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

 

FORM 10-Q

 

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2017

 

Commission file number 333-207100

 

CAPSTONE SYSTEMS INC.

(Exact name of registrant as specified in its charter)

 

Nevada
(State or other jurisdiction of incorporation or organization)

 

242 Dolenjska cesta, Ljubljana, Slovenia, 1000

(Address of principal executive offices, including zip code)

 

(725) 333-4110
(Telephone number, including area code)

 

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 last 90 days. YES x NO o

 

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

 

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

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 5,085,000 shares as of March 22, 2017

 

ITEM 1. FINANCIAL STATEMENTS

  

CAPSTONE SYSTEMS INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

 

		February 28, 2017				May 31, 2016
		(Unaudited)				(Audited)
ASSETS
CURRENT ASSETS
Cash		$	301			$	223
TOTAL CURRENT ASSETS			301				223
OTHER CURRENT ASSETS
Deferred Cost of Goods Sold		$	-			$	34,801
TOTAL CURRENT ASSETS		$	301			$	35,024
FIXED ASSETS
Slovenia Office Building		$	4,000			$	4,000
Depreciation		$	(489	)			(289	)
Slovenia Office Building Land			2,515				2,515
TOTAL FIXED ASSETS			6,026				6,226
TOTAL ASSETS		$	6,327			$	41,250
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts Payable		$	-			$	-
Loan Payable - Related Party			100				100
Unearned Revenue			-				38,205
Income Taxes Payable			2,089				2,089
TOTAL LIABILITIES		$	2,189			$	40,394
STOCKHOLDERS' EQUITY
Common stock: authorized 75,000,000; $0.001 par value;
5,085,000 and 4,000,000 shares issued and outstanding at
February 28, 2017 and May 31, 2016			5,085				4,000
Additional Paid in Capital			42,315
Profit (loss) accumulated during the development stage			(43,262	)			(3,144	)
Total Stockholders' Equity		$	4,138			$	856
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	6,327			$	41,250

 

The accompanying notes are an integral part of these financial statements

 

2

 

CAPSTONE SYSTEMS INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the				For the				For the				For the
		Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
		February 28, 2017				February 29, 2016				February 28, 2017				February 29, 2016
REVENUES
Sales:
Sales		$	72,722			$	45,868			$	143,897			$	75,978
Total Income			72,722				45,868				143,897				75,978
Cost of Goods Sold:
Purchases		$	53,045			$	38,740			$	118,018			$	63,752
Total Cost of Goods Sold			53,045				38,740				118,018				63,752
Gross Profit			19,677				7,128				25,879				12,225
Operating Expenses:
General and administrative		$	2,426			$	2,232			$	22,568			$	7,675
Advertising & Promotion			-				-				-				12,511
Product Development			-				-				43,429				-
Total Expenses			2,426				2,232				65,997				20,185
Income Before Income Tax		$	17,251			$	4,896			$	(40,118	)		$	(7,960	)
Provision for Income Tax		$	-			$	-			$	-			$	-
Net Income or (Loss) for the year			17,251				4,896				(40,118	)			(7,960	)
Net gain (loss) per share:
Basic and diluted		$	0.0034			$	0.0012			$	(0.0079	)		$	(0.0020	)
Weighted average number of shares outstanding:
Basic and diluted			5,085,000				4,000,000				5,085,000				4,000,000

 

The accompanying notes are an integral part of these financial statements

 

3

 

CAPSTONE SYSTEMS INC

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the				For the
		Nine Months Ended				Nine Months Ended
		February 28, 2017				February 29, 2016
Operating activities:
Net Income (Loss)		$	(40,118	)		$	(7,960	)
Adjustment to reconcile net loss to net cash provided by operations:
Changes in assets and liabilities:
Deferred Cost of Goods Sold		$	34,801			$	-
Accounts Payable			-				-
Depreciation			200				156
Unearned Revenue			(38,205	)			-
Provision for Income Tax			-				-
Net cash provided by operating activities			(43,322	)			(7,804	)
Financing activities:
Proceeds from issuance of common stock			43,400				-
Due to related party			-				-
Net cash provided by financing activities			43,400				-
Investing activities:
Purchase of Building & Land			-				-
Net cash provided by investing activities			-				-
Net increase in cash			78				(7,804	)
Cash, beginning of period			223				8,031
Cash, end of period		$	301			$	227
Supplemental disclosure of cash flow information:
Cash paid during the period
Taxes
Interest

 

The accompanying notes are an integral part of these financial statements

 

4

 

Capstone Systems Inc.

Notes to the Financial Statements

February 28, 2017

 

Note 1: Organization and Basis of Presentation

 

Capstone Systems Inc. (the “Company”) is a for profit corporation established under the Corporation Laws of the State of Nevada on April 1, 2015. The address of our business office is 242 Dolenjska cesta, Ljubljana, Slovenia, 1000. We maintain our statutory registered agent's office at 525 Swallow Cove, Boulder City, NV 89005. We plan to expand our business in the wholesale distribution of kitchen cabinets in the USA. The Company is subject to all risks inherent to the establishment of a start-up business enterprise.

 

Our financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. All transactions including purchases, sales and current financing is in U.S. dollars. The Company’s fiscal year-end is May 31st.

 

The Financial Statements and related disclosures as of February 28, 2017 and February 29, 2016 are reviewed pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The Financial Statements and related disclosures as of May 31, 2016 are audited pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Unless the context otherwise requires, all references to “Capstone”, “Capstone Systems”, “we”, “us”, “our” or the “company” are to Capstone Systems Inc.

 

Note 2: Significant Accounting Policies and Recent Accounting Pronouncements

 

Interim Financial Statements

 

The accompanying unaudited financial statements have been prepared in accordance with the instructions from Regulation S-X and do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim period(s), and to make the financial statements not misleading, have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim period(s) are not necessarily indicative of operations for a full year.

 

Condensed Financial Statements

Certain information and footnote disclosures normally included in the condensed financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s May 31, 2016 audited financial statements as filed in the most recent Form 10-K. The results of operations for the period ended February 28, 2017 are not necessarily indicative of the operating results for the full year.

 

5

 

Capstone Systems Inc.

Notes to the Financial Statements

February 28, 2017

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

 

Due to the limited level of operations, the Company has not had to make material assumptions or estimates other than the assumption that the Company is a going concern.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

 

Fair Value of Financial Instruments

 

ASC 825, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of February 28, 2017.

 

The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accrued liabilities and notes payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value.

 

Basic and Diluted Loss Per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. The Company has no potential dilutive instruments, and therefore, basic and diluted earnings (loss) per share are equal.

 

6

 

Capstone Systems Inc.

Notes to the Financial Statements

February 28, 2017

 

Revenue Recognition

 

The Company’s offices are currently based in Slovenia, but we utilize the U.S. dollar as our functional currency.

 

The company follows the guidelines of ASC 605-15 for revenue recognition. Revenue is recognized when all the following conditions have been met:

 

	1.	Pervasive evidence of an arrangement exists: an order has been placed and the customer has prepaid for the product;
	2.	Delivery has occurred or services have been rendered: the product has been shipped from either the Company or one of our suppliers; the product has been delivered and signed for by the customer as evidenced by the shipping company.
	3.	Seller’s price to the buyer is fixed or determinable: the price is fixed at the time of the order and the customer has prepaid prior to shipping; and
	4.	Collectability is reasonable assured: the customer has prepaid for the product prior to shipping.

 

Customers are allowed to return the products within 30 days for exchange or refund if defects in manufacturing are identified. Prior to the expiration of the 30 day exchange or refund period the cash received is recorded as unrecognized revenue.

 

Deferred revenue and deferred cost of goods sold result from transactions where the Company has accepted prepayment for the product but all revenue recognition criteria have not yet been met, such as shipped product from the supplier has not arrived at the client for delivery. Deferred cost of goods sold related to deferred product revenues includes direct product costs. Once all revenue recognition criteria have been met, the deferred revenues and associated cost of goods sold are recognized.

 

Advertising

 

The Company expenses its advertising when incurred. The Company has incurred $12,511 in advertising expense from inception (April 1, 2015). No advertising expense was recorded in the three month and nine month periods ended February 28, 2017.

 

Recent Accounting Pronouncements

 

The Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. The Company has reviewed the recently issued pronouncements. During this review the Company decided to early adopt ASU 2014-10 which eliminates the definition of a development stage entity, eliminates the development stage presentation and disclosure requirements under ASC 915, and amends provisions of existing variable interest entity guidance under ASC 810.

 

7

 

Capstone Systems Inc.

Notes to the Financial Statements

February 28, 2017

 

On June 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, consolidation, which removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted the amendment as of fiscal year ended May 31, 2015.

 

There are several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of February 28, 2017, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.

 

Note 3: Going Concern

 

The accompanying financial statements and notes have been prepared assuming that the Company will continue as a going concern.

 

For the period from inception to February 28, 2017, the Company had a net profit (loss) of $(43,262). The Company’s ability to continue as a going concern is dependent upon the Company’s ability to generate sufficient revenues to operate profitably or raise additional capital through debt financing and/or through sales of common stock.

 

Management plans to fund operations of the Company through the proceeds from a recent offering pursuant to a Registration Statement on Form S-1 or private placements of restricted securities or the issuance of stock in lieu of cash for payment of services until such a time as profitable operations are achieved. There are no written agreements in place for such funding or issuance of securities and there can be no assurance that such will be available in the future. Management believes that this plan provides an opportunity for the Company to continue as a going concern.

 

The failure to achieve the necessary levels of profitability or obtain the additional funding would be detrimental to the Company.

 

Note 4: Debt

 

In April 2015 the Director and President of the Company made the initial deposit to the Company’s bank account in the amount $100 which is being carried as a loan payable. The loan is non-interest bearing, unsecured and due upon demand.

 

8

 

Capstone Systems Inc.

Notes to the Financial Statements

February 28, 2017

 

Note 5: Capital Stock

 

The Company has 75,000,000 shares of common stock with a par value of $0.001 per share.

 

On May 11, 2015 the Company issued 4,000,000 shares of common stock for a purchase price of $0.001 per share to its sole director. The Company received aggregate gross proceeds of $4,000.

 

During June 2016 the Company, pursuant to a Registration Statement on Form S-1, sold 1,085,000 shares to 31 independent shareholders for total proceeds of $43,400.

 

As of February 28, 2017 there were no outstanding stock options or warrants.

 

Note 6. Income Taxes

 

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

 

Our effective tax rate for fiscal year 2017 will be 35%, which we expect to be fairly consistent in the near term. Our tax rate may also be affected by discrete items that may occur in any given year, but are not consistent from year to year. Income taxes are calculated and accrued for U.S. taxes only. We are not required to pay corporate taxes in Slovenia until our 3^rd year in business.

 

The Company accrued $2,089 in Income Taxes Payable for the year ended May 31, 2015. An income tax return was filed that erroneously stated the Company had no liability and no payment was made. The Company will file a return for the year ended May 31, 2016 which will report losses of $11,501, which will offset the gain of $8,357 in 2015. We will file a revised tax return for 2015 at the same time we file the 2016 tax return.

 

9

 

Capstone Systems Inc.

Notes to the Financial Statements

February 28, 2017

 

Note 7: Fixed Assets

 

In April 2015 the Company purchased for $6,515 a small office located at 242 Dolenjska cesta, Ljubljana, Slovenia, 10001. The Company utilizes the space as a primary office. The price of the building was $4,000 and the land was $2,515.

 

Fixed assets are stated at cost. The Company utilizes straight-line depreciation over the estimated useful life of the asset.

 

Buildings –	15 years
Office Equipment –	7 years

 

During the three months ended February 28, 2017 the Company recorded $67 in depreciation expense for the building.

 

Note 8: Related Party Transactions

 

The Company's sole officer and director is involved in other business activities and may in the future, become involved in other business opportunities as they become available.

 

The Company has a related party transaction involving the Company’s director. The nature and details of the transaction are described in Note 4 and Note 5.

 

Note 9: Concentration Risk

 

We currently have only one customer and have ordered from only one vendor. As we grow we expect to increase the number of customers and vendors we have, however; at this time there is a risk to the company if we lose either our customer or vendor.

 

Note 10: Research and Development

 

All expenses related to our brand are recorded as Research and Development expenses in accordance with GAAP and are expensed as incurred. Since inception that company has recorded $43,429 in R&D expense for the design, CAD and prototype development of our private brand samples of kitchen and vanity cabinets.

 

Note 11: Subsequent Events

 

The Company has evaluated events subsequent through the date these financial statements have been issued, March 22, 2017, to assess the need for potential recognition or disclosure in this report. Based upon this evaluation, it was determined that no subsequent events occurred, other than that noted above, that require recognition or disclosure in the financial statements.

 

10

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking states are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or out predictions.

 

General

 

Our financial statements are stated in United States dollars ($US) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

In this report, unless otherwise specified, all references to "common stock" refer to the common shares in our capital stock.

 

As used in this quarterly report, the terms "we", "us", "our", “Capstone" and “Capstone Systems” mean Capstone Systems Inc., unless the context clearly requires otherwise.

 

Results of Operations

 

We are still in our development stage and have generated $250,196 in revenues to date.

 

Three months ended February 28, 2017 and February 29, 2016

 

We generated $72,722 in revenue for the three months ended February 28, 2017. We incurred $53,045 in cost of goods sold and incurred $2,426 in general and administrative expenses for the same period. We generated a net profit of $17,251 for the three months ended February 28, 2017.

 

In comparison, we generated $45,868 in revenue for the three months ended February 29, 2016. We incurred $38,740 in cost of goods sold and incurred $2,232 in general and administrative expenses resulting in a net profit of $4,896 for the three months ended February 29, 2016.

 

Nine months ended February 28, 2017 and February 29, 2016

 

We generated $143,897 in revenue for the nine months ended February 28, 2017. We incurred $118,018 in cost of goods sold and incurred $22,568 in general and administrative expenses and $43,429 in product development for the same period. We generated a net loss of $40,118 for the nine months ended February 28, 2017.

 

In comparison, we generated $75,978 in revenue for the nine months ended February 29, 2016. We incurred $63,752 in cost of goods sold, $7,675 in general and administrative expenses and $12,511 in advertising and promotion for the same period, resulting in a net loss of $7,960 for the nine months ended February 29, 2016.

 

Cash Flows from Operating Activities

 

For the nine months ended February 28, 2017, net cash flows used in operating activities was $(43,322) compared to $(7,804) for February 29, 2016.

 

Cash Flows from Investing Activities

 

We neither used nor generated cash from investing activities for the nine months ended February 28, 2017 and February 29, 2016.

 

11

 

 

Cash Flows from Financing Activities

 

We generated cash from investing activities of $43,400 for the nine months ended February 28, 2017 compared to $0 as of February 29, 2016.

 

On May 11, 2015, we issued a total of 4,000,000 shares of restricted common stock to Jure Perko in consideration of $4,000.

 

During June 2016 the Company, pursuant to a Registration Statement on Form S-1, sold 1,085,000 shares to 31 independent shareholders for total proceeds of $43,400.

 

As of February 28, 2017, the Company had 5,085,000 shares of common stock issued and outstanding.

 

Plan of Operation for the next 12 months

 

We have commenced limited operations in the business of selling kitchen sinks and kitchen cabinets in the USA. We have generated some revenue and our principal business activities to date consist of creating a business plan, signing Sales Agreements with AQUACUBIC SANITARY WARE CO. LTD, Foshan Mingdeng Kitchen Cabinet Co., Ltd, Foshan Opaly Composite Materials Co., Ltd, FOSHAN SANI SANITARY WARE CO., LTD, Hangzhou Relux House Furnishing Co., Ltd, OPPEIN Home Group Inc, dated April 3-7, 2015.

 

Our current cash balance will not be sufficient to fund our operations for the next 12 months, we will need to generate revenues from operations. In June 2016 we were able to we sell approximately half of the securities offered for sale by the Company and raise gross proceeds of $43,400, net proceeds $36,400 after registration costs. This will satisfy cash requirements for 12 months and we will not be required to raise additional funds to meet operating expenses, but our growth strategy will be limited. We may also utilize funds from Mr. Perko, our Sole Officer and Director, who has informally agreed to advance funds to allow us to pay for filing fees, professional fees, including fees payable in connection with the filing the necessary reports with the Securities and Exchange Commission and operation expenses. There is no maximum amount of funds that our President has agreed to advance. Mr. Perko, however, has no formal commitment, arrangement or legal obligation to advance or loan funds to the company.

 

Our independent registered public accountant has issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have only generated limited revenues and no substantial revenues are anticipated until we complete our initial business development. Until this time, we do not believe that our operations will be able to grow. There is no assurance we will ever reach that stage.

 

Our plan of operations is as follows:

 

Office Establishment (Time Frame: 1st-2nd month, Cost $2,000)

 

We plan to set up our office in the building which we purchased in Slovenia and acquire the necessary office equipment to expend operations. We need a computer with Windows 7 or Windows 8 operation system, and a connection to the Internet. Our sole officer and director, Jure Perko will take care of our initial administrative duties. We believe that it will cost at least $2,000 to set up office and obtain the necessary office equipment and stationery to continue operations.

 

Negotiate and conclude agreements with property owners (Time Frame: 3rd-5th months, Material Costs: $6,000)

 

During this period, we intend to begin negotiations with property owners and managers in view of securing leasing agreements for the use of their premises for the office in the US. Our goal during this stage will be to enter into leasing agreement for the US based office(s). We have not executed any Lease Agreements. Search for new potential customers for our products and negotiating agreements with the owner for US based office space are ongoing matters that will continue during the life of our operations.

 

12

  

Commence Marketing/Advertising Campaign (Time Frame: 7th-12th months, Cost $16,000)

 

Initially, marketing will be conducted by our sole officer and director, Jure Perko. In the sinks and cabinets distribution business, various business strategies are used to increase the popularity of the products. We plan to offer free samples of our products which may ignite prospective customers to buy our kitchen sinks and kitchen cabinets (Cost $8,000). Other marketing strategies will involve taking the kitchen sinks and kitchen cabinets products to various events, such as shows, fairs and home builders events. We intend also to design bright stickers and signs and place them at our sample products to draw attention of potential customers. (Cost $8,000)

 

Estimated Expenses for the Next Twelve Month Period

 

The following provides an overview of our estimated expenses to fund our plan of operation over the next twelve months.

 

Description		Fees
SEC reporting and compliance		$	10,000
Establishing an office		$	2,000
Secure office lease agreement		$	6,000
Purchase samples to give to customers		$	8,000
Marketing and advertising		$	8,000
Operating Expenses		$	2,400
Total		$	36,400

 

The various amounts presented in the table above are for illustrative purposes only and the actual amount of costs may differ significantly.

 

When our distribution operations are set up completely and revenues are rising, we plan to hire employees who will sell our kitchen sinks and kitchen cabinets, under our own brand. Cost of this is estimated to be $7,000 - $20,000 which will be supported by revenues generated.

 

Jure Perko, our president will be devoting approximately twenty hours per week to our operations. Once we expand operations, and are able to attract more and more customers to buy our products, Mr. Perko has agreed to commit more time as required. Because Mr. Perko will only be devoting limited time to our operations, our operations may be sporadic and occur at times which are convenient to him. As a result, operations may be periodically interrupted or suspended which could result in a lack of revenues and a cessation of operations

 

Liquidity and Capital Resources

 

At February 28, 2017 the Company had $301 in cash, total assets of $6,327 and there were outstanding liabilities of $2,189. Our director has agreed, verbally, to continue to loan the company funds for operating expenses in a limited scenario, but he has no legal obligation to do so.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

13

  

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Management maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of February 28, 2017.

 

Based on that evaluation, management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

Changes in Internal Controls over Financial Reporting

 

As of the end of the period covered by this report, there have been no changes in the internal controls over financial reporting during the quarter ended February 28, 2017, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting subsequent to the date of management’s last evaluation.

 

14

 

PART II. OTHER INFORMATION

 

ITEM 6. EXHIBITS.

 

The following exhibits are included with this quarterly filing. Those marked with an asterisk and required to be filed hereunder, are incorporated by reference and can be found in their entirety in our Registration Statement on Form S-1, filed under SEC File Number 333-207100, at the SEC website at www.sec.gov:

  

Exhibit No.		Description
3.1		Articles of Incorporation*
3.2		Bylaws*
31.1		Sec. 302 Certification of Principal Executive Officer
31.2		Sec. 302 Certification of Principal Financial Officer
32.1		Sec. 906 Certification of Principal Executive Officer
32.2		Sec. 906 Certification of Principal Financial Officer
101		Interactive data files pursuant to Rule 405 of Regulation S-T

 

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SIGNATURES

 

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

 

 

	CAPSTONE SYSTEMS INC.
	By:	/s/ Jure Perko
	Name:	Jure Perko
	Title:	President, Treasurer and Secretary
		(Principal Executive, Financial and Accounting Officer)

 

In accordance with the requirements of the Securities Act of 1933, this report was signed by the following persons in the capacities and on the dates stated.

 

 

Signature		Title		Date
/s/ Jure Perko		President, Treasurer, Secretary and Director		March 22, 2017
Jure Perko		(Principal Executive, Financial and Accounting Officer)

 

 

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