 31 ^st of each year.

ARTICLE IX

Amendments

These bylaws may be altered, amended or repealed and new bylaws may be adopted by the board of directors at any regular or special meeting of the board of directors.

The foregoing amendments to the bylaws of Integrity Mutual Funds, Inc., are hereby approved and adopted this 28 ^th day of May, 2004, by all of the directors.

IN TESTIMONY WHEREOF, WITNESS the signatures of the directors.

/s/Vance A. Castleman

Vance A. Castleman

/s/Peter A. Quist

Peter A. Quist

/s/Myron D. Thompson

Myron D. Thompson

/s/Richard H. Walstad

Richard H. Walstad

/s/Robert E. Walstad

Robert E. Walstad

Mark R. Anderson - Employment Agreement

AGREEMENT effective as of May 1, 2004 by and between Integrity Mutual Funds, Inc., a Corporation organized and existing under the laws of the State of North Dakota, having an office and principal place of business at 1 North Main, Minot, North Dakota 58703 (hereinafter referred to as the "Employer"), and Mark R. Anderson, an individual residing at 405 16 ^th Avenue SW, Minot, North Dakota 58701 (hereinafter referred to as the "Employee").

W I T N E S S E T H:

WHEREAS, Employer desires to procure the services and access the business knowledge and contacts of Employee upon the terms herein set forth; and

WHEREAS, Employee desires to render services upon the terms herein set forth.

NOW THEREFORE, in consideration of the premises herein, and the mutual promises and undertakings herein contained and for other good and valuable consideration, the parties agree as follows:

The Employer hereby employs the Employee and the Employee hereby accepts employment upon the terms and conditions hereinafter set forth.

1. Purpose: This contract is made in order that the Employer may procure access to: (i) the financial industry knowledge, (ii) financial industry contacts, (iii) administrative skills and (iv) business enhancement experience of Employee. Employee agrees to devote Employee's professional and business knowledge, energies and endeavors to the business of Employer in the manner directed by the Employer’s Chief Executive Officer (CEO) and/or Board of Directors of Integrity Mutual Funds, Inc., and shall operate at all times in strict accordance with the ethical standards of a securities and financial services professional. Employee has stated that he has no conflicts of interest, current or previous financial or securities related regulatory issues or violations with state, federal or self-regulatory organizations that could impede or otherwise interfere with his duties under this agreement. Employee shall complete a due diligence and conflicts of interest questionnaire to be provided by Employer similar to the form of questionnaire completed by the Employer’s directors.

2. Duties. The Employee agrees to act as President of Integrity Mutual Funds, Inc. Employee shall report to the Employer’s CEO and/or Board of Directors of Integrity Mutual Funds, Inc. Employee’s areas of responsibility shall include but are not limited to:

a) Effectively representing the Employer as its President and providing presidential corporate functions as day-to-day decision maker, chief of operations and corporate leader.

b) Responsibility for supervision of all phases of the Employer’s day to day operations, including regulatory responsibility, compliance and reporting, public company activities, mutual fund distribution, advisory and fund management functions, broker dealer operations, fund administrative activities, and stock transfer agency services.

c) Administrative and internal financial planning and budgeting for the Employer through interaction with the Employer’s management team and employees with the goal of control of expenses, increases in net revenues and improved cash flow.

d) Development and execution of an internal business plan and financial budget with the goal of enhancing Employer’s shareholder value through administrative and cost structure improvements, corporate and personnel goal setting, cost savings and net revenue enhancements.

e) Such further duties and responsibilities as are assigned or directed to Employee by the Employer’s CEO and/or Board of Directors of Integrity Mutual Funds, Inc.

3. Employee is to devote his full time and efforts to Employer. Employee will not engage in any other gainful occupation or consulting for his personal benefit without the prior written consent of the Employer acting by its CEO. Employer will indemnify Employee for claims against Employee that arise from lawful actions of the Employee authorized by Employer and done within the scope of Employee’s employment. Employer will indemnify, defend, and hold Employee harmless from, against any and all actions, causes of action of any kind or nature whatsoever against Employee which arise from lawful actions of the Employee authorized by Employer and done within the scope of Employee’s Employment.

4. Term: Subject to the provisions for termination as hereinafter provided, the term of this agreement shall begin and be effective the effective date written above, and shall continue for a period of one year thereafter provided, however, that the term of this agreement shall automatically extend for consecutive one-month periods on the last day of each calendar month during the term hereof. During the term of this agreement the Employee’s job performance shall be subject to review by the Employer’s Board of Directors or such committee(s) of Employer as Employer may so desire. In the event that such review is unsatisfactory, Employer may terminate this agreement pursuant to the provisions of paragraph 15 below.

5. Employee shall work out of the Employer’s office in Minot, North Dakota. Employer shall provide Employee with such office space, equipment and staff as shall be reasonably necessary for Employee’s accomplishment of his job responsibilities.

6. Salary Compensation: For all services rendered by the Employee during the one year term of this agreement, the Employer shall pay to the Employee as salary (or other applicable payment) the sum of seventy-eight thousand dollars ($78,000) per year as salary, which sum shall be payable at the rate of six thousand five hundred dollars ($6,500) per month, in arrears, (or prorated amount if the first month is a portion of a month) commencing on the date of this contract and effective during the entire term hereof. All salary compensation provided for in this agreement shall be subject to the Employer deducting therefrom Social Security, Medicare, federal and state income taxes and any and all withholding payments as may be required by law.

7. Other Compensation: Employee shall be entitled to additional incentive compensation in the amounts set forth below upon the achievement of certain goals as set forth below:

a.) On the twelve month anniversary of Employee’s employment hereunder, Employee shall receive $5,000 if none of Employer’s subsidiary operating companies in securities brokerage, advisory and/or stock transfer receive deficiency letters or other sanctions from regulators related to events occurring or attributable to the term of Employee’s employment.

b.) Employee shall be paid $5,000 if Company shows an increase in income before taxes, excluding expenses directly attributable to Capital Financial Services, Inc. or mutual fund distribution. Incentive-based bonus or override payments made to employees of the Company shall be excluded from this calculation. An additional $5,000 shall be paid if the increase is greater than or equal to (≥) ten percent (10%).

c.) Employee shall be paid $5,000 if the closing price of the Company’s common stock on April 30, 2005 shows an increase of ten percent or more from the close on April 30, 2004. An additional $5,000 shall be paid if the increase is greater than or equal to (≥) twenty percent (20%).

d.) After the initial term of this agreement expires, an incentive bonus structure similar to that contained in this paragraph 8 with a twelve (12) month achievement window shall be set by the Board of Directors after good faith negotiation of the same with the Employee. Upon termination of this agreement for any reason, Employee shall be entitled to pro-rata bonus compensation for any benchmarks that have been achieved up to the date of termination.

8. Other Employee Benefits

(a) The Employer shall pay for and/or reimburse the Employee for the cost of attending required professional, management or technical seminars.

(b) The Employer shall maintain for the benefit of the Employee such medical, hospitalization, life and disability insurance in such amounts as may be determined by the Board of Directors, in its absolute discretion, from time to time, provided the same are available at standard rates, with Employee to receive at a minimum, those benefits provided to other regular employees.

(c) The Employee is authorized to incur reasonable expenses for promoting and advancing the business of the Employer, including the expenses for entertainment, travel and similar items. The Employer will pay for and/or reimburse the Employee for all such reasonable expenses upon the presentation by the Employee, from time to time, of an itemized account of such expenditures in a form complying with all applicable rules and regulations of the Internal Revenue Service and reasonable requirements of the Employer.

(d) The Employee shall be entitled to a vacation of up to three weeks per calendar year, or pro rata for a portion of a calendar year, without a reduction in compensation. The time of said vacation shall be determined by Employee with reasonable notice to be given to the Employer.

(e) The Employee shall be entitled to sick leave in accordance with regular Employer policies without a reduction of Employee's salary.

(f) The Employee will participate in and receive any available benefits to employees under the Employer’s current 401K plan and any future pension, profit sharing or retirement plans which the Company may install, in accordance with the provisions of each plan.

(g) The Employee will participate in and receive any available benefits or distributions to employees under the Employer’s current ESOP plan in accordance with the provisions of such plan.

9. Key Man Life Insurance: The Employer may, in its discretion, at any time after the execution of this agreement, maintain for its own benefit, insurance on the life of the Employee, in such amounts and in such form or forms as the Employer may choose. The Employee shall have no interest whatsoever in any such policy or policies, but shall, at the request of the Employer, submit to such medical examinations, supply such information and execute such documents as may be required by the insurance company or companies to whom the Employer has applied for such insurance.

10. Confidentiality and Disclosure of Information: The Employee recognizes and acknowledges that the Employer is engaged in the furnishing of certain financial services, securities brokerage and other customer related services, some of which are intangible and not quantifiable, and that there may be techniques and concepts which become a part of the proprietary rights of the Employer in and to the Employer's techniques, operations and procedures. During the course of Employee's employment hereunder, the Employee may develop or come into contact with, as same may exist from time to time, such techniques, operations and procedures, all of which are valuable, special and unique assets of the Employer's business. The Employee shall not, during or after the term of Employee's employment, without the prior written consent of the Employer, remove any software, files, records, lists, materials, documents, names or other matters which may come to Employee's attention, including copies or abstractions therefrom, or Employee's own notes made therefrom; disclose the names of the Employer's customers, other employees or agents or any part thereof, nor make use of, nor disclose, divulge or reveal the files, records, materials, documents, or client names, owned by the Employer to any person, firm, corporation, association or any other entity, for any reason or purpose whatsoever. The Employee shall not disclose, write, publish or otherwise disseminate any material, factual, fictitious or otherwise that may make reference to or be based upon any reference to the Employer or any customer or other employee of the Employer, files, records, materials, documents, names or other matters of the Employer. The Employee further covenants and agrees that Employee shall retain all such knowledge and information which Employee shall acquire and develop during Employee's employment respecting the customers and other confidential information in trust for the sole benefit of the Employer and its successors and assigns. In the event of a breach or threat of breach by the Employee of the provisions of this paragraph, the Employer shall be entitled to an injunction, restraining the Employee from any breach or threatened breach of the terms of this agreement without the posting of any bond or security. Nothing herein shall be construed as prohibiting the Employer from pursuing any other remedies available to the Employer for such breach or threat of breach, including the recovery of damages from the Employee.

11. Non Solicitation of Employees and Agents: during the period commencing on the date hereof and ending one year after the termination of the Employee's employment by Employer for any reason, the Employee shall not directly or indirectly induce or attempt to induce any of the employees or representatives of Employer to leave the employ of or association with Employer, or solicit the business of any client or customer of Employer.

12. No Relationship with Local Competitor. During the period commencing on the date hereof and ending five years after the termination of the Employee's employment by Employer for any reason, the Employee shall not be employed by, consult for, invest in, utilize the services of, or otherwise maintain any business relationship with Viking Fund Management, LLC, Viking Fund Distributors, LLC or Viking Mutual Funds of Minot, North Dakota or any successor or successors thereof.

13. Covenant to Report: The Employee shall promptly communicate and disclose to the Employer all observations made and data obtained by Employee in the course of Employee's employment. All written materials, records, software and documents made by the Employee or coming into Employee's possession during the term of this agreement concerning the business or affairs of the Employer, shall be the sole property of the Employer, and upon the termination of the employment period or upon the request of the Employer during this period, the Employee shall promptly deliver the same to the Employer, or any affiliate designated by it. The Employee agrees to render to the Employer, or any affiliate designated by it, such reports of the activities undertaken by the Employee or conducted under the Employee's discretion pursuant hereto during the employment period as the Employer may request. In the event of a breach or threat of breach by the Employee of the provisions of this paragraph, the Employer shall be entitled to an injunction, restraining the Employee from any breach or threatened breach of the terms of this agreement. Nothing herein shall be construed as prohibiting the Employer from pursuing any other remedies available to the Employer for such breach or threat of breach, including the recovery of damages from the Employee.

14. Termination: All compensation, including fringe benefits, if any, shall cease upon termination of employment if terminated in accordance with this section. This agreement may be terminated by mutual written agreement and may also terminate upon the occurrence of any one of the following events:

a. The Employer’s bankruptcy, general assignment or trust mortgage for the benefit of creditors, receivership or involuntary dissolution of the Employer; in such event Employee would have such rights and claims as are available under applicable bankruptcy regulations.

b. Employee’s death or disability as determined by a physician appointed by Employer.

c. If after written notice of specific failure to carry out duties under this contract (the “defined failure”) and a fourteen (14) day opportunity to cure the defined failure, Employer’s Board of Directors determines in its sole discretion that Employee has failed to carry out his duties and responsibilities as required by this contract.

d. If Employer’s Board of Directors determines in its sole discretion that Employee’s academic, employment or regulatory history, business background, planning and administrative abilities or business contacts are not as represented to Employer.

e. The conviction of any securities related or felony crime, or the violation or conviction of any federal, state or self regulatory organization rule or regulation by Employee which would by law or regulatory rule prevent or impair Employee from carrying out his duties and responsibilities under this agreement.

f. Upon twelve months written notice by the Employer to the Employee.

15. Amendment or Alterations: No amendment or alteration of the terms of this agreement shall be valid unless made in writing and signed by both the Employer and the Employee.

16. Choice of Law and Venue: This agreement shall be governed by the laws of the State of North Dakota. Any action brought concerning this contract shall be venued in Minot, North Dakota.

17. Notices: Any notices or tenders required or permitted to be given under this agreement shall be sufficient, if in writing and if sent by registered mail to the residence of the Employee or to the residence of the legal representative of the estate of the Employee or to the principal place of business of the Employer and shall be deemed given when mailed.

18. Waiver of Breach: The waiver by Employer or by Employee of a breach of any provision of this agreement shall not operate or be construed as a waiver of any prior or subsequent breach by either of the parties hereto.

19. Binding Effect: The terms of the agreement shall be binding upon and inure to the benefit of the parties hereto and their respective personal representatives, successors and assigns.

20. Entire agreement: This instrument contains the entire agreement of the parties.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written.

Employer:

Integrity Mutual Funds, Inc.

By: /s/ Robert E. Walstad

Print Name and Title: Robert E. Walstad

Employee:

Mark R. Anderson

Signature: /s/ Mark R. Anderson

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as of the 15 day of January, 2002 by and among ND Holdings, Inc., a North Dakota corporation (the "Buyer"), Capital Financial Services, Inc., a Wisconsin corporation (the "Company"), and Geoffrey Legler ("Legler") and Charles G. Hartman ("Hartman"), individuals residing in the state of Wisconsin (jointly and severally referred to as the "Shareholder"), who are, respectively, the sole shareholder and sole option holder of the Company.

W I T N E S S E T H:

WHEREAS, Shareholder owns all of the issued and outstanding shares of common stock of the Company as well as all options to purchase shares of common stock of the Company and Shareholder desires to sell and convey to Buyer, and Buyer desires to purchase from Shareholder, all of the outstanding common stock of the Company and all options to purchase shares of common stock of the Company;

NOW, THEREFORE, for and in consideration of the premises and of the mutual representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and upon the terms and subject to the conditions hereinafter set forth, the parties do hereby agree as follows:

ARTICLE I.

PURCHASE AND SALE

1.1 Purchase of Stock

(a)On the Closing Date (as defined in Article VII), Buyer agrees to purchase from Shareholder, and Shareholder agrees to sell to Buyer, all of the issued and outstanding shares of common stock of the Company and all options to purchase shares of common stock of the Company (collectively, the "Company Shares") for a total consideration as follows:

(1) payment of $1,140,000 in cash or other immediately available funds at Closing;

(2) a convertible debenture, that is senior to all Buyer debentures and notes with the exception of bank loans and bank lines of credit, with a term of three years in the form of EXHIBIT A hereto (the "Debenture") issued to the Shareholder on the one year anniversary of the Closing Date in the principal amount of $250,000, which principal amount shall be subject to adjustment as provided herein and in paragraph 1.3. The Debenture shall carry an interest rate of 4% per annum, payable semiannually. Following issuance, the Debenture shall be convertible, in whole or in part, at Shareholder's option to no par common stock of Buyer (the "Debenture Shares") at the rate of one share of no par common stock for each one dollar ($1.00) of principal amount converted;

(3) the issuance of 750,000 shares of no par value common stock of Buyer (the "Installment Shares") in three installments; the first installment of 250,000 shares at Closing, the second installment of 250,000 shares on the one year anniversary of the Closing Date, and the third installment of 250,000 shares on the two year anniversary of the Closing Date. Shareholder will have a put right in the form of EXHIBIT B hereto (the "Put"), whereby the Shareholder may put the Installment Shares back to Buyer at the rate of up to 250,000 shares per year for three consecutive years at a price of $1.00 per share. Shareholder also may sell, transfer, or assign the Put. Shareholder may exercise the Put at any time within the ninety (90) day period following the first, second, and third annual anniversaries of the Closing Date (the "Redemption Periods") by giving Buyer notice of Shareholder’s intent to exercise the put at least thirty days prior to the beginning of a Redemption Period and a notice of exercise prior to the end of the Redemption Period. The put rights granted hereby are nonaccumlutive, and each installment will expire if not exercised during the scheduled Redemption Period; and

(4) the issuance of 250,000 options to purchase no par common stock of Buyer in the form of EXHIBIT C hereto, at an option strike price of $1.00 per share, each option allowing each holder of such option to purchase one share of no par common stock (the "Option Shares"). Said options shall be issued in the amounts and to those persons identified in EXHIBIT C hereto and shall expire on the tenth anniversary of the Closing Date.

(b)The cash consideration described in Section 1.1(a)(1) shall be paid one-half to each of Hartman and Legler by separate cash, wire transfer, or other immediately available funds. The Debenture shall be issued as two separate, equal debentures, each having the same rights as the other. The Installment Shares shall be issued one-half to each Hartman and Legler by individually titled certificates, and the Put shall apply to them severally. The stock options described in Section 1.1(a)(4) shall be issued individually to the persons described in EXHIBIT C hereto. Any other amounts due to Shareholder hereunder shall be issued separately, one-half to each of Hartman and Legler.

(c)All of the Debenture Shares, Installment Shares, and Option Shares (collectively, the "Buyer Shares"), options to purchase any Buyer Shares, and the Debenture shall be unregistered shares issued to Shareholder by Buyer in a private transaction, exempt from federal Securities and Exchange Commission ("SEC") or any state securities commission registration. Any certificates for the Buyer Shares shall contain standard language describing restrictions on transfer. Buyer Shares issued to Shareholder shall have the same rights and privileges of all other common shares issued by Buyer. Shareholder shall have "piggyback" registration rights for the Buyer Shares in the event that Buyer registers its common stock for sale to the public. In the event of such piggyback registration, Shareholder shall pay the additional cost, if any, of preparation and filing of the registration statement created by such piggyback registration of Shareholder’s Buyer Shares and shall provide such information, disclosures and warranties as may be reasonably required by registration counsel to Buyer.

1.2 Assets and Liabilities at Closing.

(a)All of the inventory and other assets of the Company listed on SCHEDULE 2.11 and all of the material contracts, including mutual funds and variable annuity distribution contracts, listed on SCHEDULE 2.9 shall remain assets of the Company as of the Closing Date.

(b)Upon Closing, the Company shall immediately notify all mutual fund and variable annuity vendors to change the address of the Company to "care of" Buyer.

(c)Except as noted in the next sentence, no assets, tangible or intangible of the Company shall be distributed, withdrawn, transferred or assigned prior to Closing. It is agreed that all of the following cash assets that will remain in the Company as of the Closing Date: $40,000 deposit or account for the benefit of NSCC; $35,000 clearing deposit with RBC Dain Rauscher; and a $25,000 receivable from CNA due in February 2002. None of the cash assets described in this Section 1.2(c) which shall remain assets of the Company as of the Closing Date shall be subject to offset, creditor claim or registered representative commissions.

1.3 Adjustment of Debenture Principal. The principal amount of the Debenture may be reduced or increased, in accordance with this paragraph 1.3, to reflect undisclosed or unknown liabilities, loss of producing broker revenue base, recovery from third parties, and the costs of such recovery.

(a)The principal amount of the Debenture will be reduced to the extent of any liabilities, arbitration claims or civil litigation, including reasonable legal fees, penalties, fees, other payments or costs, required to be paid by Buyer or the Company as a result of liabilities of the Company occurring or arising prior to the Closing Date and are not disclosed herein on SCHEDULE 1.2(d), but which are discovered within twelve months following the Closing Date and the amount of which is determined within twelve months following the discovery of such liability (the "Undisclosed Liabilities"). The principal amount of the Debenture will also be reduced in an amount equal to 12% of all gross commissions and fees that are payable to the Company for the prior twelve month period and which were generated by each registered representative or agent listed on SCHEDULE 4.1(b)(1) who is employed by or associated with the Company on January 1, 2002, and voluntarily terminates or is terminated for violating NASD Regulation, Inc. or state securities commission regulation during the twelve month period following the Closing Date (the "Lost Production"). Lost Production shall not include lost revenue resulting from any registered representative or agent who terminates due to death, disability, retirement pursuant to a retirement agreement, Buyer’s violation of any state or federal law or regulation, or Buyer's breach of this Agreement or any agreement with such registered representative or agent. The principal amount of the Debenture shall not be adjusted for any Lost Production until twelve months after the termination of the registered representative or agent for whom such an adjustment is required. The Undisclosed Liabilities and Lost Production, together with all other losses and damages, shall be collectively referred to herein as the "Losses."

(b)Buyer will, for a period of one year after the discovery of any Loss, seek recovery from all reasonable sources for the Losses, including but not limited to any applicable insurance policies (the "Third Party Recovery"). The principal amount of the Debenture will be increased by any Third Party Recovery, less the reasonable costs, including legal fees, incurred by Buyer in seeking such Third Party Recovery (the "Recovery Costs"). Any Recovery Costs incurred by Buyer shall not exceed the Third Party Recovery. In addition, subject to the reasonable approval of Buyer, Shareholder may recruit qualified registered representatives or agents to replace any Lost Production. Upon the second annual anniversary of the Closing Date, the principal amount of the Debenture shall be increased by an amount equal to 12% of trailing twelve month gross production of the registered representatives and agents recruited by Shareholder or, if a representative or agent has not been associated with the Company for a twelve month period, 12% of the annualized, actual gross production of such representative or agent. But the principal amount of the Debenture shall not exceed $250,000 as a result of the adjustments required pursuant to this paragraph 1.3(b).

(c)At least 30 days prior to making any adjustment required under this paragraph 1.3, Buyer will give Shareholder written notice of adjustment (the "Notice of Adjustment") which describes in detail the reason for and the amount of the adjustment. Shareholder may dispute any such adjustment as provided for in sub. (f). Shareholder will be entitled to participate in the compromise, settlement, or defense of any Undisclosed Liability and, to the extent that it wishes, to assume the defense of such Undisclosed Liability with counsel reasonably satisfactory to the Buyer. After notice to the Buyer of its election to assume the defense of such Undisclosed Liability, the Debenture will not, as long as Shareholder diligently conducts such defense, be subject to reduction under Section 1.3(a) or (b) with respect to the defense of such Undisclosed Liability. If the Shareholder assumes the defense of an Undisclosed Liability, Shareholder may compromise or settle such claim and Buyer will have no liability with respect to any compromise or settlement of such claim effected without its consent. If notice is given to Shareholder of any Undisclosed Liability and Shareholder does not, within thirty days after Buyer's notice is given, notify Buyer of its election to assume the defense of such Undisclosed Liability, Shareholder will be bound by any compromise or settlement effected by Buyer.

Notwithstanding the foregoing, if Buyer determines in good faith that an Undisclosed Liability will result in less than $5,000 of monetary damages for which the Debenture is subject to reduction, Buyer may, by written notice to Shareholder, assume the exclusive right to defend, compromise, or settle such Undisclosed Liability.

(d)The principal amount of the Debenture will not be reduced for any Losses until the aggregate amount of Losses exceeds $17,500, and Shareholder shall not be liable, by principal adjustment or otherwise, for Losses in excess of $250,000 collectively. Upon the anniversary of the Closing Date, Buyer shall issue to Shareholder the Debenture in the form described in paragraph 1.1(a)(2) in the principal amount of $250,000 less all Losses and Recovery Costs, plus all Third Party Recovery.

(e)In the event that an adjustment of the principal amount of the Debenture is required under this paragraph 1.3 after the Debenture has been issued to Shareholder (whether or not the issued Debenture has been converted, in whole or in part, to Debenture Shares), the party requesting adjustment shall provide the other party with a Notice of Adjustment. Unless an Adjustment Resolution Procedure is commenced under sub. (f), Shareholder shall surrender the Debenture and certificates for any Debentures Shares to the Buyer within 10 days after receipt of the Notice of Adjustment. Thereupon, the Buyer shall promptly issue a replacement Debenture and/or new certificates for Debenture Shares reflecting the principal balance adjustment provided for in the Notice of Adjustment. Any adjustment under this paragraph 1.3 will be made, first by increasing or decreasing the principal amount of the Debenture (but to not less than $0), and then by issuing or canceling an appropriate number of Debenture Shares.

(f) If either party hereto disputes an adjustment to be made pursuant to this paragraph 1.3, such dispute shall be submitted to an accounting firm which is mutually agreeable when and if needed for final resolution within 10 days of the issuance of the Debenture or a Notice of Adjustment giving rise to the dispute, (the "Adjustment Resolution Procedure"). Thereafter, both parties shall promptly submit to said accounting firm all materials relevant to the dispute. Said accounting firm shall render its decision within 20 days of the receipt thereof. Buyer and Shareholder shall share equally the fees of said accounting firm for the purpose of resolving the dispute.

(g) The Company will list on SCHEDULE 1.2(d) all liabilities and claims against the Company, including intercompany accounts, of any amount or nature that will remain liabilities of the Company at the time of Closing.

1.4 Sublease. Shareholder or their affiliate will provide Buyer and/or the Company a sublease for space at One Landmark Place – 2901 West Beltline Highway, Madison, Wisconsin 53713.

1.5 Noncompete Agreement. Shareholder shall provide Buyer a noncompete agreement in the form attached hereto as EXHIBIT G (the "Noncompete Agreement").

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER

(A) Representations and Warranties of the Company

The Company represents and warrants that all of the following representations and warranties with respect to the Company and its business and operations set forth in this Article II (A) are true and correct in all material respects on the date hereof and will be true and correct in all material respects at the time of the Closing.

2.1 Authorization. This Agreement has been duly executed and delivered by the Company, and it constitutes the valid and binding obligation of the Company, enforceable against it in accordance with the terms hereof.

2.2 Organization, Existence and Good Standing of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Wisconsin. Set forth on SCHEDULE 2.2 is a list of the states in which the Company is qualified or licensed to do business. True, complete and correct copies of (i) the Articles of Incorporation of the Company and (ii) the By-laws of the Company are attached hereto on SCHEDULE 2.2 (collectively, the "Charter Documents").

2.3 Common Stock of the Company. The Company's authorized common stock consists of two thousand eight hundred (2800) shares of no par value common stock, of which two hundred fifty (250) shares are issued and outstanding, all of which are owned of record by Legler, and the only issued and outstanding option to purchase the Company Shares. All of the Company Shares have been validly issued and are fully paid and nonassessable and no holder thereof is entitled to any preemptive rights (except any statutory preemptive rights, which the Shareholder hereby waives). Other than the option held by Hartman, there are no outstanding conversion or exchange rights, subscriptions, options, warrants or other arrangements or commitments obligating the Company to issue any shares of common stock or other securities or to purchase, redeem or otherwise acquire any shares of common stock or other securities, or to pay any dividend or make any distribution in respect thereof. A copy of Shareholder's common stock certificate and a copy of Shareholder's option agreement and documentation are attached as Appendices hereto.

2.4 Subsidiaries. The Company does not presently own, of record or beneficially, or control directly or indirectly, 80% or more of the (i) common stock, securities convertible into common stock or (ii) other equity or membership interest in any corporation, association or business entity nor is the Company, directly or indirectly, a participant in any joint venture or partnership.

2.5 Financial Statements.

(a)The Company has previously furnished to Buyer the balance sheet of the Company as of September 30, 2001 and 2000 and the related statements of operations, shareholder equity and cash flows for the fiscal years 1999, 2000, and 2001, as audited by the Company's certified public accountants (collectively, the "Financial Statements"). The Financial Statements present fairly the financial position and results of operations of the Company as of the indicated dates and for the indicated periods and have been prepared in accordance with GAAP.

(b)Except to the extent reflected in the September 30, 2001 balance sheet included in the Financial Statements or as disclosed on SCHEDULE 1.2(d), the Company has no liabilities or obligations required to be reflected in the Financial Statements (or the notes thereto) in accordance with GAAP other than liabilities incurred in the ordinary course of business, consistent with past practice, subsequent to September 30, 2001.

2.6 Permits and Intangibles. The Company holds all material licenses, franchises, permits and other governmental authorizations necessary to conduct its business as it is currently conducted (the "Material Permits").

2.7 Tax Matters. The Company has filed all income tax returns required to be filed by the Company and all returns, reports and forms of other Taxes (as defined below) required to be filed by the Company and has paid or provided for all Taxes shown to be due on such returns and all such returns are correct and complete in all material respects. No action or proceeding for the assessment or collection of any Taxes is pending against the Company and no notice of any claim for Taxes, whether pending or threatened, has been received. No deficiency, assessment or other formal claim for any Taxes has been asserted or made against the Company that has not been fully paid or finally settled. No issue has been formally raised by any taxing authority in connection with an audit or examination of any return of Taxes. No federal, state or foreign income tax returns of the Company have been examined, and there are no outstanding agreements or waivers extending the applicable statutory periods of limitation for such Taxes for any period. All Taxes that the Company has been required to collect or withhold have been duly withheld or collected and, to the extent required, have been paid to the proper taxing authority. For purposes of this Agreement, "Taxes" shall mean all taxes, charges, fees, levies or other assessments including, without limitation, income, excise, property, withholding, sales and franchise taxes, imposed by the United States, or any state, county, local or foreign government or subdivision or agency thereof, and including any interest, penalties or additions attributable thereto.

2.8 Assets and Properties.

(a) Real Property. The Company does not own or hold any interest in real property.

(b) Real Property Leases. The Company is not a party to any lease or sublease of real property. None of such leases is subject to any lien, pledge, security interest, claim, easement, limitation, restriction or encumbrance or any kind or nature whatsoever, or any agreement to give any of the foregoing. Except as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company, the Company has the right to quiet enjoyment of all property leased by it for the full term of each such lease or sublease or similar agreement (or any renewal option) relating thereto and such leased property is not subject to any failure to have the right to quiet enjoyment.

2.9 Contracts. Set forth on SCHEDULE 2.9 is a listing of all material contracts, agreements, arrangements and commitments (whether oral or written) to which the Company is a party or by which its assets or business are bound.

2.10 Trademarks. The Company does not own any registered trademarks, copyrights, or other intellectual property.

2.11 Inventory and Description of Assets. SCHEDULE 2.11 is a complete inventory and description of the assets of the Company, and the location thereof.

2.12 Consents. Except as set forth in SCHEDULE 2.12, no consent, approval, notice to, registration or filing with, authorization or order of, any court or governmental authority, under any contract or other agreement or commitment to which the Company or Shareholder is a party or by which its respective assets are bound, is required as a result of or in connection with the execution or delivery of this Agreement, and the other agreements and documents to be executed by the Company and Shareholder or the consummation by the Company and Shareholder of the transactions contemplated hereby.

2.13 Litigation and Related Matters. Set forth on SCHEDULE 2.13 is a list of all actions, suits, proceedings, investigations or grievances pending against the Company or, to the best knowledge of the Company and the Shareholder, threatened against the Company, the business or any property or rights of the Company, at law or in equity, before or by any arbitration board or panel, court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign ("Agencies"). None of the actions, suits, proceedings or investigations listed on SCHEDULE 2.13 either would, if adversely determined, (i) have a material adverse effect on the Company or (ii) affect the right or ability of the Company to carry on its business substantially as now conducted. The Company is not subject to any continuing court or Agency order, writ, injunction or decree applicable specifically to its business, operations or assets or its employees, nor is the Company in default with respect to any order, writ, injunction or decree of any court or Agency with respect to its assets, business, operations or employees. SCHEDULE 2.13 lists all actions, suits or proceedings filed by or against the Company since December 31, 1997. The Company has not during the last two (2) years been required to make any indemnification payment as a result of any actual or alleged act or omission of the Company or any person under its control.

2.14 Compliance with Laws.

(a)The Company is in compliance with all applicable laws, regulations (including federal, state and local procurement regulations), orders, judgments and decrees except where the failure to so comply would not have a material adverse effect on the Company or its business.

(b)Neither the execution, delivery nor performance of this Agreement by the Company nor the consummation of the transactions contemplated hereby will (i) violate any provision of the Charter Documents, or (ii) violate, in any material respect, any statute, rule, regulation, order or decree of any public body or authority by which the Company or its respective properties or assets are bound

2.15 Employees and Employee Benefit Plans. The names of all of the Company’ employees and a list of all employment contracts are set forth in SCHEDULE 2.15. The Company has no employee benefit plans.

(a) The Company (i) is in compliance in all material respects with all applicable federal and state laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees; (ii) has withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to Employees; (iii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; and (iv) (other than routine payments to be made in the normal course of business and consistent with past practice) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits for Employees.

(b)The Company is not bound by or subject to (and none of its respective assets or properties is bound by or subject to) any arrangement with any labor union. No employee of the Company is represented by any labor union or covered by any collective bargaining agreement and no campaign to establish such representation is in progress. There is no pending or threatened labor dispute involving the Company and any group of its employees nor has the Company experienced any labor interruptions over the past three years and the Company considers its relationship with its employees to be good.

(c)Except as provided in this Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby or thereby will (i) result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director, officer, employee or consultant of the Company under any employment agreement or otherwise or (ii) result in the acceleration of the time of payment or vesting of any such benefits.

2.16 Officers and Directors. Set forth on SCHEDULE 2.16 is a list of the current officers and directors of the Company.

2.17 Bank Accounts and Powers of Attorney. SCHEDULE 2.17 sets forth each bank, savings institution and other financial institution with which the Company has an account or safe deposit box, letter of credit, line of credit or other financial agreement, arrangement or obligation and the names of all persons authorized to draw thereon or to have access thereto. Each person holding a power of attorney or similar grant of authority on behalf of the Company is identified on SCHEDULE 2.17. Except as disclosed on SCHEDULE 2.17, (i) the Company has not given any revocable or irrevocable powers of attorney to any person, firm, corporation or organization relating to its business for any purpose whatsoever, and (ii) the Company has canceled any and all credit, debit, gas and other cards issued to or otherwise payable by the Company effective prior to the Closing and all amounts due thereunder have been fully paid and discharged. Additionally, SCHEDULE 2.17 identifies all agreements regarding custodial accounts or other custodial arrangements.

2.18 Insurance. SCHEDULE 2.18 lists all insurance policies and fidelity bonds covering the assets, business, equipment, properties, operations, employees, officers and the Shareholder of the Company, including without limitation product liability insurance. There is no claim by the Company pending under any of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company is otherwise in material compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). The Shareholder has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies.

2.19 Interested Party Transactions. Except as set forth on SCHEDULE 2.19 and except for any insurance wholesaling activities, no officer, director or owner of the Company (nor any ancestor, sibling, descendant or spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has an interest), has, directly or indirectly, (i) an interest in any entity that furnished or sold, or furnishes or sells, services or products that the Company furnishes or sells, or proposes to furnish or sell, or (ii) an interest in any entity that purchases from or sells or furnishes to, the Company, any goods or services or (iii) a beneficial interest in any contract with the Company; provided, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation shall not be deemed an "interest in any entity" for purposes of this Section.

2.20 Regulatory Good Standings. The Company is a member in good standing with NASD Regulation, Inc. ("NASD"); Registered and in good standing with the United States Securities and Exchange Commission; and a member in good standing of SIPC. A complete copy of the Company's NASD membership agreement and restriction letter, current Form BD and all NASD Examinations and related documentation is attached hereto as SCHEDULE 2.20. A complete copy of the Company's registration with the SEC, and all SEC Examinations and related documentation is attached as an Appendix hereto. Proof of the Company's current SIPC membership is attached hereto as an Appendix hereto.

(B) Representations and Warranties of the Shareholder

The Shareholder represents and warrants that to the best of Shareholder’s actual knowledge all of the following representations and warranties with respect to the Shareholder set forth in this Article II (B) are true and correct in all material respects on the date hereof and will be true and correct in all material respects at the time of the Closing.

2.21 Authorization. This Agreement has been duly executed and delivered by the Shareholder and constitutes the valid and binding obligation of each such party, enforceable against each such party in accordance with its terms.

2.22 The Shareholder owns of record and beneficially and has good and marketable title to the Company Shares, free and clear of any and all liens, mortgages, security interests, encumbrances, pledges, charges, adverse claims, options, buy-sell agreements, right of first refusal agreements, property settlement agreements, rights or restrictions of any character whatsoever other than standard state and federal securities law private offering legends and restrictions (collectively, "Liens"). Legler has the right to vote the issued and outstanding shares common stock of the Company on any matters as to which any shares of the Company common stock are entitled to be voted under the laws of the state of incorporation of the Company and the Company's Charter Documents, free of any right of any other person.

2.23 Neither the execution, delivery and performance of this Agreement by the Shareholder nor the consummation of the transactions contemplated hereby will violate, in any material respect, any statute, rule, regulation, order or decree of any public body or authority by which the Shareholder or its properties or assets are bound.

2.24 Absence of Claims Against the Company. The Shareholder does not have any claims against the Company other than as disclosed herein, including without limitation, final settlement of intercompany accounts and transactions consistent with past practices.

2.25 Disclosure. All schedules and exhibits furnished to Buyer pursuant hereto or in connection with this Agreement or the transactions contemplated hereby are and will be complete and accurate in all material respects. No representation or warranty by the Company contained in this Agreement, in the schedules attached hereto or in any certificate furnished or to be furnished by the Company to Buyer in connection herewith or pursuant hereto contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary in order to make any statement contained herein or therein not misleading. There is no fact known to the Company that has specific application to the Company (other than general economic or industry conditions) and that materially adversely affects or, as far as the Company can reasonably foresee, materially threatens, the assets, business, prospects, financial condition, or results of operations of the Company that has not been set forth in this Agreement or any schedule hereto.

2.26 Shareholder's Representation with respect to the Buyer Shares.

(a)The Buyer Shares are being acquired by the Shareholder for the Shareholder’s own account and not on behalf of any other person.

(b)The Buyer Shares are being acquired for investment purposes and not for resale or distribution.

(c)The Shareholder has received a copy of the Corporation’s Form 10KSB for the year ended December 31, 2000 with exhibits and subsequent quarterly filings on form 10QSB (jointly and severally the "10KSB"). The Shareholder has read the 10KSB and has been afforded the opportunity to discuss the business of the Corporation with its management. As a result, the Shareholder is cognizant of the market aspects of the common shares, financial condition, capitalization, and proposed operations and financing of the Buyer and has been able to evaluate the merits and risks of the investment in the Buyer Shares. The Shareholder understands that an investment in the Buyer Shares is inherently one of high risk.

(d)The management of the Buyer has furnished to the Shareholder’s satisfaction any information requested in writing by the Shareholder and the Shareholder has made such independent investigation, research and analysis of the Company, its proposed business and prospects, as the Shareholder deems necessary.

(e)The Shareholder represents that an investment in the Buyer Shares is a suitable investment for the Shareholder.

(f)The Shareholder understands that the Buyer Shares have not been registered under the Securities Act of 1933 (the "Act") and are restricted securities within the meaning of Rule 144 of the General Rules and Regulations under the Act. The Shareholder consents to the placement of an appropriate restrictive legend or legends on any certificates evidencing shares of common stock. Each Buyer Share certificate shall contain a legend denoting restrictions on transfer.

(g) The Shareholder understands and agrees that, by the Shareholder’s execution of this Agreement, it is acknowledged and understood that the Buyer is relying upon the accuracy and completeness hereof complying with certain obligations under applicable securities laws.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to the Company and Shareholder that all of the following representations and warranties with respect to Buyer are true and correct as of the date hereof, and will be true and correct in all material respects at the time of the Closing.

3.1 Organization and Authorization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of North Dakota with all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Buyer has all requisite corporate power, capacity and authority to execute and deliver this Agreement and all other agreements and documents contemplated hereby. The execution and delivery of this Agreement and such other agreements and documents by Buyer and the consummation by Buyer of the transactions contemplated hereby, including issuance of the Buyers Shares, have been duly authorized by Buyer and no other corporate action on the part of Buyer is necessary to authorize the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and is the legal valid and binding obligation of Buyer, enforceable in accordance with its terms.

3.2 No Violations. The execution and delivery of this Agreement and the other agreements and documents contemplated hereby by Buyer and the consummation of the transactions contemplated hereby will not (a) violate any provision of the articles of incorporation or bylaws of Buyer (b) violate any statute, rule, regulation, order or decree of any public body or authority by which Buyer or its properties or assets are bound, or (c) result in a violation or breach of, or constitute a default under or result in the creation of any encumbrance upon, or create any rights of termination, cancellation or acceleration in any person with respect to any agreement, contract, indenture, mortgage or instrument to which Buyer is a party or any of its properties or assets is bound.

3.3 Consents. No consent, approval or other authorization of any governmental authority or third party is required as a result of or in connection with the execution and delivery of this Agreement and the other agreements and documents to be executed by Buyer or the consummation by Buyer of the transactions contemplated hereby except for required approval of the transfer of control of the Company as required by NASD Regulation, Inc. ("NASD ") rules and transfer of location to Minot, North Dakota.

3.4 Financial Statements. Buyer has previously furnished to Shareholder the balance sheet of Buyer as of December 31, 2000 and the related statements of operations, shareholder's equity and cash flows for the three (3) fiscal years then ended, as audited by Buyer’s certified public accountants (collectively, the "Buyer Financial Statements"). The Buyer Financial Statements present fairly the financial position and results of operations of Buyer as of the indicated dates and for the indicated periods and have been prepared in accordance with GAAP except as disclosed on SCHEDULE 3.4.

3.5 Financing. Buyer has, and as of the Closing will have, sufficient funds to consummate the transactions contemplated hereby, including, without limitation, payment of the cash Consideration.

ARTICLE IV.

COVENANTS OF THE PARTIES

4.1 Course of Conduct by the Company. From the date hereof through and until the Closing Date, except as approved in writing by Buyer or as otherwise permitted or contemplated by this Agreement, the Company's business shall be conducted only in the ordinary course of business consistent with past practice, and the Shareholder shall cause the Company to comply with the following covenants:

(a)Articles of Incorporation; Bylaws. The Company shall not make any material change to its Charter Documents.

(b)Relations with Registered Representatives The Company will use commercially reasonable efforts to preserve its relationships with the registered representatives set forth in SCHEDULE 4.1(b)(1) (the "Representatives ") and shall not materially change or modify or commit to materially change or modify any terms offered to the Representatives. Set forth in SCHEDULE 4.1(b)(2) is a list of all contracts with registered representatives.

(c)Incurrence of Debt. The Company will not voluntarily incur or assume, whether directly or by way of guaranty or otherwise, any material obligation or liability, except obligations and liabilities incurred in the ordinary course of business, consistent with past practice.

(d)Liens. The Company will not mortgage, pledge, encumber, create or allow any Liens not existing on the date hereof upon any of its properties or assets, tangible or intangible, except Liens created in the ordinary course of business, consistent with past practice.

(e)Disposition of Assets. The Company will treat its assets consistent with Section 1.2(a), (c), and (e) hereof. The Company will not cancel or forgive any debts or claims except or in the ordinary course of business, consistent with past practice.

(f)Material Transactions. The Company will not enter into any other agreement, course of action or transaction material to it, except in the ordinary course of business, consistent with past practice.

(g)Stock Issuance; Redemptions; Reorganizations. The Company shall not (i) issue, grant or dispose of, or make any agreement, arrangement or commitment obligating the Company to issue, grant or dispose of any common shares or other securities of the Company, (ii) redeem or acquire, or make any agreement, arrangement or commitment obligating the Company to redeem or acquire, any shares of common stock or other securities of the Company, or (iii) authorize or effect or make any agreement, arrangement or commitment obligating the Company to effect, any reorganization, recapitalization or split-up of such common stock of the Company.

(h)NASD Matters. The Company and Shareholder shall take all reasonably necessary actions to comply with the rules and regulations adopted and enforced by the NASD, including without limitation, (i) obtaining the consent of the NASD to the transactions contemplated hereby, and (ii) filing a notice to Company’s district field Supervisor at NASD of the request and notice, pursuant to Rule 1018 of the NASD Membership and Registration Rules for membership continuance and change of control.

4.2 Investigations. The Company shall provide Buyer and its representatives and agents such access to the books and records of the Company and furnish to Buyer such financial and operating data and other information with respect to the businesses and properties of the Company as it may reasonably request from time to time, and permit Buyer and its representatives and agents to make such inspections of the Company's real and personal properties as they may reasonably request. The Shareholder shall promptly arrange for Buyer and its representatives and agents to meet with such directors, officers, employees and agents of the Company as reasonably requested. From the date of this agreement through the Closing, Buyer will be permitted full access to all regulatory reports and data bases, financial reports, books and records of the Company, and full access to all employees, associated persons, registered representatives, customers, landlords and suppliers of the Company, in order to make a reasonable investigation of the Company's business affairs as such books and records relate to the Closing. Officers and agents of Buyer shall be permitted confidential access to the Company's registered representatives for discussions of each individual's securities business and anticipated loyalty to the Company after the Closing. Buyer will honor its nonsolicitation, confidentiality, and others promises set forth in the Confidentiality Agreement by and between the parties hereto dated October 18, 2001 (the "Confidentiality Agreement").

4.3 Records Pertaining to the Company.

(a)Turnover of Records. At the Closing, the Shareholder will deliver or cause to be delivered to the Company any and all records applicable to the Company (i) in the possession of the Shareholder, and (ii) of which the Company does not already have copies. All original agreements, documents, records, reports and files, including but not limited to customer files, related to the broker dealer business of the Company, shall be delivered to the Company by Shareholder.

(b)Access to Records. Prior to closing the Shareholder shall allow Buyer and its representatives access to all business records and files of the Shareholder that pertain in part to the Company, during normal working hours at the principal place(s) of business of the Shareholder, or at any location where such records are stored, and the Buyer shall have the right, at its own expense, to make copies of any such records and files.

(c)Assistance with Records. From and after the Closing Date, Shareholder shall make Shareholder be available to Buyer, upon written request, to the extent reasonable to assist Buyer in locating and obtaining records and files maintained by Shareholder and for assistance or participation as is reasonably required by Buyer in anticipation of, or preparation for, any existing or future third party actions, tax or other matters in which the Company or any of its past, present or future Affiliates is involved and which relate to the business of the Company, including without limitation, assisting Buyer in the conversion of Company data from the Company’s or Shareholder's computer systems to Buyer’s computer systems.

(d)Records Prior to Closing. Commencing on the effective date of this Agreement, Shareholder shall provide Buyer with all current records in electronic or other form appropriate for loading into Buyer's system and Buyer's personnel shall, at Buyer's cost and expense, be permitted to assist the Company in the servicing of its assets and accounts for purposes of familiarization and transition. Such records shall be held in strict confidence in accordance with the Confidentiality Agreement and shall be promptly returned to Shareholder or the Company in the event this Agreement is terminated prior to Closing for any reason.

(e)Third Party Payments. Any payments or checks for the benefit of Company received by Shareholder after the Closing shall be immediately forwarded to the Company care of Buyer.

(f) Audited Financial Statements. Shareholder shall provide to Buyer, at Shareholder’s sole cost and expense, audited financial statements for the Company for the fiscal years ended September 30, 1999, 2000, and 2001, and other financial data and schedules, along with the related opinions prepared by the Company's independent auditors. Shareholder shall use reasonable efforts to assist Buyer in obtaining the consent of the Company's independent auditors for Buyer to include such financial statements in Buyer’s regulatory filings.

4.4 Preparation and Filing of Tax Returns.

(a)Shareholder shall prepare or cause to be prepared and file or cause to be filed all federal and state income and employer Tax returns for all taxable periods of the Company ending on or prior to the Closing Date. Such Tax returns shall beprepared on a basis consistent with past practice. Notwithstanding the provisions of paragraph 1.3, Shareholder shall be responsible for the payment of all taxes attributable to such periods and Tax returns. Buyer shall prepare or cause to be prepared and file or cause to be filed all Tax returns of the Company for taxable periods which begin before the Closing Date and end after the Closing Date. The Buyer shall be responsible for the payment of all amounts due on such Tax returns. Notwithstanding the provisions of paragraph 1.3, Shareholder shall pay Buyer within thirty (30) days after the date on which Taxes are paid, with respect to such periods, an amount equal to the portion of such Taxes which relates to the portion of such taxable period ending on the Closing Date to the extent such Taxes are not reflected in the reserve for tax liability set forth on the Financial Statements and covered by cash left in the Company at closing for payment of such taxes. For purposes of this Section, in the case of any Taxes that are imposed on a periodic basis and are payable for a taxable period that includes (but does not end on) the Closing Date, the portion of such Tax which relates to the portion of such taxable period ending on the Closing Date shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in the entire taxable period, and (y) in the case of any Tax based upon or related to income or receipts be deemed equal to the amount which would be payable if the relevant taxable period ended on the Closing Date. Any credits relating to a taxable period that begins before and ends after the Closing Date shall be taken into account as though the relevant taxable period ended on the Closing Date. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with the prior practice of the Company. Shareholder and Buyer shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax returns pursuant to this Section.

(b)The Shareholder shall have responsibility for the conduct of any audit of the Company for any taxable period ending on or prior to the Closing Date; provided, however, that in the event that the Shareholder receives notice of a claim from the IRS or any other taxing authority the Shareholder shall promptly, but in any event within five (5) business days, notify Buyer of such claim and of any action taken or proposed to be taken. In the event Buyer wishes to participate in such audit it may do so at its own cost and expense. Notwithstanding any indication in this Agreement to the contrary, the Shareholder shall not agree to an adjustment in a federal or state income tax audit, appeals procedure or judicial proceeding that will adversely impact the Company in tax periods after the Closing Date without the prior written consent of Buyer, which consent shall not be unreasonably withheld.

(c)All tax attributes of the Company as of the Closing Date computed on a separate company basis shall remain with the Company after the Closing.

(d)Any Tax refunds, that are received by Buyer or Company, and any amounts credited against Tax to which Buyer or Company become entitled, that relate to tax periods or portions thereof ending on or before the Closing Date shall remain an assets of the Company after closing.

(e)Shareholder shall be responsible for payment of any and all personal income, sales, use or transaction taxes arising as a result of the transactions contemplated by this Agreement.

4.5 Existing Personal Service Contracts. No consulting contracts, employment contracts or other future or contingent liabilities or obligations of the Company not specifically approved by Buyer shall remain in force at closing. For a period of three years from Closing, Buyer will neither change any existing commission payout schedules with respect to associated registered representatives, assess any additional fee to such registered representatives for the conduct of their business, nor assess any fee to such registered representatives for the conduct of their business with the exception of any increases in fees which are typically passed through to the registered representatives. Additionally, at Closing Shareholder will sign a new commission agreement in the form of EXHIBIT D and a new consulting and recruiting agreement in the form of EXHIBIT E.

4.6 NASD Regulation, Inc. Issues. With respect to violations by the Company or Company associated persons of rules or regulations that may have occurred prior to closing, all fines, penalties, costs and sanctions will remain the sole responsibility of the Company up to closing, If the Company as a broker dealer shall be subject to sanction by NASD Regulation, Inc. during the one year period following closing for activities occurring prior to closing, but which are not disclosed as a liability herein, such sanctions will be considered indemnifiable losses subject to the terms of paragraph 1.3 hereof.

ARTICLE V.

CONDITIONS TO OBLIGATIONS OF BUYER

The obligation of Buyer to purchase the Company Shares, and to cause the other transactions contemplated hereby to occur at the Closing, shall be subject to the satisfaction of each of the following conditions at or prior to the Closing:

5.1 Representations and Warranties. Each representation and warranty of the Company and the Shareholder contained in this Agreement and in any schedule or other disclosure in writing from the Company or the Shareholder shall be true and correct in all material respects (i) when made, and (ii) on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of the Closing Date.

5.2 Covenants of the Shareholder and the Company. All of the material terms, covenants, conditions and agreements herein on the part of the Shareholder and the Company to be complied with or performed on or before the Closing Date shall have been fully complied with and performed.

5.3 Certificate of The Company and The Shareholder. There shall be delivered to Buyer a certificate dated the Closing Date and signed by an officer of the Company and by the Shareholder as individuals to the effect set forth in Sections 5.1 and 5.2, which certificate shall have the effect of a representation and warranty made by the Company and the Shareholder on and as of the Closing Date.

5.4 Absence of Litigation. No inquiry, action, suit or proceeding shall have been asserted, threatened or instituted (i) in which it is sought to restrain or prohibit the carrying out of the transactions contemplated by this Agreement or to challenge the validity of such transactions or any part thereof, (ii) which could, if adversely determined, have a material adverse effect on the Company or (iii) as a result of which, in the reasonable judgment of Buyer, Buyer would be deprived of the material benefits of the ownership of the Company Shares.

5.5 Consents and Approvals. All material authorizations, consents, approvals, waivers and releases, if any, necessary for the Shareholder and the Company to consummate the transactions contemplated hereby shall have been obtained and copies thereof shall be delivered to Buyer. NASD shall have been notified and consented to the transfer of control to Buyer and the relocation of Buyer’s principal office to Minot, North Dakota under the jurisdiction of District 4 of NASD. The Continuing Membership Agreement for the Company shall be reasonably satisfactory to Buyer.

5.6 Certificates. The Company and the Shareholder shall have delivered to Buyer (i) certificates of the appropriate governmental authorities, dated as of a date not more than forty five (45) days prior to the date hereof, attesting to the existence and good standing of the Company in the State of Wisconsin; (ii) a copy, certified by the Department of Financial Institutions of the State of Wisconsin as of a date not more than forty five (45) days prior to the date hereof, of the Articles of Incorporation and all amendments thereto of the Company; (iii) a copy certified by the Secretary of the Company, dated the Closing Date, of the Bylaws of the Company; and (iv) certificates, dated the Closing Date, of the Secretary of the Company, relating to the incumbency and corporate proceedings in connection with the consummation of the transactions contemplated hereby.

5.7 Opinion of Counsel. Buyer shall have received an opinion of counsel to the Shareholder and the Company, dated the Closing Date substantially in the form of EXHIBIT F hereto (" Shareholder and Company Legal Opinion").

5.8 No Transfers to Affiliates. Except as otherwise expressly contemplated by this Agreement, the Company shall not have distributed or transferred any of its assets or properties, or made any payments, to or for the benefit of any of its affiliates.

5.9 Termination of Related Party Agreements. All existing agreements between the Company and the Shareholder and all existing bonus and incentive plans and arrangements of the Company shall have been canceled or terminated.

5.10 Stock Certificates. The Shareholder shall have tendered certificates representing the Company Shares, duly endorsed in blank or accompanied by appropriate stock powers, in proper form for transfer, with all transfer taxes paid.

5.11 Resignations of Directors and Officers. Buyer shall have received the resignations of each of the directors and officers of the Company, effective as of the Closing.

5.12 Commission Agreement. Shareholder shall have executed and delivered a commission agreement with Buyer (the "Commission Agreement"), the form of which is attached hereto as

EXHIBIT E.

Noncompete Agreement. Shareholder shall have executed and delivered to Buyer a noncompete agreement in the form attached hereto as EXHIBIT G (the "Noncompete Agreement").

ARTICLE VI.

CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER

The obligations of the Shareholder to sell the Company Shares and to cause the other transactions contemplated hereby to occur at the Closing shall be subject, except as the Shareholder may waive in writing, to the satisfaction of each of the following conditions at or prior to the Closing:

6.1 Representations and Warranties. Each representation and warranty of Buyer contained in this Agreement and in any schedule or other disclosure in writing from Buyer shall be true and correct in all material respects (i) when made, and (ii) on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of the Closing Date.

6.2 Covenants of Buyer. All of the material terms, covenants, conditions and agreements herein on the part of Buyer to be complied with or performed on or before the Closing Date shall have been fully complied with and performed.

6.3 Absence of Litigation. No inquiry, action, suit or proceeding shall have been asserted, threatened or instituted in which it is sought to restrain or prohibit the carrying out of the transactions contemplated by this Agreement or to challenge the validity of such transactions or any part thereof.

6.4 Certificates. Buyer shall have delivered to the Shareholder (i) a certificate of the appropriate governmental authority, dated as of a date not more than forty five (45) days prior to the Closing Date, attesting to the existence and good standing of Buyer in the State of its incorporation; (ii) copies, certified by the Secretary of the State of its incorporation as of a date not more than forty five (45) days prior to the Closing Date, of the articles of incorporation and all amendments thereto of Buyer; (iii) copies, certified by the Secretary of Buyer, dated the Closing Date, of the bylaws of Buyer; and (iv) certificates, dated the Closing Date, of the Secretary of Buyer relating to the incumbency and corporate proceedings in connection with the consummation of the transactions contemplated hereby.

6.5 Payment of Consideration. Buyer shall have delivered to Shareholder the consideration set forth in Section 7.3 to be delivered at Closing.

6.6 Certificate of Buyer. There shall be delivered to Shareholder a certificate dated as of the Closing Date and signed by an officer of Buyer to the effect set forth in Sections 6.1 and 6.2 which certificate shall have the effect of a representation and warranty made by Buyer on and as of the Closing Date.

6.7 NASD shall have granted consent to the transfer of control of the Company to Buyer and provided the Company with a Continuing Membership Agreement satisfactory to Buyer.

ARTICLE VII.

CLOSING

7.1 Closing. Unless this Agreement is first terminated as provided in Section 8.1, and subject to the satisfaction or waiver of all the conditions set forth in Articles V and VI, the closing of the transactions contemplated hereby (the "Closing") shall take place at the principal offices of the Buyer at 1 North Main Street, Minot, North Dakota, or by telecopy with originals of all materials to follow upon the agreement of the parties, or such other place as is agreed to by Buyer and Shareholder, on the earlier January 18, 2002 or such other date as the parties may agree upon in writing (the "Closing Date"). Copies of Exhibits and Schedules as well as information requested by Schedules required by this Agreement must be provided at least seven days prior to the anticipated closing date.

7.2 Delivery of the Company Shares. At the Closing, Shareholder shall deliver or cause to be delivered to Buyer the stock certificate(s) and option documents evidencing all of the Company Shares owned by Shareholder, duly endorsed or accompanied by duly executed stock powers assigning the Company Shares (and options) to Buyer and otherwise in good form for transfer.

7.3 Payment of Consideration to Shareholder. At the Closing, Buyer shall deliver: 1) by wire transfer or other immediately available funds, to Shareholder, an amount equal to $1,140,000; 2) a certificate for 2 50,000 shares of no par value common stock of Buyer; and 3) an option agreement for 250,000 options to purchase no par common stock of Buyer at an option strike price of $1.00 per share, each option allowing Shareholder to purchase one share of no par common stock. The additional items of consideration will be issued in good faith post-Closing in accordance with the provisions of paragraph 1.1 hereof.

ARTICLE VIII.

TERMINATION PRIOR TO CLOSING

8.1 Termination.

(a) This Agreement may be terminated and abandoned at any time prior to the Closing:

(1) By the written mutual consent of Buyer and Shareholder;

(2) By Buyer on the Closing Date if any of the conditions set forth in Article V shall not have been fulfilled on or prior to the Closing Date;

(3) By Shareholder on the Closing Date if any of the conditions set forth in Article VI shall not have been fulfilled on or prior to the Closing Date;

In the event of a termination pursuant to this Article VIII, each party shall bear its own costs and expenses incurred with respect to the transactions contemplated hereby. Neither party hereto shall be entitled to monetary damages pursuant to a termination in accordance with this Article VIII.

ARTICLE IX.

MISCELLANEOUS

9.1 Entire Agreement. This Agreement (including the exhibits and schedules hereto) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof, and no party shall be liable or bound to the other in any manner by any representations or warranties not set forth herein.

9.2 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned by any party hereto without the prior written consent of all other parties hereto.

9.3 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument. Facsimile signatures may be substituted for originals.

9.4 Headings. The headings of the articles and sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

9.5 Construction. As used in this Agreement, the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular article, section, paragraph or other subdivision.

9.6 Modification and Waiver. Any of the terms or conditions of this Agreement may be waived in writing at any time by the party which is entitled to the benefits thereof, and this Agreement may be modified or amended by a written instrument executed by Buyer, the Company and the Shareholder. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by all of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

9.7 Schedules, etc. All exhibits and schedules annexed hereto are expressly made a part of this Agreement as though fully set forth herein.

9.8 Notices. All notices of communication required or permitted hereunder shall be in writing and may be given by (a) depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt request, (b) delivering the same in person to an officer or attorney of such party, or (c) telecopying the same with electronic confirmation of receipt to the addresses set forth below or to such other address or counsel as any party hereto shall specify pursuant to this Section from time to time.

(1) If to Buyer, addressed to it at:

1 North Main Street

Minot, North Dakota 58703

ATTENTION: Robert E. Walstad

(2) If to the Shareholder, addressed to:

Charles G. Hartman

One Landmark Place – Suite 307

2901 West Beltline Highway

Madison, Wisconsin 53713

Geoffrey Legler

One Landmark Place – Suite 307

2901 West Beltline Highway

Madison, Wisconsin 53713

9.9 GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH LAWS OF THE STATE OF NORTH DAKOTA. THE PARTIES HERETO EXPRESSLY CONSENT AND AGREE THAT ANY DISPUTE, CONTROVERSY, LEGAL ACTION OR OTHER PROCEEDING THAT ARISES UNDER, RESULTS FROM, CONCERNS OR RELATES TO THIS AGREEMENT SHALL BE BROUGHT IN THE UNITED STATES DISTRICT COURTS FOR THE DISTRICT OF NORTH DAKOTA WITH VENUE IN FARGO, NORTH DAKOTA AND ACKNOWLEDGE THAT THEY WILL ACCEPT SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL OR THE EQUIVALENT DIRECTED TO THEIR LAST KNOWN ADDRESS AS DETERMINED BY THE OTHER PARTY IN ACCORDANCE WITH THIS AGREEMENT OR BY WHATEVER OTHER MEANS ARE PERMITTED BY SUCH COURTS.

9.10 Termination of Representations and Warranties. All representations and warranties contained herein shall terminate at and as of the Closing.

9.11 Expenses. Company and the Shareholder, on the one hand, and Buyer, on the other hand, shall be solely responsible for their respective costs and expenses incurred in connection with the transactions contemplated hereby.

9.12 Number and Gender of Words. Whenever the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate.

9.13 Further Assurances. From time to time after the Closing, at the request of any other party but at the expense of the requesting party, Buyer, Company or the Shareholder, as the case may be, will execute and deliver any such other instruments of conveyance, assignment and transfer, and take such other action as the other party may reasonably request in order to consummate or evidence the transactions contemplated hereby.

9.14 Brokers and Agents. Each party represents and warrants that it has employed no broker or agent in connection with this transaction and agrees to indemnify and hold harmless the other parties against all loss, cost, damages or expense arising out of claims for fees or commissions of brokers employed or alleged to have been employed by such indemnifying party.

9.15 Public Announcements. Buyer, the Company and Shareholder shall not issue or cause the publication of any press release or any other announcement (including without limitation announcements to the Company’s employees, representatives, or agents) with respect to this Agreement or the transactions contemplated hereby without the consent of the others, except where such release or announcement is required by applicable law or pursuant to any listing agreement with, or the rules or regulations of, any securities exchange or any other regulatory requirements.

9.16 Damages. Except as otherwise expressly set forth herein, the parties acknowledge that their sole remedy under this Agreement is to terminate this Agreement pursuant to Article VIII.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.

BUYER: COMPANY:

ND HOLDINGS, INC. CAPITAL FINANCIAL SERVICES, INC.

By: __________________________ By: ____________________________

Title:_________________________ Title___________________________

SHAREHOLDER:

__________________

Charles G. Hartman, an Individual

__________________

Geoffrey Legler, an Individual

LIST OF SCHEDULES AND EXHIBITS

EXHIBITS:

EXHIBIT A Form of Debenture Agreement

EXHIBIT B Form of Put Agreement

EXHIBIT C Form of Option Agreement

EXHIBIT D Form of Commission Agreement - Shareholder

EXHIBIT E Form of Consulting and Recruiting Agreement - Shareholder

EXHIBIT F Form of Opinion of Shareholder's and Company’s Counsel

EXHIBIT G Form of Noncompete Agreement

EXHIBIT H Form of Bill of Sale

SCHEDULES:

1.2(d) Liabilities to Remain in Company

2.2 List of Jurisdictions Company qualified or licensed to do business

2.8(b) Existing Leases

2.9 List of all Material Contracts

2.11 Inventory and Description of Assets

2.13 List of all Litigation

2.15 List of Employees

2.16 List of Directors and Officers

2.17 Bank Accounts, Credit Accounts, Powers of Attorney, Custodial Accounts

2.18 Insurance Policies and Bonds

2.19 Interested Party Transactions

4.1(b)(1) List of Registered Representatives

4.1(b)(2) List of Contracts with Registered Representatives

Appendix Certificates at Closing:

ARTICLE V

Seller's Corporate Articles Certificate of Good Standing

Seller's Certified Articles of Incorporation

Seller's Secretary Certified Bylaws

Seller's Closing Certificate

Company's Closing Certificate

Seller's Officer and Director Resignations

ARTICLE VI

Buyer's Corporate Articles Certificate of Good Standing

Buyer's Certified Articles of Incorporation

Buyer's Secretary Certified Bylaws

Buyer's Minutes Authorizing Transaction

Buyer's Closing Certificate

NASD Membership, Form BD and Examinations

SEC Registration and Documents

SIPC Documentation

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES

Exhibit 31.1

CERTIFICATION

I, Robert E. Walstad, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Integrity Mutual Funds, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 10, 2004	By /s/ Robert E. Walstad
	--------------------------
	Robert E. Walstad
	Chief Executive Officer,
	Chairman, and Director
	(Principal Executive Officer)

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES

Exhibit 31.2

CERTIFICATION

I, Heather Ackerman, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Integrity Mutual Funds, Inc.;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: November 10, 2004	By /s/ Heather Ackerman
	--------------------------
	Heather Ackerman
	Chief Financial Officer
	And Controller

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Integrity Mutual Funds, Inc. (the “Company) on Form 10-QSB for the quarter ended September 30, 2004, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Robert E. Walstad, Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 10, 2004	By /s/ Robert E. Walstad
	--------------------------
	Robert E. Walstad
	Chief Executive Officer,
	Chairman, and Director
	(Principal Executive Officer)

INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Integrity Mutual Funds, Inc. (the “Company) on Form 10-QSB for the quarter ended September 30, 2004, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Heather Ackerman, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 10, 2004	By /s/ Heather Ackerman
	--------------------------
	Heather Ackerman
	Chief Financial Officer
	And Controller