Capstone Companies Announces Cancellation of Outstanding Debts in Recent Agreements

Capstone Companies, Inc. (OTCMKTS:CAPC) recently disclosed the entry into significant agreements in a recent 8-K SEC filing. The agreements outlined the cancellation of outstanding debts owed by the company to various parties. The agreements were finalized on December 20, 2024, with Capstone Companies Inc. and its wholly owned subsidiary, Capstone Industries, Inc., engaged in the cancellations.

The cancellation agreements involved several key parties, including Stewart Wallach, former Chief Executive Officer and current Chair of the Company’s Board of Directors, Group Nexus, LLC, Jeffrey Postal, George Wolf, and the Estate of E. Fleisig. These agreements were facilitated to address debts owed by Capstone Companies, with debts transferred to the subsidiary for accounting purposes.

As part of the agreements, Capstone Companies issued shares of its Series B-1 Convertible Preferred Stock (B-1 Stock) to the creditor parties in exchange for canceling the debts. The number of shares of B-1 Stock issued and the amount of debt cancelled under each agreement were specified in the filing.

The B-1 Stock issued is classified as “restricted securities” under Rule 144 of the Securities Act of 1933. Furthermore, the agreements did not grant any registration rights to the shares of B-1 Stock or any shares of Company Common Stock issued upon conversion of the B-1 Stock.

The filing detailed that the B-1 Stock has specific rights and restrictions, including no dividend distributions or voting rights. The conversion rate from B-1 Stock to Company Common Stock was set at 66.66 shares of Common Stock per share of B-1 Stock.

Lock-up provisions were implemented for the creditor parties regarding the transfer and conversion of the B-1 Stock. The agreements specified conditions under which the creditor parties could or could not transfer or sell the shares received.

The company highlighted that the cancellation of debts was crucial to enhance its ability to obtain funding for new business lines or acquisitions. The filing emphasized that the company’s lack of operating revenues or funding necessitated the issuance of shares of B-1 Stock to settle the debts.

The Board of Directors, including independent director Jeffrey Guzy, reviewed and approved each cancellation agreement. The company concluded that issuing shares of B-1 Stock was the most viable option to eliminate the debts and avoid potential bankruptcy, considering its financial limitations.

The filing detailed potential changes in control of the registrant based on the shares issued and voting power held by Stewart Wallach and Jeffrey Postal. Notably, the agreements could result in significant changes in voting control based on possible future conversions of B-1 Stock and Common Stock ownership.

The company also recognized the risks associated with its current financial situation and the uncertainties surrounding its ability to develop new business lines or operations. The filing highlighted that forward-looking statements contained therein involved inherent risks and uncertainties.

Capstone Companies provided a list of exhibits filed with the 8-K, including the cancellation agreements with the specified parties. The company reiterated its commitment to transparency and compliance with SEC regulations in the disclosure of these agreements and their potential implications.

This article was generated by an automated content engine and was reviewed by a human editor prior to publication. For additional information, read Capstone Companies’s 8K filing here.

About Capstone Companies

Capstone Companies, Inc, through its subsidiaries, operates as a designer, manufacturer, and marketer of consumer products to simplify daily living through technology. The company offers Connected Chef, a purpose-built kitchen appliance tablet with an integrated platform for cooking accessories, such as cutting board, as well as Smart Mirrors.