NOTES AND LOANS PAYABLE TO RELATED PARTIES

3 Months Ended

Mar. 31, 2013

NOTES AND LOANS PAYABLE TO RELATED PARTIES

NOTES AND LOANS PAYABLE TO RELATED PARTIES

NOTE 4 – NOTES AND LOANS PAYABLE TO RELATED PARTIES

Capstone Companies, Inc. - Notes Payable to Officers and Directors

On May 30, 2007, the Company executed a $575,000 promissory note payable to a director of the Company.  This note was amended on July 1, 2009 and again on January 2, 2010. As amended, the note carries an interest rate of 8% per annum.  All principal is payable in full, with accrued interest, on January 2, 2014.  On November 2, 2007, the Company issued 12,074 shares of its Series B Preferred stock valued at $28,975 as payment towards this loan.  The loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.

On July 12, 2011 Stewart Wallach, the Chief Executive Officer and Director of CHDT and JWTR Holdings, LLC owned by a Director, Jeffrey Postal entered into a Securities and Notes Purchase Agreement with Howard Ullman, the previous Chairman of the Board of CHDT, whereby they would purchase equally all of Howard Ullmans notes including the subordinated notes net of any offsets, monies due by Howard Ullman to the Company. The original terms of all notes would remain the same. On July 12, 2011 this note payable was reassigned by Howard Ullman, equally split between Stewart Wallach Director and JWTR Holdings LLC.   The note balance of $466,886 was reduced by $47,940 for offsets due by Howard Ullman. The revised loan balance of $418,946 was reassigned equally $209,473 to Stewart Wallach and $209,473 to JWTR Holdings LLC. As amended the note is due on or before January 2, 2014.  At December 31, 2011, the total amount payable on the reassigned notes to Stewart Wallach was $216,498 which includes accrued interest of $7025 and JWTR Holdings, LLC was $216,498 which includes accrued interest of $7,025.  At December 31, 2012, the total amount payable on the reassigned notes to Stewart Wallach was $233,256 which includes accrued interest of $23,783 and JWTR Holdings; LLC was $233,256 which includes accrued interest of $23,783.  For the revised notes the interest payments are being accrued monthly to the note holders.  As of March 31, 2013 the total combined balance due on these two notes was $474,776, which includes interest of $55,830.

On July 11, 2008, the Company received a loan from a director of $250,000.  As amended, the note is due on or before January 2, 2014 and carries an interest rate of 8% per annum.  At December 31, 2012, the total amount payable on this note was $310,000 including interest of $60,000.  At March 31, 2013, the total amount payable on this note was $314,932 including interest of $64,932.

As part of this note payable, the Company also issued a warrant to the loan holder to purchase 4,000,000 shares of common stock at a price of $.025 per share.  At the date of issuance, the stock price was $.021 per share.  The Company accounted for the debt and warrants using APB 14, whereby the proceeds of $250,000 were allocated between the debt and warrants.  This resulted in the warrants being valued at $56,375, which was recorded as additional paid-in capital, and a discount on the note of $56,375 being recognized.  The discount was amortized over the term of the note (6 months) to interest expense.  At December 31, 2008, the discount had been fully amortized resulting in interest expense of $56,375 being recognized.

On March 11, 2010, the Company received a loan from a director of $100,000. As amended, the note is due on or before January 2, 2014 and carries an interest rate of 8% per annum.  At December 31, 2012 the total amount payable on this note was $122,466 including interest of $22,466.  At March 31, 2013 the total amount payable on this note was $124,439 including interest of $24,439.

On May 11, 2010, the Company received a loan from a director of $75,000. As amended, the note is due on or before January 2, 2014 and carries an interest rate of 8% per annum.  The loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.  At December 31, 2012 the total amount payable on this note was $90,847 including interest of $15,847 .  At March 31, 2013 the total amount payable on this note was $92,326, including interest of $17,326.

On June 11, 2010, the Company received a loan from a director of $150,000. As amended, the note is due on or before January 2, 2014 and carries an interest rate of 8% per annum.  The loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.  At December 31, 2012 the total amount payable on this note was $180,674 including interest of $30,674.  At March 31, 2013 the total amount payable on this note was $183,633 including interest of $33,633.

During the quarter ended June 30, 2008, the Company executed three notes payable for a combined total of $200,000 to an officer of the Company.  As amended, the notes are due on or before January 2, 2014 and carry an interest rate of 8% per annum.  These loans grant to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.  At December 31, 2012 the total amount due on these notes was $248,000, including interest of $48,000.  At March 31, 2013 the total amount due on these notes was $251,945 including interest of $51,945.

On January 15, 2013, the company received a new loan of $250,000 from Stewart Wallach, the Chief Executive Officer and Director of Capstone Companies, Inc. formerly (CHDT) with due date on or before January 14, 2014 and carries an interest rate of 8% per annum. This loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.  At March 31, 2013 the total amount payable on this note was $254,932 including interest of $4,932.

On January 15, 2013, the company received a new loan of $250,000 from a director of Capstone Companies, Inc. formerly (CHDT) with due date on or before January 14, 2014 and carries an interest rate of 8% per annum. This loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.  At March 31, 2013 the total amount payable on this note was $254,932 including interest of $4,932.

Capstone Industries – Notes Payable to Officers and Directors

On July 16, 2007, Capstone Industries executed a $103,000 promissory note payable to a director of the Company.  As amended, the note carries an interest rate of 8% per annum and is due on or before January 2, 2013.  In December 2008, the Company borrowed an additional $75,000 from this director.  As amended, this note was due on or before January 2, 2013, but it has been extended and is due on or before January 2, 2014. These loans grant to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid Principal.

On July 12, 2011 Stewart Wallach, the Chief Executive Officer and Director of CHDT and JWTR Holdings, LLC owned by a Director, Jeffrey Postal entered into a Securities and Notes Purchase Agreement  with Howard Ullman, the previous Chairman of the Board of CHDT, whereby they would purchase all of Howard Ullman’s notes including the subordinated notes. The original terms of all notes would remain the same.  On July 12, 2011 the subordinated note payable was reassigned by Howard Ullman, to Stewart Wallach director and JWTR Holding LLC.  The original note balance of $178,000 was reassigned to Stewart Wallach and to JWTR Holdings LLC. For the year 2011 the interest payments were paid monthly to the note holder as of July 31, 2011. As amended, this note was due on or before January 2, 2013 but it has been extended and is due on or before January 2, 2014.

At December 31, 2012 the total amount due on these two notes was $222,472, including interest of $44,472.  At March 31, 2013 the total amount due on these two notes was $225,983, including interest of $47,983.

Purchase Order Assignment- Funding Agreements

During the Second Quarter 2012, Capstone Industries, Inc. received a $432,000 loan from George Wolf who is a business partner of the CEO. The loan is due on or before August 31, 2012 and carries an interest rate of 1.0% simple interest per month (12% annual).  As of December 31, 2012 the note balance was paid in full.

During the Second Quarter 2012, Capstone Industries, Inc. received a $746,000 loan from Jeffrey Postal a director of the Company. The loan is due on or before January 2, 2013 and carries an interest rate of 1.0% simple interest per month (12% annual).  As of December 31, 2012 the total amount due on these notes was $602,148 including interest of $27,148. During the first Quarter 2013, the loan balance was paid in full and the total amount due on these notes is $0.00.

During the Second Quarter 2012, Capstone Industries, Inc. received a $375,000 loan from Phyllis Postal. Mrs. Postal is a mother of a director of the Company. The loan was due on or before September 30, 2012 and carried an interest rate of 1.0% simple interest per month (12% annual).  During the Third Quarter 2012, an additional $150,000 loan was received and then the entire balance was paid in full in September 2012. As of December 31, 2012 the total amount due on these notes is $0.00.

During the First Quarter 2013, Capstone Industries, Inc. received two notes from George Wolf who is business partner of the CEO Stewart Wallach, with payment due date of on or before January 02, 2014 and carries an interest rate of 1.0% simple interest per month (12% annual).  Note # 021313 dated February 13, 2013, total amount due at March 31, 2013 was $226,668, including interest of $1,668.  Note # 032013 dated March 20, 2013, total note amount due at March 31, 2013 was $40,145, including interest of $145.

During the Third Quarter 2012, Capstone Industries, Inc. received a $220,000 loan from Everett Fleisig who is the father in law of an officer of the company. The loan is due on or before January 2, 2013 and carries an interest rate of 1.0% simple interest per month (12% annual). As of December 31, 2012 the total amount due on this note was $0.00.

On October 10, 2012, the Company entered into agreement with Phyllis Postal, which carried a simple interest rate of 1% per month (12% annual), the Company received $200,000 under this agreement which was paid in full with accrued interest as of December 31, 2012.

Working Capital Loan Agreements

On April 1st 2012, the Company signed a working capital loan agreement with Postal Capital Funding, LLC, (“PCF”) a private capital funding company owned by Jeffrey Postal and James McClinton who is a director and director and senior officer of the Company.  Pursuant to the agreement, the company may borrow up to a maximum of $1,000,000 of revolving credit from PCF.  Amounts borrowed were to be repaid by April 1, 2013 at an interest rate of 8%.  As amended, this note is due on or before January 2, 2014.  As of December 31, 2012, the loan balance under this agreement was $382,310 including interest of $7,310. During the first quarter 2013, additional $100,000 loan was received by the company. As of March 31, 2013, the loan balance under this agreement was $490,847 including interest of $15,847.

Notes and Loans Payable to Related Parties – Maturities

The total amount payable to officers, directors and related parties as of March 31, 2013 was 2,935,557 including accrued interest of $47,277.  The maturities under the notes and loan payable to related parties for the next five years are:

Year Ended December, 31,
2013	$	0
2014		2,935,557
2015		-
2016		-
2017		-
Total future maturities	$	2,935,557