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From the $CAPC 3Q 2016 Quarterly Report. In summary, the following outlines a bit of the history with AC Kinetics. When AC Kinetics was to be bought by another company, Capstone got their $500k investment back and in return terminated the royalty agreement where AC Kinetics would pay Capstone 7% for sale of any Capstone technology product. Apparently the purchasing company did not want this arrangement. CPC came out of this and maybe the new product will too. Skip to the bolded parts if you get bored

On January 15, 2013, the Company entered into an agreement with AC Kinetics, Inc. ("AC Kinetics") to purchase 100 shares of AC Kinetics Series A Preferred Stock for $500,000. These shares carry a liquidation preference in the amount of $500,000, are convertible at the Company's demand into 3% of the outstanding shares of AC Kinetics common stock and have anti-dilution protection.

In addition, the Company and AC Kinetics agreed to cooperate in the development and commercialization of consumer and industrial products to be solely owned by the Company. AC Kinetics will be the Company's advanced product developer. AC Kinetics will notify
the appropriate technology departments at the Massachusetts Institute of Technology ("MIT") of the Company's ability and desire to commercialize consumer and industrial products developed in the MIT incubator departments.

The Company and AC Kinetics also entered into a royalty agreement whereby, the Company would receive a 7% royalty on any licensing revenues received by AC Kinetics for products sold by them. This royalty agreement will terminate upon receipt by the Company of royalties of $500,000.

On June 8, 2016, the Board of Directors approved a Resolution to accept an offer from AC Kinetics to sell back the 100 shares of AC Kinetics Series A Preferred Stock. With acceptance of this offer the royalty agreement will also terminate. For consideration, the Company received a note for $1,500,000 that will be immediately paid to the Company on completion and funding of a Securities Purchase Agreement with a national company to purchase AC Kinetics. The note is subject to a Subordination Agreement for loans made to AC Kinetics by the national company involved in the Securities Purchase Agreement. As the note is subject to a subordination agreement, and the Securities Purchase Agreement between the national company and AC Kinetics has not been concluded, the Company has determined a $500,000 fair value of this note at September 30, 2016. As further consideration, the Company also, received an option to repurchase 1,666,667 shares of Company Common Stock held by Involve L.L.C. at an exercise price of $.15. The Agreements were signed June 27, 2016 and the option period is the 12-month period between the first option exercise date and the 36-month anniversary of the effective date of the option agreement.

Our 2013 investment in AC Kinetic Technologies, an Armonk, New York technology development company, has allowed us to develop certain innovative concepts that the Company has conceived and that are complex and which has yielded intellectual property that we believe will further distinguish the Company's products from other off-the-shelf products commonly marketed at the retail level. The Company plans to exploit the trade secret technologies developed and completed by AC Kinetic Technologies within the Company's own products, both labeled under "Capstone" and under the Hoover Ò HOME LED brand.


On June 8, 2016, the Board of Directors approved and accepted an offer from AC Kinetics to buy back their 100 shares of AC Kinetics Series A Preferred Stock for a $1,500,000 Note Receivable with an estimated fair market value of $500,000. The Company may continue its technology development relationship with AC Kinetics despite the agreement to sell the 100 shares of A C Kinetics Series A Preferred Stock.