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Invest in Kapsul

Reinventing air conditioning, one room at a time.

  • $125,419Amount raised
  • $1,000Minimum
  • $15,000,000Pre-Money valuation

Purchased securities are not currently tradeable. Expect to hold your investment until the company lists on a national exchange or is acquired.

Share:

Kapsul is offering securities under both Regulation D and Regulation CF through SI Securities, LLC ("SI Securities"). SI Securities is an affiliate of SeedInvest Technology, LLC, a registered broker-dealer, and member FINRA/SIPC. SI Securities will receive cash compensation equal to 7.50% of the value of the securities sold and equity compensation equal to 5.00% of the number of securities sold. Investments made under both Regulation D and Regulation CF involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Furthermore, the contents of the Highlights, Term Sheet sections have been prepared by SI Securities and shall be deemed broker-dealer communications subject to FINRA Rule 2210 (the “Excluded Sections”). With the exception of the Excluded Sections noted above, this profile contains offering materials prepared solely by Kapsul without the assistance of SI Securities, and not subject to FINRA Rule 2210 (the “Issuer Profile”). The Issuer Profile may contain forward-looking statements and information relating to, among other things, the company, its business plan and strategy, and its industry. Investors should review the risks and disclosures in the offering's draft. The contents of this profile are meant to be a summary of the information found in the company’s Form C. Before making an investment decision, investors should review the company’s Form C for a complete description of its business and offering information, a copy of which may be found both here and below.


Company Highlights

  • Over $3.3M in presales on Kickstarter, Indiegogo, and kapsulair.com
  • Pre-sold over 9,000 units DTC with a 13X ROAS (Return On Ad Spend) April –September 2018 (unaudited)
  • Purchase intent from Home Depot, PC Richard, and Bed Bath & Beyond
  • Eight patents filed with three patents granted to date
  • A Techstars Boston 2018 Company

Fundraise Highlights

  • Total Amount Raised: US $125,419
  • Total Round Size: US $6,000,000
  • Raise Description:  Seed
  • Minimum Investment:  US $1,000 per investor
  • Security Type:  Preferred Equity
  • Pre-Money Valuation:  US $15,000,000
  • Offering Type:   Side by Side Offering

“The solution to air conditioners we’ve all been waiting for” – Tech Insider


Kapsul is building one of the first premium home-climate brands in the world with high-design products that are smart, connected, and better for the planet. Our first product, the Kapsul W5, is a connected air conditioner that Tech Insider called “The solution to air conditioners we’ve all been waiting for” and that has pre-sold over 9,000 units.

The Kapsul W5 is a 5,000 BTU connected window air conditioner that’s half the height and quieter than traditional units. The W5 is safe, easy to install, Wi-Fi enabled, connects to a mobile app for iOS and Android, and integrates with Alexa, Nest, and Google Home.  As an early mover in this category, we have a robust patent portfolio with eight  patents filed, and three granted to date.

In terms of market traction, we have $3.3M in pre-sales direct to consumer plus purchase order interest for 2019 of $2M from leading retailers like Home Depot, PC Richard, and Bed Bath & Beyond, to name a few. Our revenue model is hardware with recurring software sales, and we project that we will recognize $7M in revenue in 2019 with margins of over 50%.

We are ready to manufacture. We have developed prototypes, a final manufacturable design, and both mature firmware and software, and our supply chain is established from sourcing through to stateside distribution. We have deep customer knowledge, a repeatable customer acquisition process, and a blended return on ad spend of over 13X – meaning we earn $13 in revenue for every advertising dollar spent.

We aim to reinvent the category, have demonstrated consumer demand through pre-sales and retail purchase order interest, possess a mature and manufacturable design, have complete supply and distribution logistics established, and after this round of funding will be ready to go to market. 

Product & Service

The window air conditioner category presents a rich target. Today’s window air conditioners are inconvenient and anything but modern. They are large, loud, heavy, unattractive from inside and outside the home, and difficult to install and remove. Kapsul has addressed each of these pain points with its first product offering. Kapsul’s 5,000 BTU/h unit is approximately half as tall at 7” and half as loud at 50 dB than traditional units. In addition, it is safe and easy for one person install and remove. Its design is simple, and it can be conveniently controlled via a single knob interface, with your voice using popular smart-home platforms such as Alexa and Google Home, or with an Android or iOS app over WiFi. 

Kapsul intends to sell its products and services direct to consumer via kapsulair.com and Amazon and through select third-party retail partners. Retailers who have proffered purchase orders or expressed purchase intent include, but are not limited to Home Depot, Lowe’s, PC Richard, and Bed Bath & Beyond. We project  that, at scale, our direct margins will be over 60% and our retail margins will be 40%.

Kapsul’s competitive advantages include the ability to understand emerging customer requirements and our core competencies in hard-to-duplicate areas such as industrial design, mechanical engineering, and electrical engineering. In addition, we have filed eight patents to date covering the window air conditioner, window frame adapter, and dehumidifier designs, of which, three have been granted. We also enjoy an early mover advantage in the premium smart home-climate market.

Market Overview & Products

We are addressing a $14 billion U.S. market for home cooling and comfort products with a planned product lineup that includes two window units, two humidistats (humidification and dehumidification in a single product), two portable air conditioning units, and a micro-split unit.

Our first product line is two window air conditioners, 5,000 and 8,000 BTU/h models, that together represent over half of all window air conditioner sales in the U.S. by BTU/h.

Our design has been embraced by users, the media, and retail buyers. We have received over $3.3 million dollars in pre-orders since April 2016 on crowdfunding platforms and through direct sales on kapsulair.com, have 22,000 followers on Facebook, and have been called “The solution to air conditioners we’ve all been waiting for!” by Tech Insider. We have also had a warm reception from retailers, with over $1,000,000 in pre-orders through kapsulair.com and over $2,000,000 in order interest from prospective retail partners.

Partners

We are outsourcing non-core functions to trusted partners who, in many cases, act as an extension of our team. This strategy is being pursued both as a practical matter (resource allocation and specialization) and so as not to build capabilities that will be redundant to those of either a multinational OEM / distribution partner or acquirer.

Our partnerships provide for support through the product and customer lifecycle and are supported inside the company by dedicated administrative staff. Arguably our most important relationships are manufacturing, firmware/app development, sales, and advertising.

Technology

Kapsul is a fully connected device with an onboard sensor array consisting of temperature, humidity, ambient light, and kilowatt usage sensors. It has a WiFi module and connects to Amazon Web Services to allow remote operation via mobile application for iOS and Android and local operation including through voice assistant platforms such as Amazon Alexa and Google Assistant. Kapsul's firmware has been designed to allow extensibility through over the air updates.

Media Mentions

Team Story

Our team has always wanted to create our own brand of products in home climate and has leveraged our deep product design, thermodynamics, and home climate experience to do so. We identified room products--window air conditioners, space heaters, humidifiers--as a neglected product area ripe for innovation. We agreed to only launch products that fulfilled our brand promise to (a) solve pain points of an existing product and (b) reinvent the category. When our first product, the Kapsul W5 connected window air conditioner became a top-100 all-time crowdfunding success, we knew we had hit upon a product category and vision the resonated with our customers.

Our team has core capabilities in industrial design, mechanical and electrical engineering, connected device hardware and software engineering, in understanding customer requirements, and in customer acquisition. We design consumer products and advance those designs to the point where they can be passed to our OEM (original equipment manufacturing) partners. 

Founders and Officers

Kapsul’s founder, CEO, and lead engineer Kurt Swanson has been obsessed with thermodynamics for as long as he can remember. Kurt is a mechanical engineer by training and got his start at the Boeing Corporation where he worked on the 787 among other projects. He left Boeing to start Likuma Labs, a product design firm that became well known for making premium connected products. Kurt provides the vision for our product lineup across heating and cooling.

Kurt Swanson

CEO

Kapsul’s founder, CEO, and lead engineer Kurt Swanson has been obsessed with thermodynamics for as long as he can remember. Kurt is a mechanical engineer by training and got his start at the Boeing Corporation where he worked on the 787 among other projects. He left Boeing to start Likuma Labs, a product design firm that became well known for making premium connected products. Kurt provides the vision for our product lineup across heating and cooling.

Kapsul’s CTO Don Pancoe is a PE electrical engineer with an MS in industrial design who has deep experience in connected device architecture and systems design earned working in transportation and power infrastructure for organizations such as Amtrak, SEPTA (Positive Train Control), Metro-North Railroad, and Metrolink. Don has 20-years experience with a background that spans all the functional areas of the company from design to engineering. 

Don Pancoe

CTO

Kapsul’s CTO Don Pancoe is a PE electrical engineer with an MS in industrial design who has deep experience in connected device architecture and systems design earned working in transportation and power infrastructure for organizations such as Amtrak, SEPTA (Positive Train Control), Metro-North Railroad, and Metrolink. Don has 20-years experience with a background that spans all the functional areas of the company from design to engineering. 

Kapsul COO Chris B. Myers, was backer #207 a full year before he joined Kapsul to provide our go-to-market strategy. Chris has over 20 years of experience in high growth companies bringing new technology products to market, has raised funding rounds from seed through exit, built several best of breed business’, sold the technologies developed to market leaders, and has deep experience in customer acquisition earned running campaigns for brands like Nordstrom, Mac and PC Mall, Gateway, HP, Autotrader, ProFlowers, and De Beers. 

Chris Myers

COO

Kapsul COO Chris B. Myers, was backer #207 a full year before he joined Kapsul to provide our go-to-market strategy. Chris has over 20 years of experience in high growth companies bringing new technology products to market, has raised funding rounds from seed through exit, built several best of breed business’, sold the technologies developed to market leaders, and has deep experience in customer acquisition earned running campaigns for brands like Nordstrom, Mac and PC Mall, Gateway, HP, Autotrader, ProFlowers, and De Beers. 

Key Team Members

Sam Ettinger

Mechanical Engineer

Caitlin Antram

Community Manager

Linda Shi

General Counsel

Devin Sidell

Head of Design

Notable Advisors & Investors

Ben Franklin Technology Partners

Investor, Regional Technology Investor

Evan Malone

Investor, Individual Investor

Techstars

Investor, Global Accelerator

Cooley LLP

Advisor, Counsel

The Stable

Advisor, Consumer Brand Agency

Dragon Innovation

Advisor, Manufacturing Planning

Q&A with the Founder

  • Can you describe your typical customer/user profile?

    We plan to sell both direct to consumer and through third-party retail outlets.

    We expect that our retail partners will be regional and big box consumer retailers (e.g., PC Richard, Home Depot, and Lowes) interested primarily in offering quality differentiated products to their customers. Retailers use a planogram for each product category rated as “good”, “better”, “best” and we believe we fit their need for a clear “best” in both 5,000 BTU window air conditioners and connected window air conditioners. Several retailers that we are in discussions with have initiatives to expand or create a focus around smarthome products and we fit neatly into those initiatives.

    We have pre-sold over 9,200 units direct to consumers and have a deep understanding of our customer.

    Our customers are primarily design centric, affluent, college educated, urban, professional, millennials. 60% are men and 40% are women, and the average age of our customer is 35. Our customers have an affinity for brands such as Apple, Audi, Dyson, and Nest. They value connected products and expect that the products that they buy will be both functional and beautiful. They make statements such as “Good design enhances the quality of my life.” and “I’m willing to pay more for something that is well designed.”

  • Who do you view as your closest competitors and what key factors differentiate yourselves?
    We compete across two connected product categories: home comfort / cooling and smart home.

    Competitors in the home comfort / cooling market include established brands like Frigidaire, Haier, LG, Friedrich, and Dyson. These companies are well funded, well managed, and efficient at market although they are also large and except for Dyson – are not terribly innovative or competitive on dimensions other than price.

    The smart home category is much more dynamic and market entrants are typically design and technology driven just as Kapsul is. Prime examples are Nest / Alphabet, Amazon / Alexa, and Apple / Siri. The smart home category has reached a level of maturity such that the original companies (the platform providers) have receded from view as valid use cases have emerged from product ecosystems: smart platforms connecting the devices in your home which may include a thermostat, lighting, security and cameras, a crib monitor, media centers, and front door locks, for example. More and more products are being enabled to connect to smart home platforms (the Internet of things or “IoT”) and it is increasingly common to see products advertised as “Works with Alexa” or “Works with Nest” for example.

    Several air conditioning companies have added “smart” features to their products to attempt to bridge this gap, but we believe that none has done so in a way that has convinced consumers. To date, we are not aware of any smart home companies have come out with (or announced plans to come out with) home cooling products, but have relied on established brands to enter their platforms.

    Direct competitors in the U.S. window air conditioner market include: Frigidaire (owned by Electrolux), Haier, LG, Friedrich, and several other brands, many just white labels of one of several dominant Chinese manufacturers including Midea (Arctic King). Historically, the home comfort market has been dominated by several large companies competing mostly on cost, without differentiation in size, ease of installation, or user experience in general. These incumbents certainly have advantages over Kapsul in terms of unit cost, manufacturing cost, and supply chain optimization, but they are vulnerable to an attack from below on dimensions other than cost such as those that Kapsul’s approach embodies: premium construction and materials, high design, and smart home. There is no competitor in the market today with a truly comparable product.

    We believe that it is extremely difficult for pure smart home companies to solve the engineering and design challenges posed by refrigeration, which are non-trivial and not at all the same as those posed by the dominant product categories of temperature and lighting control for example. As seen with Nest’s collaboration with Yale to produce a smartlock, certain smart products will require an integration with an established brand to engender trust is critical applications. In addition, companies from the home comfort and cooling market do not possess core competencies in IoT technology or have the culture (internal market size and margin hurdles necessary to greenlight new projects) to pursue the premium market because doing so takes a willingness to spend mightily on design, engineering, tooling, and marketing to reach a small niche market of 5% of affluent consumers willing to buy a premium product. So far, the solution that incumbents favor is to bolt on a Wi-Fi module and smartphone application to make their products “smart”.

    In both markets, we believe we can create enough breathing room to get to market and establish a premium brand. Our list of competitors is also and necessarily a highly targeted list of investors and acquirers.

  • What do you view as your competitive advantages?

    We think that our most compelling competitive advantage is our understanding of consumer needs and our ability to build products that satisfy those needs in a way that delights users. This “soft” competency is reflected in a very measurable premium price. Renowned business writer Michael Porter called premium pricing one of only two viable pillars to competitive advantage and posited that it was provable by assessing a customer's “willingness to pay”. We have proven willingness to pay both through selling over 9,200 units directly to consumers and by getting purchase orders from retailer partners.

    We also believe that we have operating advantages derived through our operating structure. We design, market, and sell products and use trusted partners for all other aspects of the business from sourcing through to manufacturing, distribution, and customer support. This structure allows us to keep fixed costs very low and ratchets variable costs in proportion to sales volume.

    In addition, our team has expertise both with this category of products -home comfort and cooling- and with product design more generally. Prior to founding Kapsul, individuals on our engineering team ran a fast growing product design firm and designed over twenty products that are currently in market including the LUX line of thermostats. We have experience in the full spectrum of activities associated with product design and manufacturing from the selection of partners to contract negotiation to the design build and prototype process to component and life testing through to the DFM process, cutting tools, setting up a manufacturing line, and quality assurance necessary to successfully manufacture quality consumer goods.

    Last, management has foundational expertise in customer acquisition earned building and running marketing funnels for top brands like Nordstrom, Best Buy, Mac Mall, PC Mall, Debeers, and Autotrader. This expertise is reflected in our ongoing marketing for our first product, where we have achieved a 13X return on ad spend.

  • Are there any regulations you must comply with, and how do you comply with those regulations?

    Kapsul’s window air conditioner, and subsequent consumer products, will be in compliance will all regulatory requirements. For the window air conditioner in the United States, these include UL 484 Standard for Room Air Conditioners, National Electrical Code NFPA 70, and performance and energy conservation standards in accordance with U.S. Department of Energy Federal Register Vol. 76 No. 4 and the U.S. Code of Federal Regulations Title 10, Chapter II, Subchapter D, Part 430. Kapsul’s window air conditioner has been designed with consideration for these requirements, in consultation with UL, and tested in-house thus far. All remaining required third party testing will be completed in late 2018 starting with the ETL and UL marks.

  • Are any founders no longer with the company? If yes, please explain.

    Yes. Kurt W. Swanson separated December 2016, and Justin Bain separated June 2017. Kurt W. Swanson is Kurt M. Swanson's father. During the first year of operation, Kurt and his father agreed that it was in the best interest to part ways due to disagreements about technical strategy, including difference of opinion regarding file management, version control, and other engineering professional practices (speed vs. regimentation). Justin Bain resigned for personal / family reasons regarding income level as a result of working at a startup. He had taken a significant pay cut which was unsustainable, felt he was not providing significant value as a full time CFO of a pre-revenue startup, and had a very long commute. Both Justin and Kurt W. agreed to sell back half their vested stock to remaining founders Don Pancoe and Kurt M. Swanson in separate personal transactions, authorized by board action, and is reflected in the current cap table. Both parties have an amicable relationship with the remaining team.
  • The Q&A with the Founder is based on due diligence activities conducted by SI Securities, LLC. The verbal and/or written responses transcribed above may have been modified to address grammatical, typographical, or factual errors, or by special request of the company to protect confidential information.

    Term Sheet

    A Side by Side offering refers to a deal that is raising capital under two offering types. If you plan on investing less than US $20,000.00, you will automatically invest under the Regulation CF offering type. If you invest more than US $20,000.00, you must be an accredited investor and invest under the Regulation D offering type.

    Fundraising Description

  • Round type:
    Seed

  • Round size:
    US $6,000,000

  • Raised to date:
    US $125,419
    US $125,419 (under Reg CF only)

  • Minimum investment:
    US $1,000

  • Target Minimum:
    US $1,000,000
  • Key Terms

  • Security Type:
    Preferred Equity

  • Share price:
    US $1.4377

  • Pre-money valuation:
    US $15,000,000

  • Option pool:
    5.0%

  • Is participating?:
    False

  • Liquidation preference:
    1.0x
  • Additional Terms

  • Investor Proxy Agreement

    All non-Major Purchasers will be subject to an Investment Proxy Agreement "IPA". The IPA will authorize SeedInvest to act as representative for each non-Major Purchaser and take certain actions for their benefit and on their behalf. Please see a copy of the IPA included with the Company's offering materials for additional details.


  • Closing conditions:
    While Kapsul has set an overall target minimum of US $1,000,000 for the round, Kapsul must raise at least US $25,000 of that amount through the Regulation CF portion of their raise before being able to conduct a close on any investments below $20,000. For further information please refer to Kapsul's Form C.

  • Regulation CF cap:
    While Kapsul is offering up to US $6,000,000 worth of securities in its Seed, only up to US $1,070,000 of that amount may be raised through Regulation CF.

  • Transfer restrictions:
    Securities issued through Regulation CF have a one year restriction on transfer from the date of purchase (except to certain qualified parties as specified under Section 4(a)(6) of the Securities Act of 1933), after which they become freely transferable. While securities issued through Regulation D are similarly considered "restricted securities" and investors must hold their securities indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available.

  • Use of Proceeds

    Investor Perks

    Early Bird Specials:

    • The first 100 investors will receive a 50% off coupon at kapsulair.com
    • The following 100 investors will receive a 30% off coupon at kapsulair.com

    Regular Perks:

    • Tier 1: Investments of $5,000 or more: free Kapsul W5 unit
    • Tier 2:Investments of $10,000 or more: tier 1 perk plus a unit to gift to a friend
    • Tier 3:Investments of $25,000 or more: tier 2 perk plus a humidistat (when launched)
    • Tier 4: Investments of $50,000 or more: tier 3 perk plus a private visit to HQ and dinner with the team
    • Tier 5: Investments of $100,000 or more: tier 4 perk plus a quarterly call with management

    It is advised that you consult a tax professional to fully understand any potential tax implications of receiving investor perks before making an investment.

    Prior Rounds

    The graph below illustrates the valuation cap or the pre-money valuation of Kapsul's prior rounds by year.


    This chart does not represent guarantees of future valuation growth and/or declines.

    Pre-Seed

  • Round Size
    US $700,000
  • Closed Date
    Aug 31, 2018
  • Security Type
    Convertible Note
  • Valuation Cap
    US $4,500,000
  • Financial Discussion

    Operations

    Premium Home Comfort, Inc. dba Kapsul (“the Company) is a Delaware limited liability company that was founded in 2016, and is headquartered in Philadelphia, Pennsylvania. The Company is developing a premium home-comfort brand with products that are smart, connected, and better for the planet.

    The Company has incurred losses from inception of approximately $2,194,555 which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern for the twelve-month period from the report date. The ability of the Company to continue as a going concern is dependent upon management's plans to raise additional capital from the issuance of debt or the sale of stock, its ability to attract users to its software platform and its ability to generate positive operational cash flow. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.

    The Company recognizes revenue only when all of the following criteria have been met:

    • Persuasive evidence of an arrangement exists;
    • Delivery has occurred or services have been rendered;
    • The fee for the arrangement is fixed or determinable; and
    • Collectability is reasonably assured.

    During 2016, the Company entered into a Kickstarter campaign wherein the Company received over two million. For those individuals that had contributed more than $250 into the campaign, they are to receive an air conditioning unit once the Company is producing their product. These funds are shown as customer deposits on the balance sheet. For the contributions that were less than $250, these are shown as other income on the statement of operations.

    On January 2, 2018, the Company reorganized in the state of Delaware from and LLC to a C-Corporation. The Company authorized a total of 9,000,000 common shares with a par value of $0.0001 per share. These financial statements reflect the Company’s current status as a C-Corporation.

    On January 16, 2018, the Company agreed to sell 532,979 shares of the Company’s common stock, which represented six percent of the capital stock of the Company to Techstars Boston 2017, LLC, for a sales price of $20,000.

    In January through August 2018, the Company entered into convertible notes totaling $700,000. These notes accrue interest at a rate of 8% per annum and are due 24 months after issuance date. These notes are convertible at either 80% of the cash price paid by the other purchasers during the Next Round Securities of the Company’s next Qualified Financing event, or the price obtained by dividing $4,500,000 by the number of outstanding shares of common stock of the Company immediately prior to the Qualified Financing event.

    Liquidity and Capital Resources

    The proceeds from the Offering are essential to our operations. We plan to use the proceeds as set forth above under "Use of Proceeds", which is an indispensable element of our business strategy. The Offering proceeds will have a beneficial effect on our liquidity, as we have approximately $57K in cash on hand as of June 30, 2018 which will be augmented by the Offering proceeds and used to execute our business strategy.

    The Company currently does not have any additional outside sources of capital other than the proceeds from the Combined Offerings.

    Market Landscape

    U.S. Window Air Conditioner Sales 2012 - 2016


    Global Home Climate Market

    The total global market for room cooling products is approximately $100B. U.S. sales are driven primarily by replacement, but global sales are predominantly for new units. Use of room cooling in emerging markets is expected to grow from 5% of all households today to 70% of all households over the next twenty years.

    There are an estimated 34M U.S. homes with individual air conditioning units, and approximately 54M units are in use today. The number of window air conditioner units sold in 2017 is estimated to be over 5M.

    The company’s products enter a established category of home climate that collides with an emerging category of smart home goods such as thermostats, lighting, AND locks. The smart home market is expected to grow to 1.8B connected-devices sold in 2019 according to BI Intelligence, and to enjoy a 67% compound annual growth rate over the next five years. That represents $490B in connected-home device sales in 2019 up from $61B in 2016.

    Although there is consistent yearly demand for window air conditioning units, most demand stems from replacing existing units rather than from new construction. Most units are replaced every 7-10 years and 30% of all units are 5,000 BTU/h while 20% are 8,000 BUT/h. 

    The number of window air conditioner units sold in 2016 is estimated to be over 5 million and our replacement analysis largely supports this figure. We see a trend in this data: 3.5 million units are bought to replace units that are more than ten years old indicating that there will be significant demand that new units conform to standards and provide for features that did not exist ten years ago such as the expanded capabilities provided by smart-home, control by smartphone, voice-user-interface, etc., that Kapsul offers. 

    Risks and Disclosures

    Risks Related to the Company’s Business and Industry

    We have not prepared any audited financial statements. Therefore, you have no audited financial information regarding the Company’s capitalization or assets or liabilities on which to make your investment decision. If you feel the information provided is insufficient, you should not invest in the Company.

    The Company’s cash position is relatively weak. The Company could be harmed if it is unable to meet its cash demands, and the Company may not be able to continue operations if they are not able to raise additional funds.

    The Company has generated substantial net losses and negative operating cash flows since its inception as part of the development of its business. The Company has generated substantial net losses and negative cash flows from operating activities since it commenced operations. It has incurred losses of $2,194,555 from its inception through December 31, 2017. For the year ended 2017, it incurred a net loss of $1,271,428. Before achieving profitability it will generate continued losses. Its costs may also increase due to such factors as higher than anticipated financing and other costs; non-performance by third-party suppliers, licensees, partners or subcontractors; and increases in the costs of labor or materials. If any of these or similar factors occur, its net losses and accumulated deficit could increase significantly and the value of its stock could decline.

    The reviewing CPA has included a “going concern” note in the reviewed financials. The Company has incurred losses from inception of approximately $2,194,555 which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern for the twelve-month period from the report date. The ability of the Company to continue as a going concern is dependent upon management's plans to raise additional capital from the issuance of debt or the sale of stock, its ability to attract users to its software platform and its ability to generate positive operational cash flow. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.

    The Company has a limited operating history upon which you can evaluate its performance: the Company has not recorded any sales through July 2018 and requires capital to begin manufacturing and shipping its product. Since the Company’s inception in February 5, 2016, it has been designing and developing its product. While sales efforts have begun, and the Company has accepted a number of pre-orders for future sales, the Company requires additional capital to manufacture and ship its product. Assuming the Company is able to raise sufficient capital, the management anticipates being able to start deliveries in March 2019, but there are numerous risks that may prevent or delay the start of product shipments. Accordingly, the Company has no history upon which an evaluation of its prospects and future performance can be made. Its proposed operations are subject to all business risks associated with new enterprises. The likelihood of its creation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the inception of a business, operation in a competitive industry, and the continued development of advertising, promotions, and a corresponding client base. The Company’s operating expenses are already quite high for an early stage company, and the management team anticipates that the operating expenses may increase for the near future. There can be no assurances that the Company will ever operate profitably. You should consider the Company's business, operations and prospects in light of the risks, expenses and challenges faced as an early-stage company.

    Many of company’s contracts are understood to be contingent / to trigger on the successful development and proof of concept of the Kapsul Air Conditioner. The Kapsul Air Conditioner is still in development, and the Company’s business depends almost entirely on its successful development and commercialization. The Company will require substantial additional development, testing, and potentially regulatory approval before it is able to commercialize its product effectively. This process may take many years and may require the expenditure of substantial resources beyond the proceeds raised in this offering. Accordingly, even if the Company is able to obtain the requisite financing to continue to fund the development of its products, it cannot guarantee that the Kapsul Air Conditioner or any other product candidates will be successfully developed or commercialized.

    The Company operates in a business that is highly regulated and subject to liability concerns. Compliance with regulatory requirements and changes in regulations could result in expenses and in diversion of management attention to the operations of the business.

    Cyclical and seasonal fluctuations in the economy and in weather patterns may have an effect on our business. These seasonal trends may cause fluctuations in our quarterly results, including fluctuations in revenues.

    The Company’s sales cycle is long and may be unpredictable, which can result in variability of its financial performance. Additionally, long sales cycles may require the Company to incur high sales and marketing expenses with no assurance that a sale will result, which could adversely affect its profitability. The Company’s results of operations may fluctuate, in part, because of the resource-intensive nature of its sales efforts and the length and variability of the sales cycle. A sales cycle is the period between initial contact with a prospective customer and any sale of its product. The sales process involves educating customers about the Company’s products/services and participating in extended product evaluations.The length of the sales cycle, from initial contact with a customer to the execution of a purchase order, is generally 2 to 3 months. During the sales cycle, the Company may expend significant time and money on sales and marketing activities or make other expenditures, all of which lower its operating margins, particularly if no sale occurs or if the sale is delayed as a result of extended qualification processes or delays. It is difficult to predict when, or even if, it will make a sale to a potential customer or if the Company can increase sales to existing customers. As a result, the Company may not recognize revenue from sales efforts for extended periods of time, or at all. The loss or delay of one or more large transactions in a quarter could impact its results of operations for that quarter and any future quarters for which revenue from that transaction is lost or delayed.

    Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating to the use of the products can lead to injury or other adverse events. These events could lead to recalls or safety alerts relating to our products and could result, in certain cases, in the removal of a product from the market. Any recall could result in significant costs as well as negative publicity that could reduce demand for our products. Personal injuries relating to the use of our products can also result in product liability claims being brought against us. In some circumstances, such adverse events could also cause delays in new product approvals. Similarly, negligence in performing our services can lead to injury or other adverse events.

    The consolidation of retail customers could adversely affect us. Retail customers in our major markets may consolidate, resulting in fewer customers for our business. Consolidation also produces larger retail customers that may seek to leverage their position to improve their profitability by demanding improved efficiency, lower pricing, increased promotional programs, or specifically tailored products. In addition, larger retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own white-label brands. Retail consolidation and increasing retailer power could adversely affect our product sales and results of operations. Retail consolidation also increases the risk that adverse changes in our customers’ business operations or financial performance will have a corresponding material and adverse effect on us. For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease, or cancel purchases of our products, or delay or fail to pay us for previous purchases, which could materially and adversely affect our product sales, financial condition, and operating results.

    The Company has not filed a Form D for its previous offerings. The SEC rules require a Form D to be filed by companies within 15 days after the first sale of securities in the offering relying on Regulation D. Failing to register with the SEC or get an exemption may lead to fines, the right of investors to get their investments back, and even criminal charges. There is a risk that a late penalty could apply.

    The Company’s 2017 tax return is on extension. A late filing of the tax return could subject it to penalties, fines, or interest changes, and which could indicate a failure to maintain adequate financial controls and safeguards. In particular, the Internal Revenue Service (IRS) could impose the Company with costly penalty and interest charges if the Company has filed its tax return late, or has not furnished certain information by the due date. In addition, even if the Company has filed an extension, if it underestimated its taxes, the IRS could penalize it. Potential tax consequences could adversely affect the Company’s results of operations or financial condition.

    Related Party Transactions. The Company has conducted certain transactions with related parties. Please see Page 19 for details.

    Existing investors have confirmed verbally that they plan to waive their pre-emptive rights but have not provided an executed waiver. The pre-emptive right entitles those investors to participate in this securities issuance on a pro rata basis. If those investors choose to exercise their pre-emptive right, it could dilute shareholders in this round. This dilution could reduce the economic value of the investment, the relative ownership resulting from the investment, or both.

    Risks Related to the Securities

    The Series Seed-1 Preferred Stock will not be freely tradable until one year from the initial purchase date. Although the Series Seed-1 Preferred Stock may be tradable under federal securities law, state securities regulations may apply and each Purchaser should consult with his or her attorney. You should be aware of the long-term nature of this investment. There is not now and likely will not be a public market for the Series Seed-1 Preferred Stock. Because the Series Seed-1 Preferred Stock have not been registered under the 1933 Act or under the securities laws of any state or non-United States jurisdiction, the Series Seed-1 Preferred Stock have transfer restrictions and cannot be resold in the United States except pursuant to Rule 501 of Regulation CF. It is not currently contemplated that registration under the 1933 Act or other securities laws will be effected. Limitations on the transfer of the Series Seed-1 Preferred Stock may also adversely affect the price that you might be able to obtain for the Series Seed-1 Preferred Stock in a private sale. Purchasers should be aware of the long-term nature of their investment in the Company. Each Purchaser in this Offering will be required to represent that it is purchasing the Securities for its own account, for investment purposes and not with a view to resale or distribution thereof.

    A majority of the Company is owned by a small number of owners. Prior to the Offering the Company’s current owners of 20% or more beneficially own up to 62.4% of the Company. Subject to any fiduciary duties owed to our other owners or investors under Delaware law, these owners may be able to exercise significant influence over matters requiring owner approval, including the election of directors or managers and approval of significant Company transactions, and will have significant control over the Company’s management and policies. Some of these persons may have interests that are different from yours. For example, these owners may support proposals and actions with which you may disagree. The concentration of ownership could delay or prevent a change in control of the Company or otherwise discourage a potential acquirer from attempting to obtain control of the Company, which in turn could reduce the price potential investors are willing to pay for the Company. In addition, these owners could use their voting influence to maintain the Company’s existing management, delay or prevent changes in control of the Company, or support or reject other management and board proposals that are subject to owner approval.

    Your ownership of the shares of preferred stock may be subject to dilution. Non-Major Purchasers (as defined below) of preferred stock do not have preemptive rights. If the Company conducts subsequent offerings of preferred stock or Securities convertible into preferred stock, issues shares pursuant to a compensation or distribution reinvestment plan or otherwise issues additional shares, investors who purchase shares in this Offering who do not participate in those other stock issuances will experience dilution in their percentage ownership of the Company’s outstanding shares. Furthermore, Purchasers may experience a dilution in the value of their shares depending on the terms and pricing of any future share issuances (including the shares being sold in this Offering) and the value of the Company’s assets at the time of issuance.

    You will be bound by an investor proxy agreement, which limits your voting rights. All Non-Major Purchasers of Series Seed-1 Preferred Stock will be bound by an investor proxy agreement. This agreement will limit your voting rights and at a later time may require you to convert your future preferred shares into common shares without your consent. Non-Major Purchasers will be bound by this agreement, unless Non-Major Purchasers holding a majority of the principal amount outstanding of the Series Seed-1 Preferred Stock held by Non-Major Purchasers vote to terminate the agreement.

    The Securities will be equity interests in the Company and will not constitute indebtedness. The Securities will rank junior to all existing and future indebtedness and other non-equity claims on the Company with respect to assets available to satisfy claims on the Company, including in a liquidation of the Company. Additionally, unlike indebtedness, for which principal and interest would customarily be payable on specified due dates, there will be no specified payments of dividends with respect to the Securities and dividends are payable only if, when and as authorized and declared by the Company and depend on, among other matters, the Company’s historical and projected results of operations, liquidity, cash flows, capital levels, financial condition, debt service requirements and other cash needs, financing covenants, applicable state law, federal and state regulatory prohibitions and other restrictions and any other factors the Company’s board of directors deems relevant at the time. In addition, the terms of the Securities will not limit the amount of debt or other obligations the Company may incur in the future. Accordingly, the Company may incur substantial amounts of additional debt and other obligations that will rank senior to the Securities.

    There can be no assurance that we will ever provide liquidity to Purchasers through either a sale of the Company or a registration of the Securities. There can be no assurance that any form of merger, combination, or sale of the Company will take place, or that any merger, combination, or sale would provide liquidity for Purchasers. Furthermore, we may be unable to register the Securities for resale by Purchasers for legal, commercial, regulatory, market-related or other reasons. In the event that we are unable to effect a registration, Purchasers could be unable to sell their Securities unless an exemption from registration is available.

    The Company does not anticipate paying any cash dividends for the foreseeable future. The Company currently intends to retain future earnings, if any, for the foreseeable future, to repay indebtedness and to support its business. The Company does not intend in the foreseeable future to pay any dividends to holders of its shares of preferred stock.

    Any valuation at this stage is difficult to assess. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult to assess and you may risk overpaying for your investment. In addition, there may be additional classes of equity with rights that are superior to the class of equity being sold.

    General Risks and Disclosures

    Start-up investing is risky. Investing in startups is very risky, highly speculative, and should not be made by anyone who cannot afford to lose their entire investment. Unlike an investment in a mature business where there is a track record of revenue and income, the success of a startup or early-stage venture often relies on the development of a new product or service that may or may not find a market. Before investing, you should carefully consider the specific risks and disclosures related to both this offering type and the company which can be found in this company profile and the documents in the data room below.

    Your shares are not easily transferable. You should not plan on being able to readily transfer and/or resell your security. Currently there is no market or liquidity for these shares and the company does not have any plans to list these shares on an exchange or other secondary market. At some point the company may choose to do so, but until then you should plan to hold your investment for a significant period of time before a “liquidation event” occurs. A “liquidation event” is when the company either lists their shares on an exchange, is acquired, or goes bankrupt.

    The Company may not pay dividends for the foreseeable future. Unless otherwise specified in the offering documents and subject to state law, you are not entitled to receive any dividends on your interest in the Company. Accordingly, any potential investor who anticipates the need for current dividends or income from an investment should not purchase any of the securities offered on the Site.

    Valuation and capitalization. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult to assess and you may risk overpaying for your investment. In addition, there may be additional classes of equity with rights that are superior to the class of equity being sold.

    You may only receive limited disclosure. While the company must disclose certain information, since the company is at an early-stage they may only be able to provide limited information about its business plan and operations because it does not have fully developed operations or a long history. The company may also only obligated to file information periodically regarding its business, including financial statements. A publicly listed company, in contrast, is required to file annual and quarterly reports and promptly disclose certain events through continuing disclosure that you can use to evaluate the status of your investment.

    Investment in personnel. An early-stage investment is also an investment in the entrepreneur or management of the company. Being able to execute on the business plan is often an important factor in whether the business is viable and successful. You should be aware that a portion of your investment may fund the compensation of the company's employees, including its management. You should carefully review any disclosure regarding the company's use of proceeds.

    Possibility of fraud. In light of the relative ease with which early-stage companies can raise funds, it may be the case that certain opportunities turn out to be money-losing fraudulent schemes. As with other investments, there is no guarantee that investments will be immune from fraud.

    Lack of professional guidance. Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g., angel investors and venture capital firms). These investors often negotiate for seats on the company's board of directors and play an important role through their resources, contacts and experience in assisting early-stage companies in executing on their business plans. An early-stage company may not have the benefit of such professional investors.

    Representatives of SI Securities, LLC are affiliated with SI Advisors, LLC (“SI Advisors”). SI Advisors is an exempt investment advisor that acts as the General Partner of SI Selections Fund I, L.P. (“SI Selections Fund”). SI Selections Fund is an early stage venture capital fund owned by third-party investors. From time to time, SI Selections Fund may invest in offerings made available on the SeedInvest platform, including this offering. Investments made by SI Selections Fund may be counted towards the total funds raised necessary to reach the minimum funding target as disclosed in the applicable offering materials.

    Kapsul's Form C

    The Form C is a document the company must file with the Securities and Exchange Commission, which includes basic information about the company and its offering and is a condition to making a Reg CF offering available to investors. It is important to note that the SEC does not review the Form C, and therefore is not recommending and/or approving any of the securities being offered.

    Download Kapsul's  Form C

    Frequently Asked Questions

    About Side by Side Offerings
    What is Side by Side?

    A Side by Side offering refers to a deal that is raising capital under two offering types. This Side by Side offering is raising under Regulation CF and Rule 506(c) of Regulation D.


    What is a Form C?

    The Form C is a document the company must file with the Securities and Exchange Commission (“SEC”) which includes basic information about the company and its offering and is a condition to making a Reg CF offering available to investors. It is important to note that the SEC does not review the Form C, and therefore is not recommending and/or approving any of the securities being offered.

    Before making any investment decision, it is highly recommended that prospective investors review the Form C filed with the SEC (included in the company's profile) before making any investment decision.


    What is Rule 506(c) under Regulation D?

    Rule 506(c) under Regulation D is a type of offering with no limits on how much a company may raise. The company may generally solicit their offering, but the company must verify each investor’s status as an accredited investor prior to closing and accepting funds. To learn more about Rule 506(c) under Regulation D and other offering types check out our blog and academy.


    What is Reg CF?

    Title III of the JOBS Act outlines Reg CF, a type of offering allowing private companies to raise up to $1 million from all Americans. Prior capital raising options limited private companies to raising money only from accredited investors, historically the wealthiest ~2% of Americans. Like a Kickstarter campaign, Reg CF allows companies to raise funds online from their early adopters and the crowd. However, instead of providing investors a reward such as a t-shirt or a card, investors receive securities, typically equity, in the startups they back. To learn more about Reg CF and other offering types check out our blog and academy.


    Making an Investment in Kapsul
    How does investing work?

    When you complete your investment on SeedInvest, your money will be transferred to an escrow account where an independent escrow agent will watch over your investment until it is accepted by Kapsul. Once Kapsul accepts your investment, and certain regulatory procedures are completed, your money will be transferred from the escrow account to Kapsul in exchange for your securities. At that point, you will be a proud owner in Kapsul.


    What will I need to complete my investment?

    To make an investment, you will need the following information readily available:

    1. Personal information such as your current address and phone number
    2. Employment and employer information
    3. Net worth and income information
    4. Social Security Number or passport
    5. ABA bank routing number and checking account number (typically found on a personal check or bank statement)

    If you are investing under Rule 506(c) of Regulation D, your status as an Accredited Investor will also need to be verified and you will be asked to provide documentation supporting your income, net worth, revenue, or net assets or a letter from a qualified advisor such as a Registered Investment Advisor, Registered Broker Dealer, Lawyer, or CPA.


    How much can I invest?

    An investor is limited in the amount that he or she may invest in a Reg CF offering during any 12-month period:

    • If either the annual income or the net worth of the investor is less than $100,000, the investor is limited to the greater of $2,000 or 5% of the lesser of his or her annual income or net worth.
    • If the annual income and net worth of the investor are both greater than $100,000, the investor is limited to 10% of the lesser of his or her annual income or net worth, to a maximum of $100,000.

    Separately, Kapsul has set a minimum investment amount of US $1,000.

    Accredited investors investing $20,000 or over do not have investment limits.


    After My Investment
    What is my ongoing relationship with the Issuer?

    You are a partial owner of the company, you do own securities after all! But more importantly, companies which have raised money via Regulation CF must file information with the SEC and post it on their websites on an annual basis. Receiving regular company updates is important to keep shareholders educated and informed about the progress of the company and their investment. This annual report includes information similar to a company’s initial Reg CF filing and key information that a company will want to share with its investors to foster a dynamic and healthy relationship.

    In certain circumstances a company may terminate its ongoing reporting requirement if:

    1. The company becomes a fully-reporting registrant with the SEC
    2. The company has filed at least one annual report, but has no more than 300 shareholders of record
    3. The company has filed at least three annual reports, and has no more than $10 million in assets
    4. The company or another party purchases or repurchases all the securities sold in reliance on Section 4(a)(6)
    5. The company ceases to do business

    However, regardless of whether a company has terminated its ongoing reporting requirement per SEC rules, SeedInvest works with all companies on its platform to ensure that investors are provided quarterly updates. These quarterly reports will include information such as: (i) quarterly net sales, (ii) quarterly change in cash and cash on hand, (iii) material updates on the business, (iv) fundraising updates (any plans for next round, current round status, etc.), and (v) any notable press and news.


    How can I sell my securities in the future?

    Currently there is no market or liquidity for these securities. Right now Kapsul does not plan to list these securities on a national exchange or another secondary market. At some point Kapsul may choose to do so, but until then you should plan to hold your investment for a significant period of time before a “liquidation event” occurs. A “liquidation event” is when Kapsul either lists their securities on an exchange, is acquired, or goes bankrupt.


    How do I keep track of this investment?

    You can return to SeedInvest at any time to view your portfolio of investments and obtain a summary statement. If invested under Regulation CF you may also receive periodic updates from the company about their business, in addition to monthly account statements.


    Other General Questions
    What is this page about?

    This is Kapsul's fundraising profile page, where you can find information that may be helpful for you to make an investment decision in their company. The information on this page includes the company overview, team bios, and the risks and disclosures related to this investment opportunity. If the company runs a side by side offering that includes an offering under Regulation CF, you may also find a copy of the Kapsul's Form C. The Form C includes important details about Kapsul's fundraise that you should review before investing.


    How can I (or the company) cancel my investment under Regulation CF?

    For offerings made under Regulation CF, you may cancel your investment at any time up to 48 hours before a closing occurs or an earlier date set by the company. You will be sent a reminder notification approximately five days before the closing or set date giving you an opportunity to cancel your investment if you had not already done so. Once a closing occurs, and if you have not canceled your investment, you will receive an email notifying you that your securities have been issued. If you have already funded your investment, your funds will be promptly refunded to you upon cancellation. To cancel your investment, you may go to your portfolio page


    What if I change my mind about investing?

    If you invest under any other offering type, you may cancel your investment at any time, for any reason until a closing occurs. You will receive an email when the closing occurs and your securities have been issued. If you have already funded your investment and your funds are in escrow, your funds will be promptly refunded to you upon cancellation. To cancel your investment, please go to your portfolio page.