UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended August 31, 2018
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the ~~transition~~quarterly period ~~from~~ended ~~___________~~December to31, ~~___________~~ 2018

~~Commission~~¨ ~~file~~Transition ~~number~~Report ~~333-207100~~pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~CAPSTONE~~For ~~SYSTEMS~~the ~~INC.~~transition ~~(Exact~~period ~~name~~from of__________ ~~registrant~~to ~~as specified in its charter)~~__________

Nevada		30-0867167
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Commission file number: 333-207100

~~Yun~~CAPSTONE GuSYSTEMS ~~Hui,~~INC. ~~International~~(Exact ~~Financial~~name ~~Center~~of small business issuer as specified in its charter)

42nd Fl, Hanzhong Str 1, Qinhuai District,

Nevada		2750
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Number)

Yun Gu Hui, First Floor South Building No.7 Tongren West Street, Xuanwu District Nanjing, Jiangsu Province, ~~China~~PRC ~~210005~~210008 (Address of principal executive offices) + (86) 400-886-9610 (Issuer's telephone number)

Indicate by check mark whether the registrant (~~Address~~1) has filed all reports required to be filed by Section 13 or 15 (d) of ~~principal~~the ~~executive~~Securities ~~offices~~Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), ~~including~~and ~~zip~~(2) has ~~code~~been subject to such filing requirements for the past 90 days. (1) Yes ¨ No x (2) Yes x No ¨

~~(86)~~Indicate ~~025~~by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-~~57625882~~accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x (~~Telephone~~Do ~~number,~~not ~~including~~check ~~area~~if ~~code~~a smaller reporting company) Emerging growth company ¨

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x¨ No ¨x

~~Indicate~~State the number of shares outstanding of each of the issuer’'s classes of common ~~stock~~equity, as of the latest practicable date: 5 205,085,000 common shares issued and outstanding as of ~~October~~April 1511, ~~2018~~2019.

CAPSTONE SYSTEMS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Index to Form 10-Q

		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Balance Sheets as of December 31, 2018 (unaudited) and September 30, 2018	3

	Condensed Statements of Operations for the three and six month periods ended December 31, 2018 and 2017 (unaudited)	4

	Condensed Statements of Cash Flows for the three and six month periods ended December 31, 2018 and 2017 (unaudited)	5

	Notes to the Condensed Unaudited Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	24

Item 1A	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mining Safety Disclosures	24

Item 5.	Other Information	24

Item 6.	Exhibits	25

	Signatures	26

		Page
	Part I FINANCIAL INFORMATION
Item 1.	Financial Statements
	Report of Independent Registered Public Accounting Firm		4
	Unaudited Condensed Balanced Sheets		5
	Unaudited Condensed Statement of Operations		6
	Unaudited Condensed Statement of Cash Flows		7
	Notes to Financial Statements		8-11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		13
Item 4.	Controls and Procedures		13
	Part II OTHER INFORMATION
Item 1.	Legal Proceedings		14
Item 1A.	Risk Factors		14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		14
Item 3.	Defaults Upon Senior Securities		14
Item 4.	Mine Safety Disclosures		14
Item 5.	Other Information		14
Item 6.	Exhibits		15
SIGNATURE			16

Table of Contents

~~FORWARD-LOOKING~~Capstone ~~STATEMENTS~~Systems Inc.

~~This~~Unaudited ~~Quarterly~~Condensed ~~Report~~Consolidated onBalance Form 10-Q contains certain forward-looking statements. The statements herein which are not historical reflect our current expectations and projections about the Company’s future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and our interpretation of what we believe to be significant factors affecting our business, including many assumptions about future events. Such forward-looking statements include statements regarding, among other things:Sheets

·As ~~our~~of ~~ability~~December ~~to produce~~31, ~~market~~2018 and ~~generate~~June ~~sales of our products and services; · our ability to develop and/or introduce new products and services; · our projected future sales~~30, profitability and other financial metrics; · our future financing plans; · our anticipated needs for working capital; · the anticipated trends in our industry; · our ability to expand our sales and marketing capability; · acquisitions of other companies or assets that we might undertake in the future; · competition existing today or that will likely arise in the future; and · other factors discussed elsewhere herein.2018

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “will,” “plan,” “could,” “target,” “contemplate,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these or similar words. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue the Company’s operations. These statements may be found under Part I, Item 2-”Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as elsewhere in this Quarterly Report on Form 10-Q generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, matters described in this Quarterly Report on Form 10-Q.

	December 31,			June 30,
	2018			2018
				(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	29,158		$	47,037
Accounts receivable		145,424			-
Other receivables		15,108			192,557
Related party receivable		3,780			4,986
Prepaid expenses		12,522			209
Advance to suppliers		28,476			15,608
Total current assets		234,468			260,397

Non-current assets
Note receivable		72,712			75,539
Plant and equipment, net		29,880			35,629
Intangible asset, net		68,544			2,215
Total Assets	$	405,604		$	373,780

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities
Accounts payable	$	76,731		$	15,658
Taxes payable		126			20
Other payable		41,608			32,095
Related party payable		1,157,880			35,432
Accrued liabilities		34,000			26,000
Customer deposits		283,868			305,600
Total current liabilities		1,594,213			414,805

Commitments and Contingencies

Stockholders’ Deficiency
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 206,842,664 shares issued and outstanding, respectively		206,843			206,843
Additional paid-in capital		1,582,086			1,582,086
Accumulated deficit		(2,968,245	)	(1,820,378		)
Accumulated other comprehensive loss		(9,293	)	(9,576		)
Total Stockholders’ Deficiency		(1,188,609	)		(41,025	)

Total Liabilities and Stockholders’ Deficiency	$	405,604		$	373,780

InSee ~~light~~accompanying ofnotes ~~these~~to ~~risks~~financial ~~and uncertainties, there can be no assurance that the forward-looking~~ statements ~~contained in this Quarterly Report on Form 10-Q will in fact occur~~.

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. Such statements are presented only as a guide about future possibilities and do not represent assured events, and we anticipate that subsequent events and developments will cause our views to change. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q also contains estimates and other statistical data prepared by independent parties and by us relating to market size and growth and other data about our industry. These estimates and data involve a number of assumptions and limitations, and potential investors are cautioned not to give undue weight to these estimates and data. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Quarterly Report on Form 10-Q. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk.

Potential investors should not make an investment decision based solely on our projections, estimates or expectations.

Table of Contents

~~REPORT~~Capstone OFSystems ~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Inc.

ToUnaudited ~~the~~Condensed ~~Board~~Consolidated Statement of ~~Directors and~~ Operations

~~Stockholders~~For ofthe ~~Capstone~~three-month ~~Systems~~and ~~Inc.~~six-month periods ended December 31, 2018 and 2017

Results of Review of Interim Financial Information

	For the three-month period ended December 31,						For the six-month period ended December 31,
	2018			2017			2018			2017
Net revenues	$	2,974		$	14		$	225,869		$	33,547
Cost of revenues		8			2,565			821			32,122
Gross profit		2,966			(2,551	)		225,048			1,425

Operating expenses:
Selling expense		719			-			719			-
General and administrative expenses		343,817			474,753			1,372,350			493,144
Total operating expenses		344,536			474,753			1,373,069			493,144

Operating loss		(341,570	)		(477,304	)		(1,148,021	)		(491,719	)

Other income (expenses):
Other income		68			-			180			2,089
Interest income		73			202			148			202
Interest expense		(121	)		-			(174	)		-
Total other income and (expenses)		20			202			154			2,291

Loss before taxes from operations		(341,550	)		(477,102	)		(1,147,867	)		(489,428	)

Provision for income taxes		-			-			-			-

Net loss	$	(341,550	)	$	(477,102	)	$	(1,147,867	)	$	(489,428	)

Other comprehensive income:
Foreign currency translation income		8,620			(8,525	)		(9,293	)		(9,795	)
Comprehensive loss	$	(332,930	)	$	(485,627	)	$	(1,157,159	)	$	(499,223	)

Loss per share:
Basic and diluted loss per share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Basic and diluted weighted average shares outstanding		206,842,664			206,842,664			206,842,664			206,842,664

WeSee ~~have~~accompanying reviewed the condensed balance sheet of Capstone Systems Inc. (the “Company”) as of August 31, 2018, and the related condensed statements of operations for the three-month periods ended August 31, 2018, and condensed statements of cash flows for the three-month periods then ended, and the related notes ~~(collectively referred~~ to ~~as the interim~~ financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the balance sheet of the Company as of May 31, 2018, and the related statements of operations, stockholders’ deficiency, and cash flows for the year then ended (not presented herein); and in our report dated August 24, 2018, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of May 31, 2018, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had incurred substantial losses in previous years, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

San Mateo, CA	WWC, Professional Corporation
October 15, 2018	Certified Public Accountants

Table of Contents

~~CAPSTONE~~Capstone ~~SYSTEMS,~~Systems ~~INC~~Inc.

~~UNAUDITED~~Unaudited ~~CONDENSED~~Condensed ~~BALANCE~~Consolidated ~~SHEETS~~Statement of Cash Flows

ASFor OFthe ~~AUGUST~~six-month ~~31,~~periods ~~2018~~ended ~~AND~~December ~~MAY~~ 31, 2018

	August 31,			May 31,
	For the six-month period ended December 31,
	2018			~~2018~~2017
				(Audited)
Cash Flows from Operating Activities
ASSETS
Net Loss	$	(1,147,867	)	$	(489,428	)
Current assets
Adjustments to reconcile net income to net cash provided by operating activities:
Prepaid expense	$	-		$	209
Amortization		6,290			43
Total current assets		-			209
Depreciation		4,895			292
Total assets	$	-		$	209
Decrease/(increase) in accounts receivable		(145,424	)		-
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Decrease/(increase) in other receivables		177,449			(522,172	)
Current liabilities
Decrease/(increase) in related party receivables		1,206			(5,072	)
Accounts payable & accrued liabilities	$	24,798		$	11,400
Decrease/(increase) in inventory		-			(1,860	)
Due to related party		37,571			35,432
Decrease/(increase) in advance to suppliers		(12,868	)		-
Total liabilities		62,369			46,832
Decrease/(increase) in prepaid expenses		(12,313	)		-
Commitments and Contingencies
Increase/(decrease) in accounts payable		61,074			3,602
Stockholders’ deficiency
Increase/(decrease) in taxes payable		107			(2,089	)
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 5,085,000 shares issued and outstanding, respectively		5,085			5,085
Increase/(decrease) in other payable		9,512			152,496
Additional paid-in capital		35,781			35,781
Increase/(decrease) in related party payables		1,122,448			9,650
Accumulated deficit		(103,235	)		(87,489	)
Increase/(decrease) in accrued liabilities		8,000			-
Total stockholders’ deficiency		(62,369	)		(46,623	)
Increase/(decrease) in customer deposits		(21,733	)		-
Total liabilities and stockholders’ deficiency	$	-		$	209
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES		50,776			(854,538	)
Cash Flows from Investing Activities
Purchase of Fixed Assets		-			(16,358	)
Purchase of Intangible Assets		(72,618	)		(2,551	)
NET CASH USED IN INVESTING ACTIVITIES		(72,618	)		(18,910	)
Cash Flows from Financing Activities
Proceeds from issuance of common stock		-			960,348
NET CASH PROVIDED BY FINANCING ACTIVITIES		-			960,348
NET DECREASE IN CASH		(21,842	)		86,900
EFFECT OF CURRENCY TRANSLATION		3,963			(9,794	)
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD		47,037			2,294
CASH AND CASH EQUIVALENTS – ENDING OF PERIOD	$	29,158		$	79,400
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes		-			-
Cash received for interest income		148			202

See accompanying notes to financial statements.

Table of Contents

~~CAPSTONE~~Capstone ~~SYSTEMS,~~Systems ~~INC~~Inc.

~~UNAUDITED~~Notes ~~CONDENSED~~to ~~STATEMENT~~the OFFinancial ~~OPERATIONS~~Statements

~~FOR~~NOTES ~~THE~~TO ~~THREE-MONTH~~CONDENSED ~~PERIODS~~CONSOLIDATED ~~ENDED~~FINANCIAL ~~AUGUST 31, 2018 AND 2017~~STATEMENTS

	For the three-month periods ended August 31,
	2018			2017
REVENUES
Sales:
Sales	$	-		$	30,258
Total Income		-			30,258
Cost of Goods Sold:
Purchases	$	-		$	29,549
Total Cost of Goods Sold		-			29,549
Gross Profit		-			709
Operating Expenses:
General and administrative	$	15,746		$	2,146
Total Expenses		15,746			2,146
Other Income/(Expense):
Other Income		-			-
Income Before Income Tax	$	(15,746	)	$	(1,437	)
Provision for Income Tax	$	-		$	-
Net Loss for the period		(15,746	)		(1,437	)
Net gain (loss) per share:
Basic and diluted	$	(0.0030	)	$	(0.0003	)
Weighted average number of shares outstanding:
Basic and diluted		5,085,000			5,085,000

1. Organization and Principal Activities

~~See~~Capstone ~~accompanying~~Systems ~~notes~~Inc. to(the ~~financial~~“Company”) ~~statements~~was incorporated in the State of Nevada on April 1, 2015. The address of our business office is Yun Gu Hui, First Floor South Building, No.7 Tongren West Street, Xuanwu District, Nanjing, Jiangsu Province, PRC 210008

On January 15, 2018, the Company entered into a share exchange agreement with Yunguhui Group Limited (“Yunguhui Group”) and thirty-three stockholders of Yunguhui Group, together holding 100% of the issued and capital stocks of Yunguhui Group. Pursuant to the Share Exchange Agreement, in exchange for all of the issued and outstanding stocks of Yunguhui Group Limited, the Company issued to Yunguhui Group stockholders an aggregate of 201,757,664 shares of the Company’s common stock. This transaction has been accounted for a reverse takeover transaction and a recapitalization of the Company whereby the Company, the legal acquirer, is the accounting acquiree, and Yunguhui Group, the legal acquiree, is the accounting acquirer; accordingly, the Company historical statement of stockholders’ equity has been retroactively restated to the first period presented.

On January 17, 2018, the Company filed a Certificate of Amendment with the State of Nevada to increase its authorized shares of common stock from 75,000,000 to 2,000,000,000.

Yunguhui Group Limited (the “Yunguhui Group” or “Company”) was incorporated as an international business company in the Republic of Seychelles on November 2, 2017. Yunguhui Group’s wholly-owned subsidiary, Yunguhui Holdings Development Limited (“Yunguhui Holdings”) was incorporated as an international business company in the Republic of Seychelles on November 3, 2017. Yunguhui Holdings’ wholly-owned subsidiary, Yun Gu Hui International (Hong Kong) Development Limited (“Yunguhui Hong Kong”) was incorporated as a limited liability company in Hong Kong on December 6, 2017. Yunguhui Hong Kong’s wholly-owned subsidiary, Shenzhen Yunguhui Technology Development Limited (“Yunguhui Shenzhen”) was incorporated as a limited liability company in Shenzhen City, Guangdong Province, People’s Republic of China on February 22, 2018 as a wholly owned foreign enterprise (“WFOE”). Yunguhui Shenzhen’s wholly-owned subsidiary, Anhui Yunguhui Internet Technology Limited (“Yunguhu Anhui”) was incorporated as a limited liability company in Anhui City, Anhui Province, People’s Republic of China on July 28, 2017. Yunguhui Anhui’s wholly-owned subsidiaries, (1) Beijing Yunguhui Information Technology Co. Limited (“Yunguhui Beijing”) was incorporated as a limited liability company in Beijing City, People’s Republic of China on December 19, 2017 and (2) Nanjing Yunguhui Information Technology Co. Limited (“Yunguhui Nanjing”) was incorporated as a limited liability company in Nanjing City, Jiangsu Province, People’s Republic of China on December 20, 2017.

On August 20, 2018, Yunguhui Shenzhen entered into a Management and Consultancy Service Agreement which entitles Yunguhui Shenzhen to substantially all of the economic benefits of Yunguhui Anhui and its Subsidiaries, all of which are PRC companies, in consideration of services provided by Yunguhui Shenzhen to Yunguhui Anhui and its Subsidiaries. In addition, Yunguhui Shenzhen entered into certain agreements with the shareholders of Yunguhui Anhui, Yusheng Jiang and Ding Yong (collectively, the “Yunguhui Anhui Shareholders”), as well as Yunguhui Anhui and its Subsidiaries, including (i) an Exclusive Right and Option to Purchase Agreement allowing Yunguhui Shenzhen to acquire the shares of Yunguhui Anhui as permitted by PRC laws, (ii) a Shareholders' Voting Rights Proxy Agreement that provides Yunguhui Shenzhen with the voting rights of the Yunguhui Anhui Shareholders and those of Yunguhui Anhui, and (iii) an Equity Pledge Agreement that pledges the shares in Yunguhui Anhui and its Subsidiaries to Yunguhui Shenzhen. This VIE structure provides Yunguhui Shenzhen, a wholly-owned subsidiary of Yunguhui, with control over the operations and benefits of Yunguhui Anhui and its Subsidiaries without having a direct equity ownership in Yunguhui Anhui and its subsidiaries.

The Company’s primary business activities is to provide consulting services.

Our financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. The Company’s fiscal year-end is June 30^th.

Table of Contents

~~CAPSTONE~~Capstone ~~SYSTEMS,~~Systems ~~INC~~Inc.

~~UNAUDITED~~Notes ~~CONDENSED~~to ~~STATEMENT~~the OFFinancial ~~CASH FLOWS~~Statements

~~FOR~~NOTES ~~THE~~TO ~~THREE-MONTH~~CONDENSED ~~PERIOD~~CONSOLIDATED ~~ENDED~~FINANCIAL ~~AUGUST 31, 2018 AND 2017~~STATEMENTS

	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(15,746	)	$	(1,437	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		-			134
Decrease in prepaid expenses		209			-
Increase in accrued liabilities		13,398			-
NET CASH (USED IN) OPERATING ACTIVITIES	$	(2,139	)	$	(1,303	)
NET CASH (USED IN) INVESTING ACTIVITIES		-			-
CASH FLOWS FROM FINANCING ACTIVITIES
Due to related party		2,139			-
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,139			-
NET DECREASE IN CASH	$	-		$	(1,303	)
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD	$	-		$	4,294
CASH AND CASH EQUIVALENTS – ENDING OF PERIOD	$	-		$	2,991
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes		-			-
Cash received for interest income		-			-
Cash paid for interest expense		-			-

2. Summary of Significant Accounting Policies

~~See~~Method ~~accompanying~~of ~~notes to financial statements.~~accounting

7Management ~~Table~~has prepared the accompanying financial statements and these notes in accordance to generally accepted accounting principles in the United States of ~~Contents~~America; the Company maintains its general ledger and journals with the accrual method accounting.

~~CAPSTONE~~Principles ~~SYSTEMS,~~of ~~INC.~~Consolidation

~~NOTES~~The TOaccompanying ~~CONDENSED~~consolidated ~~FINANCIAL~~financial ~~STATEMENTS~~statements include the accounts of the Company and its significant subsidiaries on a consolidated basis. The Company also includes subsidiaries over which a direct or indirect legal or effective control exists and for which the Company is deemed to direct the significant activities and has the obligation to absorb the losses or benefits of the entities. All intercompany accounts, balances and transactions with consolidated entities have been eliminated.

FOR THE THREE-MONTH PERIODS ENDED AUGUST 31, 2018 AND 2017

Name of Subsidiary	State or Jurisdiction of Organization of Entity	Attributable equity interest
Yunguhui Group Limited (“Yunguhui Group”)	Republic of Seychelles	100%
Yunguhui Holdings Development Limited (“Yunguhui Holdings”)	Republic of Seychelles	100%
Yun Gu Hui International (Hong Kong) Development Limited (“Yunguhui Hong Kong”)	Hong Kong	100%
Shenzhen Yunguhui Technology Development Limited (“Yunguhui Shenzhen”)	PRC	100%
Anhui Yunguhui Internet Technology Limited (“Yunguhui Anhui”)	VIE
Beijing Yunguhui Information Technology Co. Limited (“Yunguhui Beijing”)	PRC	100%
Nanjing Yunguhui Information Technology Co. Limited (“Yunguhui Nanjing”)	PRC	100%

Capstone Systems Inc. (the “Company”) is a for profit corporation established under the Corporation Laws of the State of Nevada on April 1, 2015. The address of our business office is Yun Gu Hui, International Financial Center, 42nd Fl, Hanzhong Str 1, Qinhuai District, Nanjing, Jiangsu Province, China 210005. We maintain our statutory registered agent’s office at 525 Swallow Cove, Boulder City, NV 89005. We plan to expand our business in the wholesale distribution of kitchen cabinets in the USA. The Company is subject to all risks inherent to the establishment of a start-up business enterprise.

Our financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. All transactions including purchases, sales and current financing is in U.S. dollars. The Company’s fiscal year-end is May 31st.

NOTE 2 – Significant Accounting Policies and Recent Accounting Pronouncements

Interim Financial Statements

The accompanying unaudited financial statements have been prepared in accordance with Regulation S-X and do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim period(s), and to make the financial statements not misleading, have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim period(s) are not necessarily indicative of operations for a full year.

Condensed Financial Statements

Certain information and footnote disclosures normally included in the condensed financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s ~~May~~June 3130, 2018 audited financial statements as filed in the most recent Form 10-K. The results of operations for the period ended ~~August~~December 31, 2018 are not necessarily indicative of the operating results for the full year.

~~Use~~7 Table of ~~Estimates and Assumptions~~Contents

~~The~~Capstone ~~preparation~~Systems of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periodInc. ~~Actual results could differ from those estimates.~~

~~Due~~Notes to the ~~limited~~Financial ~~level of operations, the Company has not had to make material assumptions or estimates other than the assumption that the Company is a going concern.~~Statements

~~Cash~~NOTES ~~and~~TO ~~Cash~~CONDENSED ~~Equivalents~~CONSOLIDATED FINANCIAL STATEMENTS

Use of estimates

The ~~Company~~preparation ~~considers~~of ~~all~~the ~~highly~~financial ~~liquid~~statements ~~investments~~requires ~~with~~management anto ~~original~~make ~~maturity~~estimates and assumptions that affect the reported amounts of ~~three~~assets ~~months~~and orliabilities ~~less~~and ~~when~~disclosure ~~purchased~~of tocontingent beassets ~~cash~~and ~~equivalents~~liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from those estimates.

~~Fair~~Cash ~~Value~~and ofcash ~~Financial Instruments~~equivalents

~~ASC~~The ~~825,~~Company ~~“Disclosures~~considers ~~about~~all ~~Fair~~highly ~~Value~~liquid ofinvestments ~~Financial~~purchased ~~Instruments”,~~with ~~requires~~original ~~disclosure~~maturities of ~~fair~~three ~~value~~months ~~information~~or ~~about financial instruments. ASC 820~~less, ~~“Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles,~~ and ~~expands~~unencumbered ~~disclosures~~bank ~~about~~deposits ~~fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available~~ to ~~management~~be ascash ~~of August 31, 2018~~equivalents.

~~The~~Accounts respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accrued liabilities and notes payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value.receivable

Accounts receivable are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

Plant and equipment

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. The Company’s typically applies a salvage value of 0% to 10%. The estimated useful lives of the plant and equipment are as follows:

Office Furniture	3 years
Office equipment	3-5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss are included in the Company’s results of operations. The costs of maintenance and repairs are recognized to expenses as incurred; significant renewals and betterments are capitalized.

Intangible Asset

Intangible assets are carried at cost and amortized on a straight-line basis over a specified period. Amortization is provided using the straight-line method over 5 years.

Accounting for the impairment of long-lived assets

The Company annually reviews its long-lived assets for impairment or whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Impairment may be the result of becoming obsolete from a change in the industry, introduction of new technologies, or if the Company has inadequate working capital to utilize the long-lived assets to generate the adequate profits. Impairment is present if the carrying amount of an asset is less than its expected future undiscounted cash flows.

If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed are reported at the lower of the carrying amount or fair value less costs to sell.

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~~CAPSTONE~~Capstone ~~SYSTEMS,~~Systems ~~INC~~Inc.

~~NOTES~~Notes TOto ~~CONDENSED~~the ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements

~~FOR~~NOTES ~~THE~~TO ~~THREE-MONTH~~CONDENSED ~~PERIODS~~CONSOLIDATED ~~ENDED~~FINANCIAL ~~AUGUST 31, 2018 AND 2017~~STATEMENTS

~~The~~Statutory Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive. The Company has no potential dilutive instruments, and therefore, basic and diluted earnings (loss) per share are equal.reserves

~~Revenue~~Statutory ~~Recognition~~reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand production or operations. PRC laws prescribe that an enterprise operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 10% of its profit. Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered capital.

~~The~~Foreign ~~Company’s office is currently based in Nanjing, PRC, but we utilize the U.S. dollar as our functional~~ currency. translation

The ~~company~~accompanying ~~follows~~financial ~~the~~statements ~~guidelines~~are presented in United States dollars. The functional currencies of ~~ASC~~the ~~605-15~~Company ~~for~~are ~~revenue~~in ~~recognition~~Renminbi (RMB). The ~~Revenue~~Company’s isassets ~~recognized~~and ~~when~~liabilities ~~all~~are translated into United States dollars from RMB at year-end exchange rates, and its revenues and expenses are translated at the ~~following~~average ~~conditions~~exchange ~~have~~rate ~~been~~during ~~met:~~the year. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

1. Pervasive evidence of an arrangement exists: an order has been placed and the customer has prepaid for the product; 2. Delivery has occurred or services have been rendered: the product has been shipped from either the Company or one of our suppliers; the product has been delivered and signed for by the customer as evidenced by the shipping company. 3. Seller’s price to the buyer is fixed or determinable: the price is fixed at the time of the order and the customer has prepaid prior to shipping; and 4. Collectability is reasonable assured: the customer has prepaid for the product prior to shipping.

	12/31/2018		6/30/2018		12/31/2017
Year/period end RMB: US$ exchange rate		6.8764		6.6191		6.5074

Annual/period average RMB: US$ exchange rate		6.8587		6.5052		6.6416

~~Customers~~The ~~are~~RMB ~~allowed~~is tonot ~~return~~freely ~~the~~convertible ~~products~~into ~~within~~foreign 30currencies ~~days~~and ~~for~~all ~~exchange~~foreign ~~or refund if defects in manufacturing are identified. Prior to the expiration of the 30 day~~ exchange ortransactions ~~refund~~must ~~period~~be ~~the~~conducted ~~cash~~through ~~received~~authorized isfinancial ~~recorded as unrecognized revenue~~institutions.

~~Deferred~~Revenue ~~revenue and deferred cost of goods sold result from transactions where the Company has accepted prepayment for the product but all revenue~~ recognition criteria have not yet been met, such as shipped product from the supplier has not arrived at the client for delivery. Deferred cost of goods sold related to deferred product revenues includes direct product costs. Once all revenue recognition criteria have been met, the deferred revenues and associated cost of goods sold are recognized.

The Company recognizes revenue when all the following criteria have been met: it has negotiated the terms of the transaction with the customer which includes setting a fixed sales price, it has transferred of possession of the product to the customer, the customer does not have the right to return the product, the customer is able to further sell or transfer the product onto others for economic benefit without any other obligation to be fulfilled by the Company, and the Company is reasonably assured that funds have been or will be collected from the customer. The Company's the amount of revenue recognized to the books reflects the value of goods invoiced, net of any value-added tax (VAT) or excise tax.

Advertising

~~Advertising~~All advertising costs are expensed as incurred. The Company incurred $0 in advertising expenses for the ~~three~~six-month periods ended ~~August~~December 31, 2018 and 2017 ~~were $0 and $0, respectively~~.

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued recently. As of August 31, 2018, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.

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~~CAPSTONE~~Capstone ~~SYSTEMS,~~Systems ~~INC~~Inc.

~~NOTES~~Notes TOto ~~CONDENSED~~the ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements

~~FOR~~NOTES ~~THE~~TO ~~THREE-MONTH~~CONDENSED ~~PERIODS~~CONSOLIDATED ~~ENDED~~FINANCIAL ~~AUGUST 31, 2018 AND 2017~~ STATEMENTS

~~NOTE~~Research 3and ~~– Going Concern~~development

All research and development costs are expensed as incurred. The Company incurred $0 in research and development costs for the six-month periods ended December 31, 2018 and 2017.

Retirement benefits

Retirement benefits in the form of mandatory government sponsored defined contribution plans are charged to the either expenses as incurred or allocated to inventory as part of overhead.

Income taxes

The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

Comprehensive income

The Company uses FASB ASC Topic 220, “Reporting Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions to stockholders due to investments by stockholders.

Loss per share

The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis from the potential conversion of convertible securities or the exercise of options and or warrants; the dilutive effects of potentially convertible securities are calculated using the as-if method; the potentially dilutive effect of options or warrants are calculated using the treasury stock method. Securities that are potentially an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Financial instruments

The Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities and short-term debt, have carrying amounts that approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

	·	Level 1 - inputs to the valuation methodology used quoted prices for identical assets or liabilities in active markets.
	·	Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
	·	Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

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Capstone Systems Inc.

Notes to the Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Recent accounting pronouncements

In January 2017, the FASB issued guidance which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. The Company is currently evaluating the impact on the financial statements of this guidance.

In January 2017, the FASB amended the existing accounting standards for business combinations. The amendments clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company is currently evaluating the impact on the financial statements of this guidance.

3. Going Concern

The accompanying financial statements and notes have been prepared assuming that the Company will continue as a going concern.

~~For~~As ~~the~~of ~~period~~December ~~from inception to August~~ 31, 2018, the Company had accumulated deficit of $ ~~103~~2,~~235~~968,245. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to generate ~~sufficient~~revenue ~~revenues~~ to operate profitably or raise additional capital through debt financing and/or through sales of common stock.

Management has funded operations from sales and through the cash proceeds from ~~an offering pursuant to a Registration Statement on Form S-1 or private placements of restricted securities or~~ the issuance of stock. Until ~~in lieu of cash for payment of services until~~ such a time as profitable operations are achieved., ~~Directors~~directors and related parties may from time to lend funds to the Company to fund operations. There are no written agreements in place for such funding or issuance of securities and there can be no assurance that such will be available in the future. Management believes that this plan provides an opportunity for the Company to continue as a going concern.

The failure to achieve the necessary levels of profitability or obtain the additional funding would be detrimental to the Company.

~~NOTE~~ 4. –Other ~~Capital Stock~~receivables

~~The~~Other ~~Company~~receivables ~~has~~consisted ~~2,000,000,000~~of ~~shares~~advances to employees for job/travel disbursements consisted of ~~common~~advances ~~stock~~to ~~authorized~~employees ~~with~~for atransportation, ~~par~~meals, ~~value~~client ofentertainment, ~~$0.001~~and ~~per~~set-up ~~share~~costs for new subsidiary establishments.

5. Note receivable

On April 10, 2018, Beijing Yunguhui issued a note to Mr. Cheng, Yangbing, an unrelated party, in the amount of RMB 500,000 (USD $72,712) which is due on April 9, 2020. If the note is in default, a penalty of RMB 50,000 (USD $7,271) will be imposed on the note in addition the principal amount due.

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Capstone Systems Inc.

Notes to the Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. Plant and Equipment

	12/31/2018			6/30/2018
At Cost:
Office furniture	$	1,604		$	1,226
Office equipment		37,510			38,742
	$	39,114		$	39,968

Less: Accumulated depreciation		(9,234	)		(4,339	)

	$	29,880		$	35,629

Depreciation expense for the periods ended December 31, 2018 and 2017 was $4,895 and $292, respectively.

7. Intangible Asset

	12/31/2018			6/30/2018
At Cost:
Software application	$	75,126		$	2,508

Less: Accumulated amortization		(6,582	)		(293	)

	$	68,544		$	2,215

Amortization expense for periods ended December 31, 2018 and 2017 was $6,290 and $43, respectively.

8. Related Party Receivables and Payables

Related party receivable consisted of the following:

	12/31/2018		6/30/2018

Huijin International Limited, shareholder	$	1,744	$	1,812
Huichuang International Limited, shareholder		1,018		1,058
Huibang International Limited, shareholder		-		1,058
Huiyang International Limited, shareholder		1,018		1,058
	$	3,780	$	4,986

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Capstone Systems Inc.

Notes to the Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Related party receivables represented advances for operational use and in the normal course of business. The amounts are unsecured, interest-free and due on demand.

Related party payables consisted of the following:

	12/31/2018		6/30/2018

Huibang International Limited, shareholder	$	1,050,660	$	-
Xu, Guoliang, official representative of Nanjing Yunguhui		54,518		-
Xu, Jiyuan, CEO		52,702
	$	1,157,880	$	-

Related party payables represented advances provided for operational use and in the normal course of business.

For the period ended December 31, 2018, Huibang International Limited, a shareholder of the Company, entered into various loan agreements with numerous individuals where the proceeds were deposited to the bank account of Nanjing Yunguhui as a result of Huibang International not having established a bank account. The amounts are unsecured, interest-free and due on demand.

9. Customer Deposits

Customer deposits represent prepayments from customers whom have engaged the Company to render services. The Company accounts for the amounts as liabilities until it has fulfilled all the criteria set forth under the significant accounting policy for revenue recognition at which point those amounts will be recognized the Company’s result of operations.

10. Equity

The Company was incorporated on April 1, 2015 with 75,000,000 shares of common stock, par value of $0.001 per share, authorized as its capital stock.

On May 11, 2015, the Company issued 4,000,000 shares of common stock for a purchase price of $0.001 per share to its sole director. The Company received aggregate gross proceeds of $4,000.

In May 2016, the Company, pursuant to a Registration Statement on Form S-1, sold 1,085,000 shares to 31 independent shareholders for total proceeds of $43,400.

On January 1017, 2018, the Company amended its articles of incorporation increasing the authorized common stock from 75,000,000 shares to 2,000,000,000 shares.

As13 Table of ~~August 31, 2018, there were no outstanding stock options or warrants.~~Contents

~~NOTE~~Capstone 5Systems ~~– Income Taxes~~Inc.

Notes to the Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11. Income Taxes

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

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CAPSTONE SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE-MONTH PERIODS ENDED AUGUST 31, 2018 AND 2017

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Our effective tax rate for fiscal year 2018 will be 21%, which we expect to be fairly consistent in the near term. Our tax rate may also be affected by discrete items that may occur in any given year, but are not consistent from year to year. Income taxes are calculated and accrued for U.S. taxes only.

~~NOTE~~The 6Company’s –subsidiaries ~~Related~~formed ~~Party~~in ~~Transactions~~the Republic of Seychelles is not subject to tax on its income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no withholding tax is imposed.

The Company’s ~~underwent~~subsidiary aformed ~~change of control~~ in ~~September~~Hong ~~2017.~~Kong Asis ofsubject ~~August~~to ~~31, 2018, there were advances of $37,571 from~~ the ~~current~~profits ~~shareholder~~tax ~~for~~rate ~~the~~at ~~purpose of operating the Company~~16.5% ~~The~~for ~~advances~~income ~~bear~~generated noand ~~interest~~operation ~~and~~in ~~are~~the ~~due~~special ~~upon~~administrative ~~demand~~region.

~~NOTE~~The 7Company’s –subsidiaries ~~Concentration~~incorporated ~~Risk~~in the PRC are subject to profits tax rate at 25% for income generated and operation in the country.

WeThe ~~currently~~full ~~have~~realization ~~only~~of ~~one~~the ~~customer~~tax ~~and~~benefit ~~have~~associated ~~ordered~~with ~~from~~the ~~only~~carry ~~one~~forward ~~vendor.~~depends Aspredominantly weupon ~~grow~~the weCompany’s ~~expect~~ability to ~~increase~~generate ~~the~~taxable ~~number~~income ofduring ~~customers and vendors we have, however; at this time there is a risk to~~ the ~~company~~carry ifforward ~~we lose either our customer or vendor~~period.

~~NOTE~~The 8Company’s –subsidiaries ~~Research~~incorporated ~~and~~in ~~Development~~the PRC has unused net operating losses (“NOLs”) available for carry forward to future years for PRC income tax reporting purposes up to five years. The Company recorded a deferred tax asset in the amount of $0 at December 31, 2018.

~~All~~14 ~~expenses~~Table ~~related~~of ~~to our brand are recorded as Research and Development expenses in accordance with GAAP and are expensed as incurred.~~Contents

~~NOTE~~Capstone 9Systems ~~– Subsequent Events~~Inc.

~~The~~Notes ~~Company has evaluated events subsequent through the date these financial statements have been issued, October 15, 2018,~~ to ~~assess~~ the ~~need~~Financial for potential recognition or disclosure in this report. Based upon this evaluation, it was determined that no subsequent events occurred, other than that noted above, that require recognition or disclosure in the financial statements.Statements

11NOTES ~~Table~~TO ofCONDENSED ~~Contents~~CONSOLIDATED FINANCIAL STATEMENTS

~~ITEM~~In 2assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. ~~MANAGEMENT’S~~The ~~DISCUSSION~~ultimate ~~AND~~realization ~~ANALYSIS~~of OFdeferred ~~FINANCIAL~~tax ~~CONDITION~~assets ~~AND~~is ~~RESULTS~~dependent OFupon ~~OPERATIONS~~the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

~~This~~The ~~section~~following ~~includes~~table areconciles ~~number~~the ofstatutory ~~forward-looking~~rates ~~statements that reflect our current views with respect~~ to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the ~~date~~Company’s ofeffective ~~this~~tax ~~report. These forward-looking states are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or out predictions.~~rate:

General

	12/31/2018			12/31/2017
Statutory rates in the Republic of Seychelles		-			-
Statutory rates in Hong Kong		16.5	%		16.5	%
Statutory rates in PRC		25.0	%		25.0	%
Foreign earned income not subject to taxes in the Republic of Seychelles		(41.5	)%		(41.5	)%
Effective income tax rate		0	%		0	%

Loss before taxes:
United States	$	(31,238	)	$	(12,281	)
Republic of Seychelles		-			(102,898	)
Hong Kong		-			(3,851	)
PRC		(1,116,629	)		(370,398	)
	$	(1,147,867	)	$	(489,428	)

~~Our~~12. ~~financial~~Lease ~~statements are stated in United States dollars ($US) and are prepared in accordance with United States Generally Accepted Accounting Principles.~~Commitments

InFor ~~this~~the ~~report,~~period ~~unless~~ended ~~otherwise~~December ~~specified~~31, ~~all~~2018, ~~references~~the toCompany ~~“common~~entered ~~stock” refer to~~ the ~~common~~following ~~shares~~lease ~~in our capital stock.~~agreements:

As· ~~used~~Yunguhui inAnhui ~~this~~entered ~~quarterly~~into ~~report~~a five-year operating lease agreement leasing a two floored office commencing on July 1, ~~the~~2017 ~~terms~~and ~~“we~~expiring on June 30,” ~~“us~~2022. The monthly lease expense is RMB 9,”147 ~~“our~~(USD $1,”330). ~~“Company~~· Yunguhui Beijing entered into a five-year operating lease agreement leasing an office commencing on August 21,” ~~“Capstone”~~2017 and ~~“Capstone~~expiring ~~Systems”~~on ~~mean~~August ~~Capstone~~23, ~~Systems~~2022. ~~Inc~~The monthly lease expense is RMB 94,354 (USD $13,721). · Yunguhui Nanjing entered into a twenty-five months operating lease agreement leasing an office commencing on November 18, ~~unless~~2016 and expiring on December 17, 2018. The lease was renewed on November 17, 2018, extending the ~~context~~lease ~~clearly~~for ~~requires~~another ~~otherwise~~twenty-five months expiring on December 17, 2020. The monthly lease expense is RMB 104,636 (USD $15,217).

~~Results~~15 Table of ~~Operations~~Contents

~~Following~~Capstone ~~the~~Systems consummation of the stock purchase agreement with its former sole director and executive officer Jure Perko, and a group of individual purchasers on October 19, 2017, the Company became a shell company without any significant assets or operationsInc.

~~Three~~Notes ~~months~~to ~~ended~~the ~~August~~Financial ~~31, 2018 and August 31, 2017~~Statements

WeNOTES ~~had~~TO noCONDENSED ~~revenue~~CONSOLIDATED ~~for~~FINANCIAL ~~the three months ended August 31, 2018. We incurred $15,746 in general and administrative expenses for the same period. We generated a net loss of $15,746 for the three months ended August 31, 2018.~~STATEMENTS

InThe ~~comparison,~~minimum wefuture ~~generated~~lease ~~$30,258~~payments ~~in revenue~~ for the ~~three~~office ~~months~~at ~~ended~~December ~~August~~ 31, ~~2017.~~2018 Weare ~~incurred~~as ~~$29,549 in cost of goods sold and $2,146 in general and administrative expenses resulting in a net loss of $1,437 for the three months ended August 31, 2017.~~follows:

Cash Flows from Operating Activities

Period	Lease Payable
Year 1	$	363,607
Year 2		348,390
Year 3		181,008
Year 4		116,586
	$	1,009,591

~~For~~The outstanding lease commitments for the ~~three~~leases ~~months~~listed ~~ended~~above ~~August~~as of December 31, 2018 was $1,009,591. The ~~net~~lease ~~cash~~expense ~~flows~~for ~~used~~the insix-month ~~operating~~periods ~~activities~~ended ~~was~~December $231,~~139~~ ~~compared~~2018 toand 2017 was $1181,~~303~~804 ~~for~~and ~~August 31~~$70, ~~2017~~776.

~~Cash~~13. ~~Flows from Investing Activities~~Risks

WeA. ~~neither~~Credit ~~used~~risk ~~nor~~The ~~generated~~Company’s ~~any~~deposits ~~cash~~are made with banks located in the PRC. They do not carry federal deposit insurance and may be subject to loss of the banks become insolvent. Since the Company’s inception, the age of account receivables has been less than one year indicating that the Company is subject to minimal risk borne from ~~investing~~credit ~~activities~~extended to customers. B. Economic and political risks The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in the PRC. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. C. Environmental risks The Company has procured environmental licenses required by the PRC government. The Company has both a water treatment facility for water used in its production process and secure transportation to remove waste off site. In the ~~three~~event ~~months~~of ~~ended~~an ~~August~~accident, 31the Company has purchased insurance to cover potential damage to employees, ~~2018~~equipment, and ~~August~~local 31environment. D. Inflation Risk Management monitors changes in prices levels. Historically inflation has not materially impacted the company’s financial statements; however, ~~2017~~significant increases in the price of raw materials and labor that cannot be passed to the Company’s customers could adversely impact the Company’s results of operations.

~~Cash~~14. ~~Flows~~Subsequent ~~from Financing Activities~~Events

WeThe ~~generated~~Company $2evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized,~~139~~ inor ~~cash~~those ~~from~~that ~~financing~~provide ~~activities~~additional evidence with respect to conditions that existed at the date of ~~for~~the balance sheet, including the ~~three~~estimates ~~months~~inherent ~~ended~~in ~~August~~the 31process of preparing financial statements, ~~2018~~and ~~compared~~(2) non-recognized, or those that provide evidence with respect to ~~nil~~conditions asthat did not exist at the date of ~~August~~the balance sheet but arose subsequent to that date. The Company has evaluated subsequent events from December 31, ~~2017~~2018 through the date the financial statements were available to be issued. There was no subsequent event at the report date.

~~Liquidity~~16 ~~and~~Table ~~Capital~~of ~~Resources~~Contents

OnITEM ~~August 31, 2018, the Company had nil in cash, total assets of nil and outstanding liabilities of $62,369~~2. ~~Our~~MANAGEMENT’ ~~director~~DISCUSSION ~~has~~AND ~~agreed,~~ANALYSIS ~~verbally,~~OF toFINANCIAL ~~continue~~CONDITION toAND ~~loan~~RESULTS ~~the~~OF ~~company funds for operating expenses in a limited scenario, but he has no legal obligation to do so.~~OPERATIONS

12The ~~Table~~following ofmanagement’s ~~Contents~~discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. Our financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP.

~~Off-Balance~~Special ~~Sheet~~Note ~~Arrangements~~Regarding Forward Looking Statements

WeIn doaddition ~~not~~to ~~have~~historical ~~any~~information, ~~off~~this report contains forward-~~balance~~looking ~~sheet~~statements. ~~arrangements~~We ~~that~~use ~~have~~words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or ~~are~~similar ~~reasonably~~expressions ~~likely~~which are intended to ~~have~~identify aforward-looking ~~current~~statements. orForward-looking ~~future~~statements ~~effect~~speak only as of the date they are made, are based on ~~our~~various ~~financial~~underlying ~~condition~~assumptions and current expectations about the future. Accordingly, ~~changes~~such information should not be regarded as representations that the results or conditions described in ~~financial~~such ~~condition,~~statements ~~revenues~~or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or ~~expenses,~~completeness ~~results~~of any of ~~operations~~these forward-looking statements. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, ~~liquidity~~as well as assumptions, ~~capital~~which, ~~expenditures~~if they were to ever materialize or ~~capital~~prove ~~resources~~incorrect, ~~that~~could iscause ~~material~~our results to ~~investors~~differ materially from those expressed or implied by such forward-looking statements.

~~Contractual~~Readers ~~Obligations~~are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

~~We do not have any contractual obligations as of the filing of this report.~~Overview

~~ITEM~~Capstone 3Systems Inc. ~~QUANTITATIVE~~was ~~AND~~incorporated ~~QUALITATIVE~~in ~~DISCLOSURES~~the ~~ABOUT~~State ~~MARKET~~of ~~RISK~~Nevada on April 1, 2015 (“Company”). From inception to October 19, 2017, we were a development-stage company formed to sell kitchen sinks and kitchen cabinets in the USA. On October 19, 2017, the Company and its former sole director and executive officer, Jure Perko, entered into a stock purchase agreement (the “SPA”) with a group of individual purchasers, pursuant to which, the control block of voting stock of the Company, represented by 4,000,000 shares of common stock (the “Shares”), approximately 78.7% of all outstanding common stock of the Company, was transferred to the purchasers. In connection with the SPA, Jure Perko entered into an assignment agreement with the Company whereby all assets of the Company were transferred to him, all liabilities were assumed by him and the net difference was treated as a reduction in additional paid in capital. Subsequently, the Company ceased all operations, and became a “shell company” without any significant assets or operations.

~~Not~~On ~~applicable~~January 14, 2019 (the “Closing Date”), we closed a share exchange (the “Share Exchange”) under a Share Exchange Agreement, as amended (the “SEA”), with Yunguhui Group Limited (“Yunguhui”) and 33 stockholders of Yunguhui, who held 100% of the issued and outstanding stock of Yunguhui (“Yunguhui Stockholders”). Pursuant to the SEA and on the Closing Date, in exchange for all of the issued and outstanding capital stock of Yunguhui, we issued to the Yunguhui Stockholders an aggregate amount of 200,000,000 shares of CPSN’s common stock. As a result of the Share Exchange, the Yunguhui Stockholders became the controlling shareholders of the Company. The Share Exchange was accounted for under the business combination under common control of accounting.

~~ITEM~~At 4.the ~~CONTROLS~~closing ~~AND~~of ~~PROCEDURES~~ the Share Exchange, 201,757,664 shares of Yunguhui capital stock, issued and outstanding immediately prior to the closing of the Share Exchange, were exchanged for 200,000,000 newly issued shares of our Common Stock.

~~Evaluation~~17 Table of ~~Disclosure Control and Procedures.~~ Contents

WeImmediately ~~maintain~~after ~~disclosure~~giving ~~controls~~effect ~~and procedures that are designed~~ to ~~ensure~~the ~~that~~Share ~~information required to be disclosed in our Securities~~ Exchange ~~Act reports is recorded~~, ~~processed,~~there ~~summarized~~were ~~and reported within the time periods specified in the SEC’s rules and forms~~205, ~~and that such information is accumulated and communicated to our management~~085,000 ~~including~~issued ~~our President/Chief Executive~~ and ~~Financial~~outstanding ~~Officer,~~shares as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of ~~achieving~~our ~~the~~Common ~~desired control objectives~~Stock, as ~~ours are designed to do, and we necessarily were required to apply our judgment in evaluating the cost-benefit relationship of possible changes or additions to our controls and procedures.~~follows:

As· ofThe ~~August~~Yunguhui ~~31,~~Stockholders ~~2018,~~hold ~~we carried out an evaluation~~200, ~~under the supervision and with the participation of our management~~000,000 ~~including~~shares ~~our President/Chief Executive and Financial Officer,~~ of ~~the effectiveness of the design and operation of~~ our ~~disclosure~~Common ~~controls~~Stock ~~and procedures, as defined in Rules 13a-15~~(~~e) and 15d-15(e) under the Securities Exchange Act of 1934~~97. Based upon the fact that we have practically no activities and remain a shell company at this time, our President/Chief Executive and Financial Officer concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e4%); and 15d-15(e) under the Securities Exchange Act of 1934, provide a reasonable level of assurance that they are effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period.

~~Changes~~· inThe ~~internal~~stockholders ~~control~~of ~~over~~the ~~financial~~Company ~~reporting~~prior to the Share Exchange hold the remaining 5,085,000 shares of our Common Stock (2.5%).

~~There~~No ~~were~~other nosecurities ~~changes~~convertible ininto ~~the~~or ~~Company’s~~exercisable ~~internal~~or ~~control~~exchangeable ~~over~~for ~~financial~~our ~~reporting~~Common ~~that~~Stock ~~occurred~~are ~~during~~outstanding. ~~the~~Our ~~period~~Common ~~covered~~Stock byis ~~this~~quoted ~~report~~on ~~that~~the ~~have~~OTC ~~materially~~Pink ~~affected,~~under orthe ~~are~~symbol ~~reasonably~~“CPSN”. ~~likely~~Pursuant to ~~materially~~the ~~affect~~Share Exchange, we acquired the ~~Company’s~~business ~~internal~~of ~~control~~Yunguhui, ~~over~~which ~~financial~~is ~~reporting~~engaged in management consulting services. As a result, we have ceased to be a “shell company.”

13Yunguhui ~~Table~~is a development company and commenced its operations in 2017. The company offers management consulting services to its registered member enterprises and generates revenue through membership fees and other service fees. We provide consulting services to small and medium-sized enterprises in mainland China to help them achieve their growth potential. As the date of ~~Contents~~this Report, nine companies are registered members with Yunguhui. We own and operate two service centers, through which we provide in-person customer service to our clients. We also entered into cooperation agreements with independent operators who own and operate cooperation service centers (“CSC”). These independent operators pay us annual fees in exchange for the rights to use our brand name and trademark, as well as access to our other corporate resources, such as the Yunguhui App (once available) and consulting service personnel. As of the date of this Report, we have contracted with nine cooperation service centers. Due to our short history of operation, we are not yet profitable. Yunguhui conducts substantially all of its operations through contractual arrangements with Anhui Yunguhui Technology Development Limited (“Yunguhui Anhui”), an affiliated variable interest entity (“VIE”) and the VIE’s wholly owned subsidiaries Beijing Yunguhui Information Technology Co. Ltd. (“Yunguhui Beijing”), and Nanjing Yunguhui Information Technology Co. Ltd. (“Yunguhui Nanjing,” together with Yunghuhui Anhui, Yunguhui Beijing and Yunguhui Nanjin, “Yunguhui Anhui and its Subsidiaries”).

~~PART~~Yunguhui, IIa company incorporated in the Republic of Seychelles on November 2, 2017, acts as a holding company of its directly wholly owned subsidiary, Yunguhui Holdings Development Limited, also a Republic of Seychelles company, incorporated on November 3, 2017 (“YHDL”). YHDL acts as a holdings company of its directly wholly owned subsidiary, Yun Gu Hui International (Hong Kong) Development Limited, which was incorporated in Hong Kong on December 6, 2017 (“Yunguhui HK”). Yunguhui HK has a wholly owned subsidiary, Shenzhen Yunguhui Technology Development Limited, a PRC company incorporated on February 22, 2018 (“Yunguhui Shenzhen”), as a wholly foreign-owned enterprise (“WFOE”).

~~OTHER~~On ~~INFORMATION~~August 20, 2018, Yunguhui Shenzhen entered into a Management and Consultancy Service Agreement which entitles Yunguhui Shenzhen to substantially all of the economic benefits of Yunguhui Anhui and its Subsidiaries, all of which are PRC companies, in consideration of services provided by Yunguhui Shenzhen to Yunguhui Anhui and its Subsidiaries. In addition, Yunguhui Shenzhen entered into certain agreements with the shareholders of Yunguhui Anhui, Yusheng Jiang and Ding Yong (collectively, the “Yunguhui Anhui Shareholders”), as well as Yunguhui Anhui and its Subsidiaries, including (i) an Exclusive Right and Option to Purchase Agreement allowing Yunguhui Shenzhen to acquire the shares of Yunguhui Anhui as permitted by PRC laws, (ii) a Shareholders' Voting Rights Proxy Agreement that provides Yunguhui Shenzhen with the voting rights of the Yunguhui Anhui Shareholders and those of Yunguhui Anhui, and (iii) an Equity Pledge Agreement that pledges the shares in Yunguhui Anhui and its Subsidiaries to Yunguhui Shenzhen. This VIE structure provides Yunguhui Shenzhen, a wholly-owned subsidiary of Yunguhui, with control over the operations and benefits of Yunguhui Anhui and its Subsidiaries without having a direct equity ownership in Yunguhui Anhui and its subsidiaries.

~~ITEM~~18 1.Table ~~LEGAL~~of ~~PROCEEDINGS~~Contents

~~From~~Beginning ~~time to time, we may become involved~~ in ~~various~~December ~~lawsuits and legal proceedings~~2017, ~~which~~each ~~arise in the ordinary course~~ of ~~business.~~Yunghuhui ~~However,~~Beijing ~~litigation is subject to inherent uncertainties,~~ and anYunguhui ~~adverse~~Nanjing ~~result~~started inoperating ~~these~~a orlocal ~~other~~service ~~matters~~center. ~~may~~In ~~arise~~addition ~~from time~~ to ~~time~~the ~~that~~two ~~may~~directly ~~harm~~owned ~~business.~~and Weoperated ~~are~~service ~~currently~~centers, ~~not~~we ~~aware of any such legal proceedings or claims that will~~ have, ~~individually~~currently orcontracted innine ~~the~~CSCs ~~aggregate,~~through acontractual ~~material~~arrangements ~~adverse~~entered ~~effect~~with onindependent ~~our business, financial condition or operating results~~operators.

~~ITEM~~Yunguhui’s 1Aorganizational structure was crafted to abide by the laws of the PRC and maintain tax benefits as well as internal organizational efficiencies. ~~RISK~~The ~~FACTORS~~Company’s post–share exchange organization structure is summarized below:

~~Not~~Limited ~~applicable~~Operating toHistory; aNeed ~~smaller~~for ~~reporting~~Additional ~~company.~~Capital

~~ITEM~~There 2is no historical financial information about us upon which to base an evaluation of our performance. ~~UNREGISTERED~~We ~~SALE~~cannot OFguarantee ~~EQUITY~~we ~~SECURITIES~~will ~~AND~~be ~~USE~~successful OFin ~~PROCEEDS~~our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the launching of our online applications and market or wider economic downturns. We do not believe we have sufficient funds to operate our business for the next twelve months.

~~None.~~19 Table of Contents

~~ITEM~~Results 3.of ~~DEFAULT~~Operations ~~UPON SENIOR SECURITIES.~~

~~Not~~Comparison ~~applicable.~~of Three Months Ended December 31, 2018 and 2017

~~ITEM 4. MINE SAFETY DISCLOSURE.~~Revenues

~~Not~~We ~~applicable~~have generated $2,974 in revenue during the three months ended December 31, 2018 compared to $14 during the three months ended December 31, 2017.

~~ITEM~~Cost 5.of ~~OTHER INFORMATION.~~revenues

~~None~~During the three months ended December 31, 2018, we have incurred $8 cost of revenue compared to $2,565 during the three months ended December 31, 2017.

14Operating ~~Table of Contents~~Expenses

~~ITEM~~During 6the three months ended December 31, 2018, we have incurred $343,817 general and administrative expenses compared to $474,753 during the three months ended December 31, 2017. ~~EXHIBITS~~The general and administrative expenses primarily consist of professional fees.

~~The~~Net ~~following exhibits are included with this quarterly filing.~~Income

Exhibit No.		Description
3.1		Articles of Incorporation dated April 1, 2014 (incorporated by reference to our Form S-1 Registration Statement, Exhibit 3.1, filed with the Securities and Exchange Commission on September 24, 2015)
3.2		Bylaws (incorporated by reference to our Form S-1 Registration Statement, Exhibit 3.2, filed with the Securities and Exchange Commission on September 24, 2015)
3.3		Certificate of Amendment (incorporated by reference from our Current Report on Form 8-K filed on January 17, 2018.)
31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
101.INS		XBRL Instance Document **
101.SCH		XBRL Taxonomy Extension Schema Document **
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document **
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document **
101.LAB		XBRL Taxonomy Extension Label Linkbase Document **
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document **

Our net loss for the three months ended December 31, 2018 was $341,550 compared to a net loss of $477,102 during the three months ended December 31, 2017.

~~______________~~Comparison of Six Months Ended December 31, 2018 and 2017

* Filed herewith. ** Furnished herewith.Revenues

15During ~~Table~~the ofsix ~~Contents~~months ended December 31, 2018, we have generated $225,869 in revenue compared to $33,547 during the six months ended December 31, 2017.

~~SIGNATURES~~Cost of revenues

~~Pursuant~~We tohave ~~the~~incurred ~~requirements~~$821 ofand ~~the Securities Exchange Act of 1934~~$32,122 for the ~~Registrant~~six ~~has~~months ~~duly~~ended ~~caused~~December ~~this~~31, ~~report~~2018 toand be2017 ~~signed on its behalf by the undersigned thereunto duly authorized~~respectively.

	CAPSTONE SYSTEMS INC.
October 15, 2018	By:	/s/ Jiyuan Xu
	Name:	Jiyuan Xu
	Title:	President, Treasurer, Secretary,
		Principal Executive, Financial and Accounting Officer

Operating Expenses

16During the six months ended December 31, 2018, we have incurred $1,372,350 general and administrative expenses compared to $493,144 during the six months ended December 31, 2017. The general and administrative expenses primarily consist of bad debt expenses, professional fees and salary expenses.

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Net Income

Our net loss for the six months ended December 31, 2018 was $1,147,867 compared to a net loss of $489,428 for the six months ended December 31, 2017.

Liquidity and Capital Resources

Working capital	December 31, 2018			June 30, 2018
Total current assets	$	234,468		$	260,397
Total current liabilities		1,594,213			414,805
Working capital surplus/(deficit)	$	(1,359,745	)	$	(154,408	)

Total accumulated deficit as of December 31, 2018 and June 30, 2018 was $2,968,245 and $1,820,378, respectively. To date, we have financed our operations primarily from either advancements from related parties or the issuance of equity and debt instruments.

We do not believe that we have sufficient funds to operate our business for the next twelve months. We may require additional cash resources in the future but we have no assurance that future financing will be available to us on acceptable terms, or at all. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders. If we are unable to raise additional capital to maintain our operations in the future, we may be unable to carry out our full business plan or we may be forced to cease operations.

	Six Months Ended December 31,
	2018			2017
Net cash provided by (used in) operating activities	$	50,776		$	(854,538	)
Net cash provided by (used in) investing activities		(72,618	)		(18,910	)
Net cash provided by financing activities		-			960,348
Net increase (decrease) in cash and cash equivalents		(21,842	)		86,900
Effect of currency translation		3,927			(9,794	)
Cash and cash equivalents at the beginning of period		47,073			2,294
Cash and cash equivalents at the end of period	$	29,158		$	79,400

Operating Activities

For the six months ended December 31, 2018, net cash provided by operating activities was $50,776 consisting of net loss of $1,147,867, depreciation and amortization expenses of $11,185, an increase in accounts receivable of $145,424, a decrease in other receivables of $177,449, a decrease in related party receivables of $1,206, an increase in advance to suppliers of $12,868, an increase in prepaid expenses of $12,313, an increase in accounts payable of $61,074, an increase in taxes payable of $107, an increase in other payable of $9,512, an increase in related party payables of $1,122,448, an increase in accrued liabilities of $8,000 and a decrease in customer deposits of $21,733. Net cash used in operating activities for the six months ended December 31, 2017 was $854,538 consisting of net loss of $489,428, depreciation and amortization expenses of $335, an increase in other receivables of $522,172, an increase in related party receivables of $5,072, an increase in inventory of $1,860, an increase in accounts payable of $3,602, a decrease in taxes payable of $2,089, an increase in other payables of $152,496 and an increase in related party payables of $9,650.

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Investing Activities

Net cash used in investing activities for the six months ended December 31, 2018 was $72,618 for purchase of intangible assets. Net cash used in purchasing fixed assets and intangible assets for the six months ended December 31, 2017 were $16,358 and 2,551 respectively.

Financing Activities

Net cash provided by financing activities for the six months ended December 31, 2018 was $nil. Net cash provided by financing activities was $960,348 for the six months ended December 31, 2017 from proceeds from issuance of common stock.

Off-Balance Sheet Transactions

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Contractual Obligations

For the period ended December 31, 2018, the Company entered the following lease agreements:

	·	Yunguhui Anhui entered into a five-year operating lease agreement leasing a two floored office commencing on July 1, 2017 and expiring on June 30, 2022. The monthly lease expense is RMB 9,147 (USD $1,330).

	·	Yunguhui Beijing entered into a five-year operating lease agreement leasing an office commencing on August 21, 2017 and expiring on August 23, 2022. The monthly lease expense is RMB 94,354 (USD $13,721).

	·	Yunguhui Nanjing entered into a twenty-five months operating lease agreement leasing an office commencing on November 18, 2016 and expiring on December 17, 2018. The lease was renewed on November 17, 2018, extending the lease for another twenty-five months expiring on December 17, 2020. The monthly lease expense is RMB 104,636 (USD $15,217).

The minimum future lease payments for the office at December 31, 2018 are as follows:

Period	Lease Payable
Year 1	$	363,607
Year 2		348,390
Year 3		181,008
Year 4		116,586
	$	1,009,591

The outstanding lease commitments for the leases listed above as of December 31, 2018 was $1,009,591. The lease expense for the six-month periods ended December 31, 2018 and 2017 was $181,804 and $70,776.

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Critical Accounting Policies

Method of accounting

Management has prepared the accompanying financial statements and these notes in accordance to generally accepted accounting principles in the United States of America; the Company maintains its general ledger and journals with the accrual method accounting.

Condensed Financial Statements

Certain information and footnote disclosures normally included in the condensed financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s June 30, 2018 audited financial statements as filed in the most recent Form 10-K. The results of operations for the period ended December 31, 2018 are not necessarily indicative of the operating results for the full year.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2018. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Management also confirmed that there was no change in our internal control over financial reporting during the three-month period ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our Company.

ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS

The following exhibits are included as part of this report by reference:

31.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

101		Interactive data files pursuant to Rule 405 of Regulation S-T.

25

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CAPSTONE SYSTEMS INC.

Date: April 19, 2019	By:	/s/ Jiyuan Xu
	Name:	Jiyuan Xu
	Title:	Chief Executive Officer and
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Filing Compare · Capstone Systems Inc