Greetings. Welcome to the Capstone Companies, Inc. Year End 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Aimee Gaudet, Corporate Secretary for Capstone Companies Inc. Ms. Gaudet, you may begin.

Thank you, Omer and good morning to everyone. On the call today is Stewart Wallach, Capstone's President and Chief Executive Officer; and Gerry McClinton, Chief Financial Officer. They will be discussing the year end 2018 financial results as well as give us an update on the strategy and outlook followed by a question-and-answer session. If you do not have the release that was distributed yesterday afternoon, it is available on the company's website at www.capstonecompaniesinc.com. As you are aware, we may make forward-looking statements during today's presentation. These statements apply to future events which are subject to risks and uncertainties, as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in our earnings release as well as in documents filed by the company with the Securities and Exchange Commission, which can be found at www.capstonecompaniesinc.com or at www.sec.gov. With that, I'll turn it over to you, Stewart.

Thank you, Amy, and good morning to everyone. I appreciate your time with us today. Before introducing Gerry McClinton to review the year-end financial results, I'd like to put some color on our current standing as it relates to specific marketing initiatives that have been in development over the course of 2018. Before doing so, I want to make a -- take a moment to comment on our revenues for 2018. As projected and discussed during 2018 webcasts, revenues were disappointing, but were a direct result of decisions management made relative to the trade disputes with China and the resulting threats of increased tariffs. While the tariffs themselves minimally impacted our cost of goods to-date, the reduced promotional scheduling due to costing uncertainty is what drove revenues down. In short, we opted to not deviate from our successful business model in which all costs incurred in transporting and clearing products in the United States are the responsibility of our customers. We were asked to guarantee landed pricing due to the potential uncertainty of tariff adjustments. This would not have been prudent as the increased tariffs were not only unknown at the time, but furthermore, our business model would be subject to long-term change. On a positive note, we developed a new lighting product that presents a higher perceived value and improved gross margin to address the tariff issue should it have been implemented as per the administration's stated plan. This product was intended to serve as a catalyst to revitalize our revenues in 2019 within the LED category. The product resonated well with the buying community and initial orders totaled an estimated $3.5 million which were shipped in Q1 to support and manage special event within the warehouse club channel. The early point-of-sales data indicates strong sell-through, and we anticipate the product will meet its targeted objective throughout 2019. We will obviously discuss this in greater detail when we have our Q1 results webcast. We have expanded our product development focus throughout 2018 and targeted a new category of smart products, which we have referred to in prior discussions as connected surfaces. We launched the first product, the Capstone's Smart Mirror at the CES 2019 Exhibition, and I am pleased to report the response exceeded expectations. I will expand upon that more momentarily. I would like to break at this point and allow Gerry to discuss and highlight key points within 2018 financials, which I will -- after which I will elaborate further on Capstone's 2019 perspective.

Thank you Stewart, and good morning everyone. Fiscal 2018 revenue was impacted by various factors that collectively resulted in a revenue reduction as compared to 2017. So let's take a look at really what happened here. For the year December 31, 2018 net revenues were approximately $12.8 million, a decrease of $24 million from $36.8 million in fiscal 2017. The accent light category in 2017 was at the height of its retail lifecycle. Combined Capstone Lighting, Duracell and Hoover Home brands accent light program accounted for approximately $29.5 million of net revenue. However, in 2018 some of the accent light product lines both for the Duracell and Hoover program did not perform to retailer's expectation. I will highlight some of the reasons this occurred. The Duracell license was extended to Capstone in conjunction with a major promotional programming by a specific warehouse club. As a result of the promotional support, Duracell branding and very aggressive retail pricing, the club projected an estimated 40% of higher sales than they previously experienced selling Capstone’s own brand. In short, the strategy did not deliver, resulting in significant revenue reduction as compared to 2017. The 12 months ended December 31, 2018, the program generated $1.2 million of sales as compared to $15 million in sales in 2017. This represented a $14.8 million revenue reduction in 2018 by that retailer. The retailer was left with excessive carryover inventories into 2018. In an effort to balance and liquidate the inventories while minimizing costs to Capstone, the sales period was extended through 2018 and all other promotional programming was delayed or postponed. The inventory liquidation extended through Q1 and Q2 of 2018, and accordingly, we missed new business scheduling for most of the year. We did resume new product introductions, as Stewart mentioned earlier in Q1 2019. The Hoover LED Home program sales velocity also declined in 2018 as the overall LED business declined in both units and dollars, while we successfully placed three new Hoover branded products in Q1 2018 the sell-through did not meet prior year sales performance. This decline resulted in a sales decrease of $9.3 million in 2018. The Capstone Lighting program generated $5.4 million of revenue in 2018 compared to $5.2 million in 2017, an increase of $200,000 [indiscernible] as the company did launch four new Capstone products during 2018. So I trust this provides some insight into the $24.1 million reduction in sale. Now also effective September 24, 2018, the current U.S. administration implemented a 10% tariff, with a further 15% increased originally scheduled for January 1st and then delayed it to March 1, 2019. The U.S. administration recently delayed a further 15% increase due to pending negotiations with the Chinese Government trade official. However, the ongoing trade dispute continues to cause uncertainty and confusion both for suppliers and retailers. Capstone faced challenges in 2018 unlike any in its history. As a result of the trade dispute, the company was going to be impacted one way or another. We felt that being conservative during this time is prudent regardless of potential [indiscernible] reduced revenue and opted to limit underwriting support of the proposed tariff and focus on the retention of our capital reserves and the execution of our 2019 plan. In 2018, while maintaining a conservative posture, the company still continues to invest in retail support program. Point of fact, in 2017 the company provides retailers with $1.9 million of marketing funds for consumer rebate allowances and in 2018 we provided a further $559,000 in related funding. For the year December 31, 2018 international sales were approximately $1.3 million of net revenue as compared to $1.8 million of net revenue in 2017. Let's take a look at gross profit and cost of sales. As a result of the reduced revenues gross profit decreased by $5.9 million as compared to 2017. The gross margin percentage for lighting products decreased minimal to 25.5% from 24.1% in 2017. In 2018, seven new products were launched. The 1.6% reduction in the gross margin percentage resulted from the shipment of two product [tested] [ph] orders and we [sold off some] [ph] inactive inventory at lower margins. As a result of the reduced revenues, cost of sales grew approximately $9.9 million and $27.9 million respectively. This cost represents 77.5% and 75.9% of net revenues for 2018 and 2017 respectively. Total operating expenses in fiscal 2018 were $4.1 million of revenue as compared to $5.6 million of revenue in 2017. This represents a $1.5 million decrease over 2017. The two areas that most impacted operating expenses were sales and marketing and product development expenses. Sales and marketing expenses in 2018 and 2017 were $915,000 and $2.3 million respectively, a decrease of $1.4 million. With the revenue reduction in 2018, many sales related expenses were also reduced, royalty expenses decreased by $934,000 and sales agent commissions decreased by $233,000 as compared to 2017. Now, with the development of the Smart Mirror project, product development expenses were approximately $590,000 in 2018 as compared to $377,000, that's an increase of $142,000. For 2018 the company invested $295,000 in the Smart Mirror project, an increase of $235,000 from the previous year. These investments covered product design, software development, electrical engineering, product prototyping, testing and regulatory certifications by outside third-party testing lab. On other expenses areas compared to 2017, compensation expenses was down $109,000 and professional fees were at $40,000 lower, despite having $73,000 of legal expenses associated with the Cyperplus dispute. Other general and administrative expenses were $114,000 lower, mainly a result of lower bank processing fees and reduced rental expense resulting from a rent abatement that is received for relocating our corporate office during the year. Operating income loss for fiscal 2018, the operating loss was $1.2 million compared with $3.2 million operating income 2017. Despite operating expenses being reduced by $1.5 million compared to 2017 the $5.5 million gross profit reduction resulting from reduced revenue contributed to the $4.4 million negative swing as compared to 2017. Other expenses, miscellaneous total expense for fiscal 2018. Other expenses were approximately $55,000 a positive swing of $67,000 compared to $122,000 in 2017. The main reason for those expense reductions due to reduced interest cost as a result of having zero loan. Provision for income tax for fiscal 2018, you had a benefit from income tax of approximately $289,000 compared to a provision last year of $1 million in 2017. The benefit was a result of a net loss incurred during the year. Net income loss for 2018 and 2017 was approximately $1 million loss and $2.1 million profit respectively, a negative swing of $3.1 million. Liquidity and capital resources. But for 2018, we worked very diligently to improve our balance sheet position, enabling us to develop a connected surface project without financial hurdle. So let me highlight a few points. The cash balance of 2018 year-end remains strong, increasing $154,000 from 2017. Comparative year-end balances were $3.8 million in 2018 compared with $3.7 million in 2017. Accounts receivable were 64.5 thousand in 2018 as compared with $4.4 million in 2017. The cash has been collected. We have eliminated any risk of non-collection on bad debt, so we’re in a good position. Inventory on hand of 27,000 in 2018 compared to $141,000 in 2017, a reduction of $104,000 and what's in hand is all active inventory. Income tax refundable, $220,000 in 2018, which we'll be utilizing in the future. The accounts payable of 461,000 compared to 2.7 million in 2017. All suppliers have been paid down. Income tax payable was $12,000 as compared to $624,000 in 2017. The tax liability has been paid down. Notes and loans payable in 2018 remained at zero. The most impressive thing is our working capital. We've working capital of $3.8 million, which is a current working capital ratio of 6.5. Talk a little bit about funding activity. Cash flows provided by operating activity, cash provided by operating activities was approximately 208,000 in 2018 compared to $3.5 million in 2017. The negative cash impacted net loss for approximately $1 million is offset by $4.1 million reduction in accounts receivable of total cash collection. 171,000 increase in accrued sales allowances and $130,000 reduction in inventory. With this cash availability, the company reduced $2.3 million in accounts payable and $650,000 in income tax payable. The company's tax positions increased 3.7 million at December 31, 2017 $3.8 million in 2018. Cash flows used in investing activities. The use of cash in 2018 was approximately $54,000 compared to $48,000 in 2017. The company continue to invest new product moulds and tooling with the product expansion in the smart home program the company’s future capital requirement will increase. CIHK extend to maintain favorable payments with this manufacturers limiting upfront cash required with initiating new product line project. Cash flow used in financing activity. The cash used in financing activities in the year 2018 and 2017 was zero and 2018 totaled $1.4 million respectively. As of December 31, 2018, the company had zero debt outstanding. At December 31, 2018, the company complies with covenants, pursuing through existing credit facilities. So in closing, I would just like to say, our resources remain strong that is our fact of relationships and our payment terms are well established. We have a strong cash balance. We have bank lines available and expansion lines available in place and we continue to have zero debt. With these available resources, management believes that our cash flow from operations continue to support from our banks Sterling National Bank and support from our directors when needed will provide sufficient financial resources for the company in 2019. This concludes my financing covering for 2018. I'll turn it back to you.

Thanks, Gerry. As Gerry indicated, our year-end cash position remains strong and it has enabled us to pursue the Connected Services project without distracting. Let me highlight some of our specific Connected Services achievements to date. One, our initial smart device Smart Mirror was introduced at the Consumer Electronics Show in January of 2019. This was our first entry in the electronics industry showcase and we have subsequently been covered in numerous industry publications, interviews were recognized by Android Headlines as one of their Best of CES choices. Two, we engaged Max Borges Agency, a noted consumer tech PR company who helps us to spearhead the launch of the Connected Services product line at the Consumer Electronics Show. And we will continue to manage media contact for the company as we initiate product launches at retail. Three. The company expanded its social media marketing department and enhanced its social media campaign strategy. We currently have a presence on the following social media platforms; Facebook, both Capstone Industries and Capstone connected, Instagram, Pinterest, LinkedIn with plans to establish presence on YouTube as well as Twitter in the very near future. Additionally our team has been developing a strategic social media advertising campaign in an effort to reach our highly targeted audience, and leverage potential sales of the smart device. The company -- four, the company has been working with its web design and marketing team to develop a short-term presale website, which we’ll use to facilitate direct sales to early adopters. We plan to introduce this site no later than May of 2019. Additionally, number five. The web team has also been working on the design and development of our primary website, which will be a modernistic and relevant site reflective of the image associated with smart electronic products. This website will feature products from the new Capstone connected product line and is expected to launch in Q2. And lastly, we engaged Producify, a full key, full service marketing company to help us create and produce our initial product video, which will be used as social media channels and to support the initial campaign. As you can see, we have been readying the company for its foray into the electronics industry. This opportunity I have to point out is greater than any that Capstone has pursued in the past and as such sizable investments have been made to compete in this emerging electronics category. I will be travelling to Asia in the weeks ahead to review and discuss expansion plans for the Capstone connected surfaces programming as well as our LED business. This will include business outside Mainland China with sources in Thailand and Vietnam that our Capstone Hong Kong team have been in discussions with over the course of 2018. Our objectives are to mitigate the threats of future tariffs where possible and reduce our reliance over time on China-only factors. While we enjoy strong relationships with our wholly-owned factories that are not currently experiencing any delivery or production issues. There are concerns that trade relations between the U.S. and China will remain strained for the foreseeable future and we need to be prepared for future instability. In closing, having met the challenges brought on by the reduction in revenues in 2018, which were substantial, we are bullish on the direction the company is taking in 2019. It's undeniable that today's population is more connected than ever, just as smartphones, tablets and broadband subscriptions have expanded from 2010 to 2018 across all age groups and income levels, we envision the continuing simplification and access to content and data and new formats imminent, which will create substantial consumer demand. The United States is one of the largest smartphone markets in the world and for the highest smartphone penetration rates worldwide, and in 2017, 68.5% of the U.S. population uses smartphone. The number of U.S. smartphone users exceeded 220 million by year end 2017. These data points alone while remarkable are further validated, by the growth potential which is driving investments into smart home electronic products and awareness. Here are a few key data points driving our optimism, supporting the investments we have made in this category. One, revenue in the smart home segment amounts to approximate $46 billion in 2018. Two, household penetration is only 7.5% in 2018 and is projected to rise to 19.5% by 2022. Three, smartphone users in the U.S. exceed 220 million and is projected at 270 million in 2022 and four, a very key point, fixed broadband subscription in the U.S. now exceeds 100 million homes. I trust sharing this research and data will be helpful for you to understand our strategy for expansion. The sheer size of the market is exciting and clearly identifies the need for ample supply. While we are not in a position to project the potential for our company yet, you might consider that reaching only 1% of the fixed broadband households, would result in selling one million smarter, this data point alone drives our daily motivation. At this time, I'd like to personally thank our long term shareholders for your continued support and to our new and potential shareholders; I'd like to welcome you to Capstone’s next exciting chapter.

At this time, we'll be conducting a question answer session. First, we will take questions via e-mail. Afterwards, we will take questions via the telephone line. [Operator Instruction]

A – Aimee Gaudet: Great, okay, so we're going to address the questions that came in by e-mail first. First question was, in 2018, the Directors authorized the stock repurchase program up to 1 million shares which is at today's price equates to approximately 5 million shares. Wilson and Davis have been authorized to buy up to 750,000 shares. Are you planning to buy up to the authorized quantity?

A – Gerry McClinton: Let me answer that Aimee. Look the program has been working as planned and the funds have been set aside for this initial program. However, the decision to commit further funds is very much dependent on our operational cash needs at that time. Our stated goal was to buy the authorized shares, but only when the funds are available and not required to support operational moves.

A – Aimee Gaudet: Okay, great, thanks Gerry. Number two, product development expense was 519,000 of which you referenced that 295,000 were spent on the Smart Mirror project. How much more will be required to complete this project and is the funding available?

A – Stewart Wallach: Let me take that one. Based upon the budgeting requirements being equal to or slightly higher than that of 2018, funding is currently available. We’re funding this project from operational cash flow and have a $2 million expansion line designated by our branch to fund company expansion needs for this project beyond operating cash flow required.

Next question. Thank you. Number three, international sales were $1.3 million down from $1.8 million in 2017 and have been gradually declining. Do you consider increased international sales as an objective? And if so, what plans are in place to make that happen? Stewart, maybe you can answer that.

The availability of battery-operated low cost lighting product is great; it has been over the past several years. Successfully placing our products at Pacific Rim is directly related to the recognition we have earned in the U.S. market. As LED is maturing and sources are more abundant, the opportunity to Capstone to sell profitably overseas are declining. That being said, our new life which I mentioned earlier as having sales of $3.5 million in the first quarter should open distribution opportunities once again as well as the potential for our connected services products. This entry into the electronics industry will take us into all markets outside the Pacific Rim as well. We had strong interest expressed to us CES Show for a number of international markets, all of which will be followed up by our Capstone HK office as soon as product is available. And while we may see some of this business by year end 2019, I expect frankly that 2020 to be a year for significant international expansion.

Thank you. Next question, you have outlined how the tariff increase has negatively impacted 2018 revenue. It is very possible the tariff wars will continue. So, how do you plan to ensure that future revenue is not impacted by such tariff hikes?

Well, there is a number of situations that are being addressed to prepare the company for possible tariff escalation. Keep in mind that the best defense always is bringing new and unique products that do not have a previously established price perception. For instance, the LED, these products will sell at higher retails which will offset the tariff adjustment. Secondly, the reliance on China-only factory is being reduced. Here are a few points to consider further. One, our direct import business model requires all cost in transporting including the product to be paid by our retailer partner. Once again, we took a position of not getting involved in the payment of tariffs in 2018 even though we knew we would fuel revenue reductions, but at the same time, that program now remains intact and we will be proceeding to the market in the same way we did in prior years. Two, clearly, we need to diversify our manufacturing location, so that product can be produced in countries not impacted by a tariff war and preferably holding most favored nation tariff status. These are primary objectives on my trip that's coming up next -- in the next few weeks and I feel confident that based upon the feedback we've received from Capstone that we will have sources to supply operational in these other countries.

Great. Thank you. Next question, you have indicated in the past that the LED business is maturing and prices are declining. How do you plan to at least maintain the LED business position that we have earned over the past few years.

Well, as we've recently demonstrated again I referenced Q1, 2019, our retail partners continue to welcome LED innovations just as they have for the past several years. They are also challenged greatly by the decline in LED product pricing and innovations. So, in fact, so many LED products have become commoditized in the category overall is not as profitable for manufacturers. Investments by the manufacturers into new and unique products are on the decline. This is a good opportunity for Capstone to leverage its reputation as a benefit.

Thank you. Next question. The company I think -- the company has benefited in 2018 from zero loan balances and interest charges. However, with the possibility of increasing interest rates and the need for continued product development and historic future statements being negatively impacted by the cost of capital.

Let me first take that one. Purely from a financial perspective, I would answer, no. And I think Stewart kind of explained it from our future business development from and such a control rate.

Yeah, thanks, Gerry. Let me take the product development. We have certainly benefited from this position. We remain focused on -- borrow intelligently and manage our capital regionally. At the same time, management approach and product development and new business pursuits are done in a measured and planned manner as they happened in the past. For example, we will not simply develop category connected surfaces items at the time, put them out in the marketplace and see what happens. While, we will have a line-up of products designed and planned for, we will only invest in their production once we had success within the marketplace. So, the initial product as we anticipate and is accepted as we believe it will be, then we will slowly introduce the product line portfolio expansion into the marketplace. This disciplined and linear approach that delivered our pre-2018 year-over-year growth and success of the LED category.

Great. Thanks, Stewart. Last question. I know you mentioned reducing your reliance on China factory due to the administration's actions, which we, of course, do not control. How big an undertaking is this and how far along are you in the process?

So, thank you. I think I've addressed this point. But let me say that Capstone HK has been charged with this effort in early 2015 when the initial discussions and trade war issues surface. Mr. Sloven and his team have held numerous meetings over several visits and has identified potential factories for both LED products and smartphone production outside China. I will be reviewing these factories with Mr. Sloven and the Capstone HK office during my visit and we are hoping they could be operational in the latter part of 2019.

Okay. I believe we are done on our end.

Our first question via the telephone line is from Tony Kamin with Eastwood Partners. Please proceed with your question.

Sure. Hi. Thank you. I have three questions regarding the connected surfaces. And I apologize in advance. I maybe behind in sort of the understanding of some of this from what I've looked at, but the first application I saw was in mirrors and intuitively to me that seemed a market where I would think most of the consumers are putting sort of bathroom mirrors in when they're initially building a house or doing remodeling or something like that. So, how do you reach that channel? Are you in addition to going to consumers also going through builders or designers or remodelers as channel?

Let me – let me address this and [indiscernible]. First of all, Tony thank you for calling in. The – it is first important to recognize the enormity and potential of smart home products overall. And we can dispute their viability and whether you have a personal preference or not, but at the end of the day, people are – this category is growing dramatically, having anticipated a 7.5% penetration rate currently up to 19% over the next few years. People are enjoying the smart home environment. It's trending. It's not going to reverse in that. Manufacturers are investing in it greatly to make it ubiquitous and products talking to one another. But for us in particular, and again getting outside the bathroom environment and the vanity there the second largest item in a home that hangs on a wall other than arts are mirrors, a average home has 8 to 10 mirrors hanging in there in the home. And this is in hallways, entryways, family rooms, exercise rooms, guest and their family. The importance of what we're doing, which is widely believed that the Mirror will find placement in any of those areas as a replacement product, if you will is because of our approach in making these a truly functional product. And again, once the new website goes up you'll be able to get more insight into this. But let me share with you. There isn't anything that you won't be able to do on your smartphone or on a tablet that will not be accessible to you on your mirror. And this is the key issue here, because other smart mirrors that you're probably seeing in the marketplace et cetera. And if you aren't, you might want to take a look, that are surfacing in the marketplace are about playing music, maybe getting a stock report, maybe a weather report, in other words the manufacturer's take an approach of predefining what it is that mirror will do for you. We take an entirely different approach. Again, if you were to open a Google account and get on the mirror anything that you have in your Google account as an example that you're using on your smartphone, you would walk into the house you could put your smartphone down and that information will be readily accessible through the mirrors. It is also important to point out Tony that a single mirror is what you're seeing, which was sized and develop to hit a certain price point as a launch item. As this becomes mainstream, we have plans for different form factors, different configuration, with brains, without brains, dressing mirrors, full length mirrors and the options are numerous. We've also been contacted subsequent to the CES show by some hospitality concerns. So to tell you exactly how we're going to capture that market today, I wouldn't be able to tell you specifically, but what I can tell you is, the market is there. To give you an idea the Consumer Electronics Show is probably the largest exhibition in the world today. It’s unbelievable. And for Android Headlines, which is a chief publisher that covers that show to recognize us as one of the best in CES, it was actually pretty remarkable. There were other smart mirrors there and they pointed out they said, the reason we're coming to talk to you about this and why we're acknowledging you is because of your approach. People do want access to content and you seem to figure out how to take the tablet environment, the smartphone environment and deliver it in a whole new form factor. I hope maybe that helps you out a little bit.

Q – Tony Kamin: It does and I do believe in the basic thesis that more information and smarter information, it’s one of ways of getting information are going to come out there. When you first started to talk about this a few conference calls ago and you were keeping it pretty quiet, I guess I was sort of envisioning more application [indiscernible] say the island kitchen kind of surface or maybe up on any wall that you’d choose, so that you could kind of ultimately choose what surface you wanted this to show up on. Do you -- as you broaden the line, does it eventually become more -- do you go in those directions where the user will have…

A – Stewart Wallach: You actually nailed it. I mean that’s spot on. That's exactly the direction. For instance, we're working on a countertop mirror that would be perfect for a kitchen environment. I can tell you that and we've been experimenting with what's called smart displays which are now prevalent in the marketplace from Lenovo and from Google et cetera and we’re experimenting even in our own homes and access the recipe and access to how to -- certain cooking questions et cetera. It's a joy to have. I mean you no longer have a paper recipe book sitting on your countertop. And so yes, to answer your question, these items, these form factors will be configured for various rooms and I’ll have certain appeal. For instance, an exercise room, you've seen I'm sure and familiar with [indiscernible]. I mean they have built an amazing company –off of a basically a cycle and more importantly those digital content relative to participating in exercise classes. And now we've got another company that surfaced recently called The Mirror Company. They're charging $1500 for a mirror and a monthly fee to visit these exercise environments. Curiously enough, literally there are tens of thousands of exercise videos from yoga to weightlifting on YouTube alone that if people didn't want to spend the money to participate in that digital content club if you will, they could access to our mirror on YouTube and sit in front of an exercise bike or an exercise pad and enjoy it. So, yes, we will be targeting different environments as soon as we have our initial read on the primary -- first product.

Q – Tony Kamin: Okay. And final question and maybe this is in your filing somewhere, but can you talk a -- or give a little more color on -- in terms of where you're sourcing this technology from and your rights to it. Where does it stand in terms of what you're having being protected in some way proprietary or exclusive, if any of those apply here?

Well, let me say this, first of all, we will have our own user interface. Own user interface, meaning when you turn on that mirror what you see, we will have developed an own formatted how you proceed into the mirror, well, relative to whether that be accessing other applications, accessing email etcetera. So the front end is ours. The reality is, once you're on the Internet, the whole world of the Internet just as a tablet is available to you. So that's one of the reasons we took the approach we're taking is that, you could customize that format. In other words, if there're top five apps that you enjoy using on a daily basis, whether it be for stock reporting or music or what have you. You can set your mirror up with those applications. Now that being said, there is a great deal of creativity that has gone into how we make this tablet functionality integrated into the mirror itself. I can tell you that it's not easy. It's more a methodology than it is actual coding work. So to that end we have strong non-disclosure agreements in place with the manufacturer. I will tell you that unlike some other less sophisticated lower tech products that we've been in over the past 25 years of my experience overseas, primary focus was put in this area to dealing with very, very high quality manufacturers that are, for instance, Google approved manufacturers, they're called MADAs, which are mobile application distributor approved by Google. There's only a handful of them. So these people are probably far more sophisticated than any manufacturer we've ever dealt with and they are just as eager to protect you wherever possible as we are interested in being protected, because they have to comply with all of Google's requirements, et cetera. So there's a lot that goes into it. There's no pacifist component per say, but it's how we integrate the technologies and how we have them talk to one another and what's called the handoff of content between the circuitry that makes this work is quite unique. Now what's interesting is the last note, Tony, which I think might be of value, is that what we're developing relative to the content delivery portion, that will work whether it's around mirror, a square mirror, a rectangular mirror, so consider this, Honda Motor Company today may have a single chassis, so you can relate our content delivery mechanism of the chassis, that will have five different models build on it. So the form factor can change, but the guts of what we're investing in will be uniform throughout the product portfolio.

Q – Tony Kamin: Great. That's very helpful and it's very exciting. Thank you.

You bet.

Our next question comes from Mike Schellinger, MicroCapClub LLC. Please proceed with your question.

Hello. Can you comment on where the development of the connected service product is? And it sounds like it's still a couple months off from being completed given that you're doing a pre-marketing I think you said you expected that website to be up in May.

Yes. Hi Mike. It’s Stewart. Nice to see you -- speak with you. Once, we're in the final testing right now. We’re in final testing, before testing and things of that nature, testing that basically tries to simulate what a consumer will do with it. So the development piece is completed, the prototyping has been completed, but we have to go through extensive testing, that's part of the reason my trip is scheduled when it is because I'll be going there with the intent probably around the third week in April to sign off on the final product. The presale website that will go up in May serves two purposes for us. And we've never done this before as you know. But while we're waiting for the retail market, again, even if we had commitments tomorrow, the next time window is pretty much Christmas. So while we're waiting for the deliveries into the retail marketplace to occur, we're going to open up the channel to work directly with consumers and develop a unique relationship with what we're gaining as early adopters. There'll be a program in place for the early adopters that they could participate in some marketing surveys, et cetera and get a consideration for that. All-in-all, I expect the product, the initial pre-launch product to be shift in May so that should give you some indication as to where we're at.

Okay, great. And then in terms of marketing, it sounds like from what you just said that so direct consumers first roll out probably targeting big box for December. And then do you expect direct to consumer to be a big part going forward or is that probably all part?

Yes, Mike, the direct to consumer will be a smaller part initially and I'll tell you why. We've also done a few other things which I mentioned we've never done it before as a company. We've invested in a marketing company that's doing video production for us. We've developed a very strong social media campaign strategy, which will incorporate advertising as well. So all of these things are played including our PR agency that's forges, all of these people are currently working for us and ready to go, and the minute we pull the trigger on the product being available. So we don't really know how to measure that because we've never done that before. But I can tell you that we are not taking a frugal approach here. We are going top drawer across the board. We're using top companies for outsourcing as opposed to trying to control everything inside, so that we can speed the market, and this is all going to be happening through Q2, by the end of Q2, not only will I think the programs become very familiar to users through social media introduction and social media strategy -- advertising strategy, but we will also have our website up. So we'll be in full force. Now that being said my presentation to the retailers are already taking place. Just so you understand, they just can't make their commitments until I give them the final product in the box and say, here it is; now you sign off on it. But the presentations are being made and the response is sensational, again because we've taken this approach of making it not just a trendy fashion home item -- smart home item, but really making it functional. Theoretically, while you could walk in your home, put your smartphone down instead of walking around your house with your smartphone, and any room that has this mirror you've got accessibility to the content, and that’s by the way is accessible through touch, it's accessible through voice as well.

So in terms of the benefit on connected of using the connected surface versus your phone, it sounds like one is maybe you talked about something like the application in the kitchen, maybe you have your recipes easy to access, maybe in the bathroom you have your -- it’s easy to check your email, and maybe -- I don't know maybe it also has the temperature outside weather forecasts, so you know how to dress rather than trying to go on your phone and find the weather approximately, and go through that. It’s, of course, all sort of right on that. And then secondly, is there anything with the connected home that you're trying to do with it?

Okay. I have to illuminate our house right now that's been prototyping and uses for the last six months. I have one hanging in one of the bathrooms that has a -- what we call routine, so I have Google routine in it, and basically when I approach the mirror in the morning, I say, good morning, that routine kicks in. For me the routine consist of the weather report, traffic report. How long will it take me to get to work if there's any issues relative to my basic route, which by the way -- the mirror will pick up from the Google Profile setting from my listing address, then it goes to reading the news, a news summary, and then I have some music. Now I have a good night routine on it. Then at night, when I say, good night, it actually shuts off certain lights in a house, and it play some soft music. And that’s the only two things that occur at the night, and then it shuts up. So, yes, to answer your question there are various things they can do, but again, unlike any other mirror that we're aware of, this is all programmable by the user. You can get as creative as you want. One of the challenges we had was to be able to put out a product -- a smart product that whether you were an entry level tech person, a typically older in age -- not that tech savvy, but is currently using a smartphone and feels comfortable with certain aspects of a smartphone, or a millennial techie who really wants to push the limits with it. And that's why we took the approach we took by integrating the tablet capabilities into the mirror.

Okay. Thank you.

All right Mike. Thanks.

We have reached the end of the question-and-answer session. I will now turn the call over to Stewart Wallach for closing remarks.

All right. Thank you, Omer. Once again thanks everybody for attending today. Difficult webcast, certainly for you and us as you know, I'm the largest shareholder in the company and disappointing what revenues dropped 60%, but from my perspective, your management performed well and they were smart and prudent about how to deal with the challenges that are being presented by the current administration. We took risk out of the equation entirely. I think that going through that kind of a situation which again I don't think any of us have seen in our lifetime that we go through that and come out of it with potentially $1 million loss, it could have been a multi-million dollar loss have me made the wrong decision. I just want to expand upon this because it may or may not be clear. When I said that retailers have asked us to guarantee land pricing. Let me tell you what that means exactly. That meant that we went from an SOP China pricing model to guaranteeing a landed cost that would have required us to pay potentially the increased tariffs. Had this tariffs gone to 25% as Gerry mentioned the 15% is postponed, doesn't mean it's not going to occur, but it didn't occur as the trade war had indicated which was to be happen January 1st. Has that occurred, we would have lost money on every single unit that we ship, had we assume the responsibility for that. So, while nobody wants to see the topline diminish, I can tell you that it occurred, it was planned for. I try to express this the best I could over the course of 2018 webcast and we are now in a very solid position to move forward. Again, our resources are strong, our cash balances are good, our relationships are excellent. We've started to make inroads into Thailand and Vietnam relative to sourcing and manufacturing capabilities. So -- and we're in a category now that's an emerging category and we're at the ground floor of it. So, I feel good about it. And I think you'll hear more about that in our Q1 webcast which is due mid-May. I'll have more information relative to following up from my visit overseas. But everything is where it should be right now and I feel very good about how we're moving and looking in 2019. So, once again, thank you for your support. I appreciate your time today and look forward to speaking with you again in not to distant future. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.