Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On July 5, 2022, the Board of Directors ("Board") of the Company held a special
meeting and approved the following corporate actions or proposals:
1) The Board nominated the following incumbent directors to stand for election
to the Board for a term commencing upon election and ending in 2023 and the
election and assumption of office of successors: (a) Stewart Wallach; (b) James
McClinton; (c) George Wolf; (d) Jeffrey Postal; and (e) Jeffrey Guzy and
approved a resolution to seek shareholders' vote or consent to these nominees;
2) Cash compensation for services as a director and services as member of Board
Audit Committee and Compensation and Nomination Committee for independent
directors Jeffrey Postal and Jeffrey Guzy was suspended for the remainder of
2022. Mr. Guzy and Mr. Postal were also approved by the Board to continue to
serve as members of the Audit Committee and Compensation and Nomination
Committee of the Company's Board of Directors for a one-year term;
3) July 15, 2022, was set as the record date for holders of record of issued
shares of Company Common Stock entitled to vote for election of, or written
consent to election of, directors in 2022 and for any other matters presented
for shareholder approval; and
4) Approved David Brooks & Associates, PC, as public auditors for the Company
for fiscal year 2022, per recommendation and approval of Board's Audit
Committee, and approved a resolution to seek shareholder ratification of the
approval of David Brooks & Associates, PC as Company's public auditors for
fiscal year 2022.
Item 8.01 Other Matters. As previously reported on a Form 8-K filed by the
Company with the Commission on October 19, 2021, on October 18, 2021, the
Company entered into a Purchase Order Funding Agreement ("Agreement") with the
following lenders: (1) Group Nexus, LLC, a company controlled by Stewart
Wallach, the Company's Chief Executive Officer and Chairman of the Board of
Directors; (2) Jeffrey Postal, a Director of the Company; and (3) Everett
Fleisig (individually, a "Lender" and collectively, the "Lenders"). Under the
Agreement, the Lenders may provide the following funding: a maximum aggregate
principal amount of up to One Million and Twenty Thousand Dollars and No Cents
($1,020,000), or Three Hundred Forty Thousand Dollars and No Cents ($340,000)
per Lender, to support purchase of Company Smart Mirror products for inventory
and customer order fulfillment. Each draw request for funding may be in an
amount specified by the Company in a draw request but with a minimum total
request of $90,000 total or $30,000 per Lender. Money loaned was to be secured
by Company Smart Mirror product inventory. Interest rate was 5% per annum on
unpaid principal. Principal and accrued interest are due within six months from
date of advance. Company could pre-pay principal and accrued interest without
charge or penalty.
Company has entered into a new funding arrangement, consisting of the following
agreements: (1) Working Capital Loan Agreement, dated May1, 2022, by Jeffrey
Postal, an outside director of the Company, and the Company for the principal
amount of an amount not to exceed Two Hundred Thousand Dollars and No Cents
($200,000.00)("Postal Agreement"); and
(2) Working Capital Loan Agreement, dated May 1, 2022, by Group Nexus LLC, a
company controlled by Stewart Wallach, a director and Chief Executive Officer of
the Company, and the Company for the principal amount of an amount not to exceed
Two Hundred Thousand Dollars and No Cents ($200,000.00) ("Nexus Agreement"); and
(3) Working Capital Loan Agreement, dated May 1, 2022, by Mouhaned Khoury and
the Company for the principal amount of an amount not to exceed Two Hundred
Thousand Dollars and No Cents ($200,000.00) ("Khoury Agreement").
Each of these loan agreements provides for: (a) annual interest at 5% on
principal sums loaned; (b) repayment of principal and interest accrued thereon
is due in a lump sum payment on the maturity date, which is 18 months from date
of first advance of funds; (c) Company may extend maturity date by 90 days; and
(d) all sums loaned are secured by a lien on the Company's accounts receivable.
An aggregate total of $600,00 was loaned to the Company during May 2022 and June
2022 under the above agreements. Proceeds of loans are used for purchase of
product inventory, product molds, and purchase product components and to pay
general operational overhead.
The Postal Agreement, Nexus Agreement and Khoury Agreement are attached to this
Current Report on Form 8-K as Exhibits 10.1, 10.2 and 10.3, respectively. The
foregoing summary of the Postal Agreement, Nexus Agreement and Khoury Agreement
is qualified in its entirety by reference to the actual agreements as filed as
exhibits to this Current Report of Form 8-K. The term of each of these loan
agreements is 18 months.
The Postal Agreement, Nexus Agreement and Khoury Agreement were approved by the
disinterested directors of the Company at a May 1, 2022 special meeting of the
Board.
Item 9.01. Financial Statements and Exhibits.
EXHIBIT NUMBER EXHIBIT DESCRIPTION
10.1 Working Capital Loan Agreement, dated May 1, 2022, by Jeffrey Postal and
Capstone Companies, Inc.
10.2 Working Capital Loan Agreement, dated May 1, 2022, by Group Nexus LLC and
Capstone Companies, Inc.
10.3 Working Capital Loan Agreement, dated May1, 2022, by Mouhaned Khoury and
Capstone Companies, Inc .
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