Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 22, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2020 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity File Number | 000-28831 | ||
Entity Registrant Name | CAPSTONE COMPANIES, INC. | ||
Entity Central Index Key | 0000814926 | ||
Entity Tax Identification Number | 84-1047159 | ||
Entity Incorporation, State or Country Code | FL | ||
Entity Address, Address Line One | 431 Fairway Drive | ||
Entity Address, Address Line Two | Suite 200 | ||
Entity Address, Address Line Three | Deerfield Beach | ||
Entity Address, State or Province | FL | ||
Entity Address, Country | US | ||
Entity Address, Postal Zip Code | 33441 | ||
City Area Code | 954 | ||
Local Phone Number | 252-3440 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 2,183,299 | ||
Entity Common Stock, Shares Outstanding | 46,296,364 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash | $ 1,223,770 | $ 3,131,249 |
Accounts receivable, net | 120,064 | 13,459 |
Inventories | 8,775 | 24,818 |
Prepaid expenses | 75,622 | 182,782 |
Income tax refundable | 861,318 | 220,207 |
Total Current Assets | 2,289,549 | 3,572,515 |
Property and equipment, net | 54,852 | 65,649 |
Operating lease - right of use asset | 158,504 | 214,202 |
Deposit | 25,560 | 46,021 |
Goodwill | 1,312,482 | 1,936,020 |
Total Assets | 3,840,947 | 5,834,407 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 825,690 | 635,593 |
Operating lease - current portion | 63,307 | 51,174 |
Total Current Liabilities | 888,997 | 686,767 |
Long-Term Liabilities: | ||
Operating lease - long term portion | 107,690 | 170,998 |
Deferred tax liabilities-long-term | 259,699 | 0 |
Total Long-Term Liabilities | 367,389 | 170,998 |
Total Liabilities | 1,256,386 | 857,765 |
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares; Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares; Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | ||
Common Stock, par value $.0001 per share, authorized 56,666,667 shares, issued 46,296,364 shares at December 31, 2020 and 46,579,747 shares at December 31, 2019 | 4,630 | 4,658 |
Additional paid-in capital | 7,053,328 | 7,061,565 |
Accumulated deficit | (4,473,397) | (2,089,581) |
Total Stockholders' Equity | 2,584,561 | 4,976,642 |
Total Liabilities and Stockholders' Equity | 3,840,947 | 5,834,407 |
Preferred Stock, Series A [Member] | ||
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares; Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares; Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | ||
Total Stockholders' Equity | ||
Total Liabilities and Stockholders' Equity | ||
Preferred Stock, Series B-1 [Member] | ||
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares; Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares; Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | ||
Total Stockholders' Equity | ||
Total Liabilities and Stockholders' Equity | ||
Preferred Stock, Series C [Member] | ||
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares; Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares; Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | ||
Total Stockholders' Equity | ||
Total Liabilities and Stockholders' Equity |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 |
Common stock, par value per share | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 56,666,667 | 56,666,667 |
Common stock, shares outstanding | 46,296,364 | 46,579,747 |
Preferred Stock, Series A [Member] | ||
Preferred stock, par value per share | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 6,666,667 | 6,666,667 |
Preferred stock, shares issued | 0 | 0 |
Preferred Stock, Series B-1 [Member] | ||
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 3,333,333 | 3,333,333 |
Preferred stock, shares issued | 0 | 0 |
Preferred Stock, Series C [Member] | ||
Preferred stock, par value per share | $ 1 | $ 1 |
Preferred stock, shares authorized | 67 | 67 |
Preferred stock, shares issued | 0 | 0 |
Consolidated Statements Of Oper
Consolidated Statements Of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Statement [Abstract] | ||
Revenues, net | $ 2,770,358 | $ 12,404,445 |
Cost of sales | 2,266,592 | 9,972,871 |
Gross Profit | 503,766 | 2,431,574 |
Operating Expenses: | ||
Sales and marketing | 300,420 | 378,605 |
Compensation | 1,515,522 | 1,554,286 |
Professional fees | 422,820 | 435,143 |
Product development | 249,879 | 348,745 |
Other general and administrative | 477,121 | 647,696 |
Goodwill impairment charge | 623,538 | 0 |
Total Operating Expenses | 3,589,300 | 3,364,475 |
Operating Loss | (3,085,534) | (932,901) |
Other Income (Expenses): | ||
Other Income, net | 89,600 | 29,505 |
Interest Income (Expense) | 179 | (3,206) |
Total Other Income, net | 89,779 | 26,299 |
Loss Before Tax Benefit | (2,995,755) | (906,602) |
Benefit for Income Tax | (611,939) | (14,933) |
Net Loss | $ (2,383,816) | $ (891,669) |
Net Loss per Common Share Basic and Diluted | $ (0.05) | $ (0.02) |
Weighted Average Shares Outstanding Basic and Diluted | 46,337,198 | 46,863,467 |
Consolidated Statements Of Stoc
Consolidated Statements Of Stockholders' Equity - USD ($) | Preferred Stock, Series A [Member] | Preferred Stock, Series B [Member] | Preferred Stock, Series C [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance, shares at Dec. 31, 2018 | 47,046,364 | ||||||
Balance, value at Dec. 31, 2018 | $ 4,704 | $ 7,092,219 | $ (1,197,912) | $ 5,899,011 | |||
Stock options for compensation | 40,707 | 40,707 | |||||
Repurchase of shares, shares | (466,617) | ||||||
Repurchase of shares, value | $ (46) | (71,361) | 71,407 | ||||
Net Loss | (891,669) | (891,669) | |||||
Balance, shares at Dec. 31, 2019 | 46,579,747 | ||||||
Balance, value at Dec. 31, 2019 | $ 4,658 | 7,061,565 | (2,089,581) | 4,976,642 | |||
Stock options for compensation | 28,068 | 28,068 | |||||
Repurchase of shares, shares | (283,383) | ||||||
Repurchase of shares, value | $ (28) | (36,305) | 36,333 | ||||
Net Loss | (2,383,816) | (2,383,816) | |||||
Balance, shares at Dec. 31, 2020 | 46,296,364 | ||||||
Balance, value at Dec. 31, 2020 | $ 4,630 | $ 7,053,328 | $ (4,473,397) | $ 2,584,561 |
Consolidated Statements Of Cash
Consolidated Statements Of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Loss | $ (2,383,816) | $ (891,669) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 24,297 | 44,194 |
Stock based compensation expense | 28,068 | 40,707 |
Noncash lease expense | 55,698 | 20,248 |
Goodwill impairment charge | 623,538 | 0 |
Deferred income tax benefit | 0 | (12,000) |
Increase in deferred income tax liabilities-long-term | (259,699) | 0 |
Noncash accounts receivable allowance | (173,426) | 0 |
(Increase) decrease in accounts receivable, net | 106,605 | (51,052) |
Decrease in inventories | (16,043) | (2,679) |
Increase in prepaid expenses | (107,160) | (61,094) |
Decrease in deposits | 20,461 | 56,784 |
Increase in accounts payable and accrued liabilities | 16,671 | 174,147 |
Decrease in deferred rent incentive | 0 | (108,844) |
Decrease in income tax payable | 0 | (11,694) |
Increase in income tax refundable | 641,111 | 0 |
Decrease in operating lease liabilities | (51,175) | (12,278) |
Net cash used in operating activities | (1,857,646) | (585,580) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | 13,500 | 34,123 |
Net cash used in investing activities | (13,500) | (34,123) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Repurchase of Shares | 36,333 | 71,407 |
Net cash used in financing activities | (36,333) | (71,407) |
Net Decrease in Cash, cash equivalents, and restricted cash | (1,907,479) | (691,110) |
Cash, cash equivalents, and restricted cash at Beginning of Year | 3,131,249 | 3,822,359 |
Cash, cash equivalents, and restricted cash at End of Year | 1,223,770 | 3,131,249 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid during the period for: Interest | 0 | 3,206 |
NON-CASH FINANCING AND INVESTING ACTIVITIES: | ||
Operating lease – right-of-use asset at commencement | 0 | 224,550 |
Operating lease liabilities at commencement | $ 0 | $ 234,450 |
Organization And Summary Of Sig
Organization And Summary Of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Summary of Significant Accounting Policies | NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements for the years ended December 31, 2020 and 2019 include the accounts of the parent entity and its wholly-owned subsidiaries. All material intra-entity transactions and balances have been eliminated in consolidation. This summary of accounting policies for Capstone Companies, Inc. (“CAPC”), a Florida corporation (formerly, “CHDT Corporation”) and its wholly-owned subsidiaries (collectively referred to as the “Company”, “we”, “our” or “us”), is presented to assist in understanding the Company's consolidated financial statements. The accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the consolidated financial statements. Organization and Nature of Business Capstone Companies, Inc. is headquartered in Deerfield Beach, Florida. On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., (“ CAPI”). CAPI was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling low technology consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of CAPI’s Common Stock, and recorded goodwill of $1,936,020. The primary operating subsidiary is CAPI, which is located in the principal executive offices of the Company. On June 6, 2012, the Company amended its charter to change its name from CHDT Corporation to CAPSTONE COMPANIES, INC. This name change was effective as of July 6, 2012, for purposes of the change of its name on the OTC Bulletin Board. With the name change, the trading symbol was changed to CAPC. On April 13, 2012, the Company established a wholly owned subsidiary in Hong Kong, named Capstone International Hong Kong Ltd (“CIHK”) which provides support services such as engineering, new product development, product sourcing, factory certification and compliance, product price negotiating, product testing and quality control and ocean freight logistics for the Company’s other subsidiaries. CIHK is also engaged in selling the Company’s products internationally. The Company’s products are typically manufactured in Thailand and China by contract manufacturing companies. As of the date of these consolidated financial statements, the Company’s future product development effort is focused on the Smart Mirrors category because the Company believes, based on Company’s management understanding of the industry, the Smart Mirrors have the potential for greater profit margin than the Company’s historical LED consumer products. Technological developments and changes in consumer tastes could alter the perceived potential and future viability of Smart Mirrors as a primary product. The Company may change its product development strategies and plans as economic conditions and consumer tastes change, which condition and changes may be unforeseeable by the Company or may be beyond the ability of the Company to timely or at all adjust its strategic and product development plans. The Company’s operations consist of one reportable segment for financial reporting purposes: Lighting Products. Effects of COVID-19 During the year ended December 31, 2020, the outbreak and global spread of COVID-19 pandemic caused significant economic volatility, uncertainty and disruption in our operating environment. We began 2020 in an environment exhibiting strong economic conditions combined with the successful launch of our new product category, the Smart Mirror at the 2020 CES Show. However, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, and the various containment and mitigation measures adopted by governments and institutions globally and in the U.S. began to have a severe economic impact, including causing the U.S. to enter an economic recession. In response to the COVID-19 and various state and local orders, the Company instituted the following actions in March 2020: • Placed restrictions on business travel for our employees. • Closed our Corporate offices both in the U.S. and in Hong Kong. • Modified our corporate and division office functions to allow all employees to work remotely. On March 20, 2020, the Company’s U.S. staff started to work remotely from their homes. With the State of Florida lifting its “Stay at Home” requirement on May 20, 2020, the Corporate office reopened with staff working on a rotating schedule between the office and remotely from home. While all the above-referenced steps were, and some remain, necessary and appropriate in light of COVID-19, they impacted the Company’s ability to operate the business in its ordinary and traditional course. As the result of COVID-19 and the economic uncertainties, our core LED lighting orders declined significantly starting in March 2020 and the Company was unable to expand on the marketing success of the launch of the Smart Mirror at the CES Show in January 2020. As the pandemic spread and federal, state and local government mandated movement restrictions, management maintained its focus on shifting production into Thailand, expansion of the Smart Mirror portfolio, protecting our liquidity and closely managing our cash flows. In the fiscal second and third quarters, 2020, the Company implemented cost controls to mitigate the loss of revenue. The Company took action to reduce expenses, including promotional activities, travel, meetings, and compensation expenses with the elimination of certain positions overseas and the deferment of senior executive compensation and consulting expenses. Our business operations and financial performance for the year ended December 31, 2020 was adversely impacted by the developments discussed above, The Company reported a decrease in net revenue from $12.4 million in 2019 to $2.7 million in 2020, a reduction of approximately $9.7 million. The net loss for the period ended December 31, 2020 was approximately $2.4 million as compared to approximately $891.7 thousand in 2019. With these recurring losses, the cash generated from operations was negatively impacted and the Company utilized approximately $1.9 million of cash during the year ended December 31, 2020. The decrease in net sales for the year was driven by the uncertainty felt by retail buyers as to the continuing impact on the retail market of COVID-19 and its overall long-term negative impact on the U.S. economy. However, the Warehouse Club channel, which includes our customers Costco Wholesale and Sam’s Club, has seen a substantial increase in foot traffic because of the changed buying trend of consumers during the pandemic, which has recently resulted in the resumption of some promotional opportunities. Management believes that with the national distribution of vaccines now occurring, the impact of the pandemic on the general brick and mortar retail market will carry through to mid-2021. As a result of the economic uncertainties caused by the COVID-19 pandemic, during the year ended December 31, 2020, management determined sufficient indicators existed to trigger quarterly goodwill impairment analyses. The total impairment charge for the year ended December 31, 2020 was approximately $623.5 thousand. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, which we refer to as the “CARES Act.” was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOLs”) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. The Company was able to carryback the 2018 and the 2019 NOLs to 2017 tax year and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of $575,645 which was recorded in the first quarter 2020. The Company expects to carryback a portion of its 2020 NOL, for which it recorded a further net benefit of $286,433. In the third quarter 2020, the Company recorded a $21,222 net tax benefit for deferred tax liability adjustment related to goodwill impairment. For the year ended December 31, 2020, the Company has recorded $862,078 in net tax benefits. The CARES Act also provided for the Paycheck Protection Program (“PPP”). On May 11, 2020, the Company received a $89.6 thousand loan under PPP which was processed through Sterling National Bank. The Company filed SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application. On October 30, 2020, the SBA notified the Company that the PPP loan principal of $89,600 and $428 of accumulated interest had been fully forgiven. This forgiveness has been reflected in Other Income on the consolidated statements of operations. Liquidity and Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The uncertainty and the continuing negative impact that the COVID-19 disruption could have on the future retail business and consumers’ willingness to visit retail stores, causing reduced consumer foot traffic and consumer spending, could negatively impact the demand for our products or delay future planned promotional opportunities. However, with a successful relaunch of the Smart Mirror portfolio using the online retail platform, the Company may need a purchase order credit line to support increased U.S. domestic inventory to facilitate revenue growth in that category. During the year ended December 31, 2020, the Company used cash in operations of approximately $1.9 million and generated net operating losses of $2.4 million. As of December 31, 2020, the Company has working capital of approximately $1.4 million and an accumulated deficit of $4.5 million. The Company’s cash balance dropped by approximately $1.9 million from $3.1 million as of December 31, 2019 to $1.2 million as of December 31, 2020. As of December 31, 2020, the Company does not have sufficient cash on hand to finance its plan of operations and will need to seek additional capital through debt and/or equity financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern. As discussed above, the overall impact of the COVID-19 pandemic to our business, financial condition, cash flow and results of operations remains uncertain. For example, if any of our major wholesale customers fail to maintain normal operations, our revenue could further decline, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Management believes that with the ongoing national distribution of vaccines, the economic impact of the COVID-19 pandemic in the U.S. will continue through to mid-2021, but ultimately should not impact the Company’s long-term strategy and initiatives. On July 31, 2020, the Company terminated its factoring agreement with Sterling National Bank. The Company has been in discussions with alternate funding sources that offer extensive programs that are more in line with the Company’s future business model, particularly a facility that provides funding options that are suitable for the e-commerce business that the Company is transitioning into. The borrowing costs associated with such financing are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future. In addition, we could seek alternative sources of liquidity, including but not limited to accessing the capital markets, or other alternative financing measures. However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital markets on terms acceptable to us. An economic recession or a slow recovery could adversely affect our business and liquidity. The ongoing impact of the COVID-19 pandemic on the Company’s business and financial performance may also affect the Company’s ability to obtain fundin g. The Company may be able to raise the required additional capital through debt or equity financing. However, the Company can make no assurances that it will be able to raise the required capital, on acceptable terms or at all. Unless the Company succeeds in raising additional capital or successfully increases cash generated from operations, management believes there is substantial doubt about the Company’s ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this report. However, there are compensating factors and actions that are being and have been taken to address these uncertainties, including the following: • The Company has no outstanding debt or other outstanding obligations, outside of normal trade obligations. • The Company has working capital of approximately $1.4 million consisting mostly of cash of $1.2 million. • The Company had an estimated income tax refundable as of December 31,2020 of approximately $861 thousand of which approximately $576 thousand and $10.3 thousand of interest was received on February 3, 2021, (see Note 8). • On July 31, 2020 with the termination of the Sterling National Bank factoring agreement, the Company has been in discussions with alternate funding sources that offers varying programs that are more in line with the Company’s future business model, particularly a facility that provides funding options that are more suitable for the e-commerce business that the Company is transitioning into. • The Company has entered a $750,000 working capital loan agreement effective January 4, 2021 for up to a one year term, (see Note 8). • The Company’s plan is to sell direct to consumers. The funding and cashflow requirements for this business model will require e-commerce funding. The Company has been in discussions with a funding source that provides this option. • The Company has in place a mitigation plan that reduces discretionary expenses, executive managements compensation, and significantly reduces the cost of the Hong Kong operation and also reduces future travel, lodging and show expenses. • Since September 1, 2020 through December 31, 2020 in order to conserve operating cashflow, the Company’s executive management has deferred 50% of their compensation until later in 2021. The compensation deferral has been further extended until March 31, 2021, (see Note 8). Accounts Receivable For product revenue, the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivable are recognized at the amount expected to be collected and are not subject to any interest or finance charges. The Company does not have any off-balance sheet credit exposure related to any of its customers. Previously in the factoring agreement with Sterling National Bank, accounts receivable served as collateral when the Company borrowed against its credit facilities. With the termination of the Sterling National Bank factoring agreement, the accounts receivables are unencumbered. As of December 31, 2020, accounts receivable has not been collateralized against debt. As of December 31, 2019, accounts receivable served as collateral when the Company borrowed against its credit facility at that time. Allowance for Doubtful Accounts The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company becomes aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will recognize an allowance against amounts due, and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes an allowance for doubtful accounts based on the length of time the receivables are past due and consideration of other factors such as industry conditions, the current business environment and the Company’s historical payment experience. An allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available. As of both Decembers 31, 2020 and 2019, management determined that accounts receivable are fully collectible. As such, management has not recorded an allowance for doubtful accounts. The following table summarizes the components of Accounts Receivable, net: December 31, December 31, 2020 2019 Trade Accounts Receivables at year end $ 197,166 $ 276,551 Reserve for estimated marketing allowances, cash discounts and other incentives (77,102 ) (263,092 ) Total Accounts Receivable, net $ 120,064 $ 13,459 The following table summarizes the changes in the Company’s reserve for marketing allowances, cash discounts and other incentives which is included in net accounts receivable: December 31, December 31, 2020 2019 Balance at beginning of the year $ (263,092 ) $ (364,894 ) Accrued allowances - ( 89,668 ) Reclassification of allowance from accounts receivable to accounts payable and accrued liabilities 173,426 - Expenditures 12,564 191,468 Balance at year-end $ (77,102 ) $ (263,092 ) Marketing allowances include the cost of underwriting an in store instant rebate coupon or a target markdown allowance on a specific product. Cash discounts represent discounts offered to the retailer off outstanding accounts receivable in order to initiate early payment. During 2020, the Company reclassified an accrued allowance from accounts receivable to accounts payable and accrued liabilities due to the decline in revenues and accounts receivable to offset these credits. The Company could have to pay cash to settle certain marketing allowances and other incentives issued to customers with no outstanding accounts receivable. Inventory The Company's inventory, which consists of finished LED lighting products for resale by Capstone, is recorded at the lower of cost (first-in, first-out) or net realizable value. The Company writes down its inventory balances for estimates of excess and obsolete amounts. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when the expected realizable value of a specific inventory item falls below its original cost. Management regularly reviews the Company’s investment in inventories for such declines in value. The write-downs are recognized as a component of cost of sales. During the fiscal year 2020 and 2019, inventory write downs were $0 for each year. As of December 31, 2020, and 2019, respectively, the inventory was valued at $8,775 and $24,818. Prepaid Expenses The Company’s prepaid expenses consist primarily of deposits on inventory purchases for future orders as well as prepaid insurance, trade show and subscription expense. As of December 31, 2020 and 2019, respectively, prepaid expenses were $75,622 and $182,782, respectively. Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives of the related assets as follows: Useful Life December 31, 2020 December 31, 2019 Computer equipment and software 3-7 years $ 53,819 $ 53,819 Machinery and equipment 3-7 years 119,323 157,267 Furniture and fixtures 3-7 years 6,828 6,828 Less: Accumulated depreciation (125,118 ) (152,265 ) Property and Equipment, Net $ 54,852 $ 65,649 Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss. Expenditures for maintenance and repairs are charged to expense as incurred. Major overhauls and betterments are capitalized and depreciated over their estimated economic useful lives. Depreciation and amortization expense was $24,297 and $44,194 for the years ended December 31, 2020 and 2019, respectively. Leases In February 2016, the FASB issued ASU no 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet and disclose key information about the leasing arrangements. The Company adopted the new standard with an effective date of January 1, 2019 on a modified retrospective approach. The Company has elected to take the practical expedient to separate lease and non-lease components for its operating lease. See Note 5 “Operating Leases” for additional disclosures as required by the new standard. Goodwill On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation (“Capstone”). Capstone was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of Capstone’s Common Stock, and recorded goodwill of $1,936,020. Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired. Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds its fair value, an impairment loss is recognized. Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company's market capitalization. As a result of the economic uncertainties caused by the COVID-19 pandemic during the year ended December 31, 2020, management determined sufficient indicators existed to trigger the performance of interim goodwill impairment analyses for each reporting quarter. The total impairment charge for the year ended December 31, 2020 was approximately $623.5 thousand. The following table summarizes the changes in the Company’s goodwill asset which is included in the total assets in the accompanying consolidated balance sheets: December 31, December 31, 2020 2019 Balance at the beginning of the period $ 1,936,020 $ 1,936,020 Impairment charges (623,538 ) - Balance at December 31, 2020 $ 1,312,482 $ 1,936,020 With the continuing economic uncertainties caused by the COVID-19 pandemic, the capital markets may continue to have a downturn and adversely affect the Company’s stock price which will require the Company to test its goodwill for impairment in future reporting periods. The Company’s stock is deemed a “penny stock” under Commission rules. The Company estimates the fair value of its single reporting unit relative to the Company’s market capitalization. Fair Value Measurement The accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), “Fair Value Measurements and Disclosures” (ASC 820-10) requires the Company to make disclosures about the fair value of certain of its assets and liabilities. ASC 820-10 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. ASC 820-10 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are as follows: Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3: Significant unobservable inputs. Earnings Per Common Share Basic earnings per common share is computed by dividing net income(loss) by the weighted average number of shares of common stock outstanding as of December 31, 2020 and 2019. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of December 31, 2020 and 2019, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 990,000 and 1,000,000, respectively. Basic weighted average shares outstanding is reconciled to diluted share outstanding as follows: Year Ended Year Ended Basic and Diluted weighted average shares outstanding 46,337,198 46,863,467 Revenue Recognition The Company generates revenue from developing, marketing and selling consumer lighting products through national and regional retailers. The Company’s products are targeted for applications such as home indoor and outdoor lighting and have different functionalities Capstone currently operates in the consumer lighting products category and is expanding into the Smart Mirror category in the United States and in certain overseas markets. These products may be offered either under the Capstone brand or licensed brands. A sales contract occurs when the customer-retailer submits a purchase order to buy a specific product, a specific quantity, at an agreed-fixed price, within a ship window, from a specific location and on agreed payment terms. The selling price in all of our customers’ orders has been previously negotiated and agreed to including any applicable discount prior to receiving the customer’s purchase order. The stated unit price in the customer’s order has already been determined and is fixed at the time of invoicing. The Company recognizes product revenue when the Company’s performance obligations as per the terms in the customers purchase order have been fully satisfied, specifically, when the specified product and quantity ordered has been manufactured and shipped pursuant to the customers requested ship window, when the sales price as detailed in the purchase order is fixed, when the product title and risk of loss for that order has passed to the customer, and collection of the invoice is reasonably assured. This means that the product ordered and to be shipped has gone through quality assurance inspection, customs and commercial documentation preparation, the goods have been delivered, title transferred to the customer and confirmed by a signed cargo receipt or bill of lading. Only at the time of shipment when all performance obligations have been satisfied will the judgement be made to invoice the customer and complete the sales contract. The Company may enter into a licensing agreement with globally recognized companies, that allows the Company to market products under a licensed brand to retailers for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage of licensed product revenue to the licensor in order to market the licensed product. The Company expenses license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale is recorded. These costs are recorded within sales and marketing expenses. The following table presents net revenue by geographic location which is recognized at a point in time: For the Year Ended For the Year Ended Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 2,066,519 75 % $ 11,218,714 90 % Lighting Products-International 703,839 25 % 1,185,731 10 % Total Revenue $ 2,770,358 100 % $ 12,404,445 100 % Customer orders received are not long-term orders and are typically shipped within six months of the order receipt, but certainly within a one-year period. Our payment terms may vary by the type of customer, the customer’s credit standing, the location where the product will be picked up from and for international customers and which country their corporate office is located. The time between invoicing date and when payment is due may vary between 30 days and 90 days depending on the customer type. To ensure there are no payment issues, overseas customers or new customers may be required to provide a deposit or full payment before the order is delivered to the customer. The Company selectively supports retailer’s initiatives to maximize sales of the Company’s products on the retail floor or to assist in developing consumer awareness of new products launches, by providing marketing fund allowances to the customer. The Company recognizes these incentives at the time they are offered to the customers and records a credit to their account with an offsetting charge as either a reduction to revenue, increase to cost of sales, or marketing expenses depending on the type of sales incentives. Sales reductions for anticipated discounts, allowances and other deductions are recognized during the period the related revenue is recorded. The reduction of accrued allowances is included in net revenues and amounted to $341.2 thousand and $1.18 million for the years ended December 31, 2020 and 2019, respectively. Warranties The Company provides the end user with limited rights of return as a consumer assurance warranty on all products sold, stipulating that the product will function properly for the warranty period. The warranty period for all products is one year from date of consumer purchase. Certain retail customers may receive an off-invoice based discount such as a defective/warranty allowance, that will automatically reduce the unit selling price at the time the order is invoiced. This allowance will be used by the retail customer to defray the cost of any returned units from consumers and therefore negate the need to ship defective units back to the Company. Such allowances are charged to cost of sales at the time the order is invoiced. For those customers that do not receive a discount off-invoice, the Company recognizes a charge to cost of sales for anticipated non-conforming returns based upon an analysis of historical product warranty claims and other relevant data. We evaluate our warranty reserves based on various factors including historical warranty claims assumptions about frequency of warranty claims, and assumptions about the frequency of product failures derived from our reliability estimates. Actual product failure rates that materially differ from our estimates could have a significant impact on our operating results. Product warranty reserves are reviewed each quarter and recognized at the time we recognize revenue. The following table summarizes the changes in the Company’s product warranty liabilities which are included in accounts payable and accrued liabilities in the accompanying December 31, 2020 and 2019 balance sheets: December 31, December 31, 2020 2019 Balance at the beginning of the year $ 247,850 $ 212,495 Amount accrued 46,322 180,797 Payments and credits (237,707 ) (145,442 ) Balance at year-end $ 56,465 $ 247,850 Advertising and Promotion Advertising and promotion costs, including advertising, public relations, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expense was $214,856 and $254,283 for the years ended December 31, 2020 and 2019, respectively. Product Development Our research and development team located in Hong Kong working with our designated factories, are responsible for the design, development, testing, and certification of new product releases. Our engineering efforts support product development across all products, as well as product testing for specific overseas markets. All research and development costs are charged to results of operations as incurred. For the year ended December 31, 2020 and 2019, product dev |
Concentrations Of Credit Risk A
Concentrations Of Credit Risk And Economic Dependence | 12 Months Ended |
Dec. 31, 2020 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk and Economic Dependence | NOTE 2 - CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE Financial instruments that potentially subject the Company to credit risk consist principally of cash and accounts receivable. The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. Cash The Company at times has cash with its financial institution in excess of Federal Deposit Insurance Corporation ("FIDC") insurance limits. The Company places its cash with high credit quality financial institutions which minimize the risk of loss. To date, the Company has not experienced any such losses. As of December 31, 2020, the Company has approximately $431.3 thousand in excess of FIDC insurance limits. Accounts Receivable The Company grants credit to its customers, substantially all of whom are retail establishments located throughout the United States and their international locations. The Company typically does not require collateral from customers. Credit risk is limited due to the financial strength of the customers comprising the Company’s customer base and their dispersion across different geographical regions. The Company monitors exposure of credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. Major Customers The Company had two customers who comprised 63% and 26% of net revenue during the year ended December 31, 2020, and 83% and 15% of net revenue during the year ended December 31, 2019, respectively. The loss of these customers would adversely impact the business of the Company. For the years ended December 31, 2020 and 2019, approximately 25% and 10% respectively, of the Company’s net revenue resulted from international sales. As of December 31, 2020, and 2019, approximately $120.1 thousand or 100% and approximately $13.5 thousand or 100% of accounts receivable, respectively, was from one customer. Major Customers Net Revenue % Net Accounts Receivable Year Ended December 31, Year Ended December 31, 2020 2019 2020 2019 Customer A 63 % 15 % $ - $ - Customer B 26 % 83 % 120,064 13,459 Total 89 % 98 % $ 120,064 $ 13,459 Major Vendors The Company had two vendors from which it purchased 68%, and 23% , respectively, of merchandise sold during the year ended December 31, 2020, and one vendor from which it purchased 97% of merchandise sold during the year ended December 31, 2019. The loss of this supplier could adversely impact the business of the Company. As of December 31, 2020, and 2019, approximately 47% and 37%, respectively, of accounts payable were due to one vendor. Purchases % Accounts Payable Year Ended December 31, Year Ended December 31, 2020 2019 2020 2019 Vendor A 68 % 97 % $ - $ 100,705 Vendor B 23 % - % 114,870 - Total 91 % 97 % $ 114,870 $ 100,705 |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 3 – NOTES PAYABLE Sterling National Bank On September 8, The credit facility at Sterling National Bank was up for renewal. On July 16, 2020, the Company received a Termination of Factoring Agreement letter advising that the Factoring Agreement would be terminated effective September 30, 2020. The bank advised that as the existing facility had not been used in recent years and with the uncertainties associated with the resurgence of the COVID-19 pandemic and its potential impact on the retail sector, the bank decided not to renew the Factoring Agreement. The Company requested to terminate the Agreement on July 31, 2020 which was agreed to by the bank. The Company has retained its cash operating accounts at Sterling National Bank. The amount due to Sterling National Bank was zero at December 31, 2019. For the year ended December 31, 2020 and 2019, the processing fees associated with the agreement were $3,307 and $40,006, respectively. The Company has been in discussions with alternate sources of funding, that could provide funding options that are more suitable to the e-commerce business model that the Company is transitioning into. The borrowing costs associated with such financing, are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future or that we will secure affordable funding. The Company, through Sterling National Bank, applied for a loan under the Paycheck Protection Program (“PPP”). The PPP was enacted on March 27, 2020 as part of the CARES Act and provides for loans for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. On May 11, 2020, the Company received loan proceeds in the amount of $89,600.The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP forgiveness rules. Under the Small Business Administration (“SBA”) and U.S. Treasury Department guidelines issued in May 2020, a borrower could apply for the forgiveness of the loans by filing SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application which the Company submitted to Sterling National Bank on September 16, 2020, which was accepted by the bank and processed to the SBA for final review and approval. On October 30, 2020, the SBA notified the Company that the PPP loan principal of $89,600 and $428 of accumulated interest had been fully forgiven and has been recorded in Other Income on the Consolidated Statement of Operations for the year ended December 31, 2020. On December 27, 2020, the U.S. administration approved the Consolidated Appropriations Act, 2021.This second stimulus package provided aid to eligible small businesses through a second round of PPP loans (”PPP2”). Like the initial PPP program and provides for loans for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees during the eight-week period. On January 21, 2021, the Company submitted a PPP2 loan application for $139,350 through our bank’s loan processor for consideration by the SBA and is still pending approval. The unforgiven portion of the PPP2 loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. If approved, the Company will use the proceeds for purposes consistent with the PPP forgiveness rules. Under the Small Business Administration (“SBA”) and U.S. Treasury Department, a borrower could apply for the forgiveness of the loans by filing SBA Form 3508, Paycheck Protection Program Loan Forgiveness. |
Notes And Loans Payable To Rela
Notes And Loans Payable To Related Parties | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Notes And Loans Payable To Related Parties | NOTE 4 – NOTES AND LOANS PAYABLE TO RELATED PARTIES Notes Payable to Officers, Directors and Related Parties For the years ended December 31, 2020 and 2019, there have been no loan transactions with a Company Officer, Director or related parties and the Company had $0 notes payable to officers, directors and related parties. On December 31, 2020, the Board of Directors approved and authorized James McClinton, the Company’s Chief Financial Officer to sign a Loan Agreement with Directors Stewart Wallach and Jeff Postal as joint lenders (the “Lenders”) whereby Lenders will make a maximum of Seven Hundred and Fifty Thousand Dollars and No Cents ($750,000) (principal) available as a credit line to the Company for working capital purposes (see Note 8). |
Commitments And Contingencies
Commitments And Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 5 – COMMITMENTS AND CONTINGENCIES Operating Leases The Company has operating lease agreements for offices in Fort Lauderdale, Florida and in Hong Kong, expiring at varying dates. The Company’s principal executive office is located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. Effective February 1, 2017, the Company renewed the office lease for 3 years ending January 31, 2020, with a base annual rent of $92,256 and with a total rent expense of $281,711 through the term of the agreement. Under the lease agreement, Capstone was responsible for a portion of common area maintenance charges and any other utility consumed in the leased premises. On May 15, 2018, the Company entered into a lease agreement with the previous landlord to provide for a premise’s relocation, lease termination and new sublease agreement. Under the agreement the Company relocated its principal executive offices located at 350 Jim Moran Blvd, Suite 120, Deerfield Beach, Florida 33442 to 4,694 square feet of office space on the second floor of 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. The original lease terminated on the relocation date, being July 1, 2018, and the parties proceeded under the terms of the sublease which expired on January 31, 2020. The base annual rent in the sublease remained at the same rate as the previous agreement until January 31, 2020. At the expiration of the sublease, the Company had the option to accept the prime lease with another 3 years renewal and with an option to renew for an additional 5-year period. If the Company decided to further extend the sublease after January 31, 2020, the Company would be subject to the terms and conditions of the prime lease. The base monthly rent was $7,312 to January 31, 2019 and then base rent would be $7,514 until January 31, 2020 which includes an estimate for portion of the common area maintenance. On May 9, 2019, per the terms of the lease agreement, the current landlord was notified of the Company’s intent to take over the prime lease. Effective November 1, 2019, the Company entered a new prime operating lease with the landlord “431 Fairway Associates, LLC” ending June 30, 2023, for the Company’s executive offices located on the second floor of 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441 with an annualized base rent of $70,104 and with a base rental adjustment of 3% commencing July 1, 2020 and on July 1 st The Company's rent expense is recorded on a straight-line basis over the term of the lease. The rent expense for the year ended December 31, 2020 and 2019 amounted to $165,706 and $100,616, respectively. The rent increase in the year ended December 31, 2020 resulted from the Company entering a new lease as the prime lessor with the base rent much higher than the previous landlord’s lease agreement. At the commencement date of the new office lease, the Company recorded a right-of-use asset and lease liability under ASU 2016-02, Topic 842. Supplemental balance sheet information related to leases as of December 31, 2020 is as follows: Assets Operating lease - right-of-use asset $ 158,504 Liabilities Current Current portion of operating lease $ 63,307 Noncurrent Operating lease liability, net of current portion $ 107,690 Supplemental statement of operations information related to leases for the year ended December 31, 2020 is as follows: Operating lease expense as a component of other general and administrative expenses $ 69,837 Supplemental cash flow information related to leases for the year ended December 31, 2020 is as follows: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow paid for operating lease $ 128,760 Lease term and Discount Rate Weighted average remaining lease term (months) Operating lease 30 Weighted average Discount Rate Operating lease 7 % Scheduled maturities of operating lease liabilities outstanding as of December 31, 2020 are as follows: Year Operating Lease 2021 $ 73,290 2022 75,492 2023 38,304 Total Minimum Future Payments 187,086 Less: Imputed Interest 16,089 Present Value of Lease Liabilities $ 170,997 Capstone International Hong Kong Ltd, (CIHK), entered into a lease agreement for office space at 303 Hennessy Road, Wanchai, Hong Kong. The original agreement which was effective from February 17, 2014 has been extended various times. On August 17, 2019, the lease was further extended with a base monthly rate of $5,100 for six months until February 16, 2020. As the premises was no longer required as the employees were working remotely from their homes, the Company decided not to renew and allowed this lease to expire. CIHK entered into a six-month rental agreement effective from December 1, 2016 for a showroom space at 3F, Wing Kin Industrial Building, 4-6 Wing Kin Road, Kwai Chung, NT, Hong Kong. This agreement has been extended various times. The lease with a base monthly rent of $1,290 expired August 16, 2019 and was further renewed for six-months expiring on February 16, 2020. Effective February 17, 2020, the Company entered a six-month lease expiring on September 30, 2020, with a base rate of $1,285 per month. To further reduce costs, effective September 30, 2020 the Consulting Agreements On July 1, 2015, the Company entered into a consulting agreement with George Wolf, whereby Mr. Wolf was paid $10,500 per month through December 31, 2015 increasing to $12,500 per month from January 1, 2016 through December 31, 2017. On January 1, 2018, the agreement was further amended, whereby Mr. Wolf was paid $13,750 per month from January 1, 2018 through December 31, 2018. On January 1, 2019, the agreement was further amended, whereby Mr. Wolf was paid $13,750 per month from January 1, 2019 through December 31, 2020. Effective September 1, 2020 through December 31, 2020, payment for fifty percent or $6,875 of the monthly consulting fee or approximately $27,500 for the effective period, was deferred until 2021. The agreement can be terminated upon 30 days' notice by either party. The Company may, in its sole discretion at any time convert Mr. Wolf to a full-time Executive status. The annual salary and term of employment would be equal to that outlined in the consulting agreement. Employment Agreements On February 5, 2020, the Company entered into a new Employment Agreement with Stewart Wallach, whereby Mr. Wallach will be paid $301,521 per annum. The initial term of this new agreement began February 5, 2020 and ends February 5, 2023. The parties may extend the employment period of this agreement by mutual consent with approval of the Company's Board of Directors, but the extension may not exceed two years in length. On February 5, 2020, the Company entered into a new Employment Agreement with James McClinton, whereby Mr. McClinton will be paid $191,442 per annum. The term of this new agreement began February 5, 2020 and ends February 5, 2022. Effective September 1, 2020 through December 31, 2020, payments equivalent to fifty percent of both Mr. Wallach and Mr. McClinton’s salary or approximately $48,707 and $30,925, respectively, will be deferred until 2021. There is a common provision in both Mr. Wallach and Mr. McClinton's employment agreements, if the officer's employment is terminated by death or disability or without cause, the Company is obligated to pay to the officer's estate or the officer, an amount equal to accrued and unpaid base salary as well as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal to (a) the sum of twelve (12) months base salary at the rate the Executive was earning as of the date of termination and (b) the sum of "merit" based bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by the Company shall be paid from a normal payroll account on a bi-weekly basis in accordance with the normal payroll policies of the Company. The amount owed by the Company to the Executive, from the effective Termination date, will be payout bi-weekly over the course of the year but at no time will be no more than twenty (26) installments. The Company will also continue to pay the Executive's health and dental insurance benefits for 6 months starting at the Executives date of termination. If the Executive had family health coverage at the time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive's severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment. The following table summarizes potential payments upon termination of employment: Salary Severance Bonus Severance Gross up Taxes Benefit Compensation Grand Total Stewart Wallach $ 301,521 $ - $ 12,600 $ 6,600 $ 320,721 Gerry McClinton $ 191,442 $ - $ 11,000 $ 6,600 $ 209,042 Directors Compensation On May 31, 2019, the Company approved that effective on June 1, 2019, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. On May 31, 2019, the Company also approved that the independent directors would be offered effective from June 1, 2019, the opportunity to participate as a non-employee in the Company’s Health Benefit Plan, subject to compliance with all plan participation requirements and on acceptance into the plan the director will be responsible to pay 100% of their plan’s participation cost. On June 10, 2020, the Company approved that effective on August 1, 2020 until August 1, 2021, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. Licensing Agreements Under a February 4, 2015 Licensing Agreement with a floorcare company, Company markets home lighting products under the licensed brand of the floorcare company, to discount retailers, warehouse clubs, home centers, on-line retailers and other retail distribution channels in the U.S., Canada and Mexico. The initial term of the agreement was for 3 years. The Licensing Agreement did not have a guaranteed royalty stipulation. On December 29, 2016, the Company finalized the first amendment to the February 4, 2015 Licensing Agreement with the floorcare company in which the initial term was extended through February 3, 2020 and additional renewal terms and periods were also finalized. During this initial extended period through February 3, 2020, if the Company achieved net sales of $5,000,000, then the Licensing Agreement would automatically be extended 2 years until February 3, 2022 and if during this second extended period the Company achieved net sales of $5,000,000, then the Licensing Agreement would automatically be further extended 2 years until February 3, 2024. This license amendment also added an additional product category. On April 12, 2018, the Company finalized the second amendment to the February 4, 2015 Licensing Agreement in which the license was further expanded to add an additional product category. As the Company did not achieve the stated net sales volume for the renewal period, the License expired on February 3, 2020. Royalty expense related to this Licensing Agreement for the years ended December 31, 2020 and 2019, was $0. Public Relations Agreement On September 27, 2018, the Company executed a public relations services agreement with Max Borges Agency, (“MBA”), a full – service public relations and communications agency with offices in Miami and San Francisco. The Company entered into the Agreement to obtain assistance from a nationally recognized firm, specializing in the development of product branding, marketing and launching of technology products. The agreement was effective on October 1, 2018 with an initial 180-day term, which either party can cancel with 60 days advanced notice in writing on or after the 120 th During 2019 both Companies agreed to temporarily pause the MBA agreement for specific months and in May 2019 the engagement restarted with the same statement of work and terms as originally agreed. On January 21, 2020, the Company provided MBA with 60 days cancellation notice and the agreement ended March 31, 2020. During the three months ended March 31, 2020, the Company incurred $33,750 of services fees and $952 of subscription fees. As the agreement has been cancelled there will be no further charges for this project. Legal Matters The Company is not a party to any other pending or threatened legal proceedings and, to the best our knowledge, no such action by or against us has been threatened. From time to time, we are subject to legal proceedings and claims that arise in the ordinary course of our business. Although occasional adverse decisions or settlements may occur in such routine lawsuits, we believe that the final disposition of such routine lawsuits will not have material adverse effect on its financial position, results of operations or status as a going concern. |
Stock Transactions
Stock Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Stock Transactions | NOTE 6 - STOCK TRANSACTIONS Options In 2005, the Company authorized the 2005 Equity Plan that made available shares of common stock for issuance through awards of options, restricted stock, stock bonuses, stock appreciation rights and restricted stock units. On May 2, 2017, the Company’s Board of Directors amended the Company’s 2005 Equity Incentive Plan to extend the Plan’s expiration date from December 31, 2016 to December 31, 2021. On May 31, 2019, the Company granted 100,000 stock options each to two directors of the Company for their participation as members of the Audit Committee and Nominating and Compensation Committee, and 10,000 stock options to the Company Secretary. The Director options have a strike price of $.435 with an effective date of August 6, 2019 and will vest on August 5, 2020 and have a term of 5 years. The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2019 and will vest on August 5, 2020 and have a term of 10 years. On June 10, 2020, the Company granted 100,000 stock options each to two directors of the Company for their participation as members of the Audit Committee and Nominating and Compensation Committee, and 10,000 stock options to the Company Secretary. The Director options have a strike price of $.435 with an effective date of August 6, 2020 and will vest on August 5, 2021 and have a term of 5 years. The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2020 and will vest on August 5, 2021 and have a term of 10 years. As of December 31, 2020, there were 990,000 stock options outstanding, and 780,000 stock options vested. The stock options have a weighted average expense price of $0.435. Stock options were issued under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933. The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the stock options granted. The following weighted average assumptions were used in the fair value calculations during the year ended December 31, 2019: Risk free interest rate – 1.53 – 1.73% Expected term – 5 to 10 years Expected volatility of stock – 500% Expected dividend yield – 0% Suboptimal Exercise Behavior Multiple – 2.0 Number of Steps – 150 The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the stock options granted. The following weighted average assumptions were used in the fair value calculations during the year ended December 31, 2020: Risk free interest rate – 0.21% – 0.55% Expected term – 5 to 10 years Expected volatility of stock – 500% Expected dividend yield – 0% Suboptimal Exercise Behavior Multiple – 2.0 Number of Steps – 150 The risk-free interest rate is based on rates of treasury securities with the same expected term as the options. The Company uses the expected term of employee and director stock-based options. The Company is utilizing an expected volatility based on a review of the Company’s historical volatility, over a period of time, equivalent to the expected life of the instrument being valued. The expected dividend yield is based upon the fact that the Company has not historically paid dividends and does not expect to pay dividends in the near future. For the years ended December 31, 2020 and 2019, the Company recognized stock-based compensation expense of $28,068 and $40,707, respectively, related to these stock options. Such amounts are included in compensation expense in the accompanying consolidated statements of income. A further compensation expense expected to be $10,015 will be recognized for these options in 2021. The following table sets forth the Company’s stock options outstanding as of December 31, 2020 and 2019 and activity for the years then ended. Shares Weighted Average Exercise Price Weighted Average Fair Value Weighted Average Remaining Contractual Term (Years) Intrinsic Value Outstanding, January 1, 2019 970,001 $ 0.435 $ 0.308 2.77 $ (272,570 ) Granted 210,000 0.435 0.210 4.84 (64,050 ) Exercised - - - - - Forfeited/expired (180,001 ) 0.435 0.283 - 54,900 Outstanding,December 31, 2019 1,000,000 0.435 0.284 2.88 (305,000 ) Granted 210,000 0.435 0.080 6.27 - Exercised - - - - - Forfeited/expired (220,000 ) 0.435 0.179 - 83,820 Outstanding,December 31, 2020 990,000 $ 0.435 $ 0.264 3.07 - Vested/exercisable at December 31, 2019 790,000 $ 0.435 $ 0.314 2.36 $ (240,950 ) Vested/exercisable at December 31, 2020 780,000 $ 0.435 $ 0.314 2.60 $ - The following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 Plan: Exercise Price Options Outstanding Remaining Contractual Life in Years Average Exercise Price Number of Options Currently Exercisable $ .435 10,000 0.50 $ .435 10,000 $ .435 10,000 3.00 $ .435 10,000 $ .435 10,000 4.50 $ .435 10,000 $ .435 10,000 4.60 $ .435 10,000 $ .435 100,000 0.60 $ .435 100,000 $ .435 10,000 5.60 $ .435 10,000 $ .435 200,000 1.60 $ .435 200,000 $ .435 10,000 6.60 $ .435 10,000 $ .435 200,000 2.60 $ .435 200,000 $ .435 10,000 7.60 $ .435 10,000 $ .435 200,000 3.60 $ .435 200,000 $ .435 10,000 8.60 $ .435 10,000 $ .435 200,000 4.60 $ .435 - $ .435 10,000 9.60 $ .435 - Adoption of Stock Repurchase Plan On August 23, 2016, the Company's Board of Directors authorized the Company to implement a stock repurchase plan for up to $750,000 worth of shares of the Company's outstanding common stock. The stock purchases can be made in the open market, structured repurchase programs, or in privately negotiated transactions. The Company has no obligation to repurchase shares under the authorization, and the timing, actual number and value of the shares which are repurchased will be at the discretion of management and will depend on several factors including the price of the Company's common stock, market conditions, corporate developments and the Company's financial condition. The repurchase plan may be discontinued at any time at the Company's discretion. On December 21, 2016, the Company's Board of Directors approved an extension of the Company's stock repurchase plan through December 31, 2017, subject to an earlier termination at the discretion of the Company's Board of Directors. On February 13, 2017, as authorized under the Company's stock repurchase plan, the Company repurchased 1,000,000 shares of Company common stock from Involve, LLC., under the Option Agreement dated June 27, 2016, at an exercise price of $.15 per share. On May 1, 2017, as authorized under the Company's stock repurchase plan, the Company repurchased 666,667 shares of Company common stock from Involve, LLC., under the Option Agreement dated June 27, 2016, at an exercise price of $.15 per share. On May 2, 2017, the Company's Board of Directors authorized at the Company's discretion to either retain repurchased shares in the treasury or to retire the repurchased shares and these shares were retired on June 1, 2017. On December 15, 2017, the Company's Board of Directors approved an extension of the Company's stock repurchase plan for up to $750,000 through June 30, 2018. On August 29, 2018, the Company’s Board of Directors approved a further extension of the Company’s stock repurchase plan through August 31, 2019. The Board of Directors also approved an increase of the maximum amount of aggregate funding available for possible stock repurchases under the stock repurchase program from $750,000 to $1,000,000 during the renewal period. On August 29, 2018, the Company’s Board authorized and directed the Company’s management to establish a trading account at a brokerage firm for the Company to conduct open market purchases of the Company’s Common Stock in accordance with the terms and conditions of the Company’s current stock repurchase program and to fund said account from available cash of the Company but not to exceed such amount that would cause the Company to be unable to pay its bona fide debts. On December 19, 2018, Company entered into a Purchase Plan pursuant to Rule 10b5-1 under the Exchange Act, with Wilson Davis & Co., Inc., a registered broker-dealer. Under the Purchase Plan, Wilson Davis & Co., Inc will make periodic purchases of up to an aggregate of 750,000 shares at prevailing market prices, subject to the terms of the Purchase Plan. On May 31, 2019, the Company’s Board of Directors approved a further extension of the Company’s stock repurchase plan through August 31, 2020. The Board of Directors also approved that the maximum amount of aggregate funding available for possible stock repurchases under the stock repurchase program remained at $1,000,000 during the renewal period. On September 23, 2019, the Company signed a revised stock Purchase Plan to reflect an extension of the plan to repurchase up to an aggregate of 750,000 shares at prevailing market prices, subject to the terms of the Purchase Plan. On March 30, 2020, Wilson Davis & CO., Inc., advised the Company that 750,000 of the Company’s Common Stock had been repurchased to complete the authorized Purchase Plan. On June 10, 2020, the Company’s Board of Directors approved a further extension of the Company’s stock repurchase plan through August 31, 2021. Since the Board of Director approval there have been no further repurchase of the Company’s Common Stock during 2020 and further Stock repurchases have been placed on hold in order to conserve cash during the COVID-19 pandemic. As of December 31, 2020 a total of 750,000 of the Company’s Common Stock has been repurchased at a total cost of $107,740. For the year ended December 31, 2020 and 2019 respectively, 283,383 and 466,617 Common shares were repurchased at a cost of $36,333 in 2020 and $71,407 in 2019. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 7 - INCOME TAXES As of December 31, 2020, the Company had federal and state net operating loss carry forwards of approximately $1,044,000 and $3,500,000, respectively. The federal net operating loss is available to the Company indefinitely and available to offset up to 80% of future taxable income each year. The net deferred tax liability as of December 31, 2020 and 2019 was $260,000 and $0, respectively, and is reflected in long-term liabilities in the accompanying consolidated balance sheets. Tax benefit for income taxes differs from the amount computed using the federal US statutory income tax rate as follows: Year Ended December 31, 2020 2019 Tax benefit at U.S. statutory rate $ (629,108 ) $ (88,547 ) State income taxes, net of federal benefit (86,744 ) (13,260 ) Tax effect of foreign operations 119,558 (3,801 ) Non-deductible items 57 792 NOL carryback rate difference (329,618 ) - Valuation allowance 345,397 89.959 Other (31,520 ) (76 ) Income tax benefit $ (611,978 ) $ (14,933 ) The income tax benefit for the years ended December 31, 2020 and 2019 consists of: 2020 2019 Current: Federal $ (874,000 ) $ - State 2,000 1,000 Foreign - (4,000 ) Deferred: Federal 231,000 (11,000 ) State 29,000 (1,000 ) Income Tax Benefit $ (612,000 ) $ (15,000 ) 2020 2019 Deferred tax assets: Net operating loss $ 343,000 $ 416,000 Liabilities and reserves 28,000 25,000 Property and equipment and inventory (1,000 ) 6,000 Stock options 62,000 85,000 Business interest expense limitation 1,000 - Right of use asset 3,000 - 436,000 532,000 Deferred tax liabilities: Gain/loss on disposal (9,000 ) (9,000 ) Intangible assets (251,000 ) (433,000 ) Valuation allowance (436,000 ) (90,000 ) (696,000 ) (532,000 ) Net deferred tax assets and liabilities $ (260,000 ) $ - Deferred tax assets are to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company's history of cumulative net losses incurred and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2020 and 2019. Since indefinite-lived assets cannot be used as a source of taxable income to support the realization of deferred tax asset, a valuation allowance was recorded against the deferred tax assets, and a net deferred tax liability or naked credit of approximately $260,000 is presented on the company’s balance sheet. The Company's valuation allowance increased by $345,397. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 8 - SUBSEQUENT EVENTS Notes Payable to Officers, Directors and Related Parties On January 4, 2021, the Company entered a Loan Agreement with Directors Stewart Wallach and Jeff Postal as joint lenders (the “Lenders”) whereby Lenders will make a maximum of Seven Hundred and Fifty Thousand Dollars and No Cents ($750,000) (principal) available as a credit line to the Company for working capital purposes. As requested by the Company, funds will be advanced by the Lenders in tranches which must be at least for an amount of $25,000. The term of the loan starts January 4, 2021 and ends June 30, 2021 (“Initial Period’). The Company may extend the Initial Period for an additional six consecutive months, ending December 31, 2021, under the same terms and conditions of the Initial Period, by providing written notice of the election to extend to the Lenders prior to the expiration of the Initial Period. The Company may borrow and reborrow under the Agreement up to $750,000 and prepay wholly or partially the unpaid principal amount at any time and do so without pre-pay penalty or charge. The unpaid principal amount and all accrued interest is due and payable in full at the end of the Initial Period or expiration of the extended date, being December 31, 2021 (the “Maturity Date”), in a single lump sum balloon payment. The Company may unilaterally extend the Maturity Date for sixty days upon written notice delivered to Lenders on or prior to the Maturity Date. Interest shall accrue on the unpaid balance of all advances at a simple annual interest rate of One Percent (1%) based on a 360-day year and will be due and payable in full, in the single lump sum payment on the Maturity Date. The Company will provide the Lenders with a completed and signed promissory note for each advance funded, within 3 business days after receipt of the amount loaned. In consideration for the Lenders providing the loan under this Agreement for the Initial Period and agreeing to a below market rate of interest, and as payment of a finance fee for the loan on an unsecured basis, the Company shall issue to the Lenders the following securities 7,500 shares of the Company’s Series B-1 Convertible Preferred Stock (“Preferred Shares”) issued to each Lender. The Preferred Shares shall have the appropriate restrictive legends. Each Preferred Share converts into 66.66 shares of Common Stock at option of Lender. If the Company elects to extend the Initial Period for a further 6 consecutive months, the Company must issue to the Lenders, 500,000 shares of the Company’s common stock, $0.0001 par value per share, issued to each Lender. The Company will cause a stock certificate to be issued to each Lender with the appropriate restrictive legends. As of the filing date of this report there have been no proceeds received by the Company from this loan facility. Consulting Agreements On January 1, 2021, the sales operations consulting agreement with George Wolf, was further extended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2021 through December 31, 2021. Effective January 1, 2021 through March 31, 2021, payment for fifty percent or $6,875 of the monthly consulting fee or approximately $20,625 for the effective period, will be deferred until later in 2021. Employment Agreements Effective January 1, 2021 through March 31, 2021, compensation payments equivalent to fifty percent of both Mr. Wallach and Mr. McClinton’s salary or approximately $40,589 and $25,771, respectively, will be deferred until later in 2021. Liquidity and Going Concern On January 4, 2021, the Company entered a $750,000 working capital loan agreement with Directors, Stewart Wallach and Jeffrey Postal. The term of the loan started January 4, 2021 and ends June 30, 2021 (“Initial Period’). The Company may extend the Initial Period for an additional six consecutive months, ending December 31, 2021, under the same terms and conditions of the Initial Period, by providing written notice of the election to extend to the lenders prior to the expiration of the Initial Period. The Company may borrow and reborrow under the agreement up to $750,000 and prepay wholly or partially the unpaid principal amount at any time and do so without pre-pay penalty or charge. The unpaid principal amount and all accrued interest is due and payable in full at the end of the Initial Period or expiration of the extended date, being December 31, 2021 (the “Maturity Date”). Income Taxes As of December 31, 2020, the Company had an income tax refundable of approximately $861 thousand of which approximately $576 thousand income tax and $10.4 thousand of interest was refunded on February 3, 2021. |
Organization And Summary Of S_2
Organization And Summary Of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Principles of consolidation | Principles of Consolidation The consolidated financial statements for the years ended December 31, 2020 and 2019 include the accounts of the parent entity and its wholly-owned subsidiaries. All material intra-entity transactions and balances have been eliminated in consolidation. This summary of accounting policies for Capstone Companies, Inc. (“CAPC”), a Florida corporation (formerly, “CHDT Corporation”) and its wholly-owned subsidiaries (collectively referred to as the “Company”, “we”, “our” or “us”), is presented to assist in understanding the Company's consolidated financial statements. The accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the consolidated financial statements. |
Organization and Nature of Business | Organization and Nature of Business Capstone Companies, Inc. is headquartered in Deerfield Beach, Florida. On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., (“ CAPI”). CAPI was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling low technology consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of CAPI’s Common Stock, and recorded goodwill of $1,936,020. The primary operating subsidiary is CAPI, which is located in the principal executive offices of the Company. On June 6, 2012, the Company amended its charter to change its name from CHDT Corporation to CAPSTONE COMPANIES, INC. This name change was effective as of July 6, 2012, for purposes of the change of its name on the OTC Bulletin Board. With the name change, the trading symbol was changed to CAPC. On April 13, 2012, the Company established a wholly owned subsidiary in Hong Kong, named Capstone International Hong Kong Ltd (“CIHK”) which provides support services such as engineering, new product development, product sourcing, factory certification and compliance, product price negotiating, product testing and quality control and ocean freight logistics for the Company’s other subsidiaries. CIHK is also engaged in selling the Company’s products internationally. Since the beginning of fiscal year 2007, the Company through CAPI has been primarily engaged in the business of developing, marketing, and selling home LED products (“Lighting Products”) through national and regional retailers in North America and in certain overseas markets. The Company’s products are targeted for applications such as home indoor and outdoor lighting and have different functionalities to meet consumer’s needs. The Company has developed a smart interactive mirror for residential use as a variant line for its lighting products, which was launched at the Consumer Electronics Show in early 2020 but its release to the retail market has been delayed due to product development delays at our suppliers, resulting from the impact of COVID-19. The development of the smart interactive mirror or “Smart Mirrors” is part of the Company’s strategic effort to find new product lines to replace or supplement existing products that are nearing or at the end of their product life cycle. These products are offered either under the Capstone brand or licensed brands. The Company’s products are typically manufactured in Thailand and China by contract manufacturing companies. As of the date of these consolidated financial statements, the Company’s future product development effort is focused on the Smart Mirrors category because the Company believes, based on Company’s management understanding of the industry, the Smart Mirrors have the potential for greater profit margin than the Company’s historical LED consumer products. Technological developments and changes in consumer tastes could alter the perceived potential and future viability of Smart Mirrors as a primary product. The Company may change its product development strategies and plans as economic conditions and consumer tastes change, which condition and changes may be unforeseeable by the Company or may be beyond the ability of the Company to timely or at all adjust its strategic and product development plans. The Company’s operations consist of one reportable segment for financial reporting purposes: Lighting Products. |
Effects of COVID-19 | Effects of COVID-19 During the year ended December 31, 2020, the outbreak and global spread of COVID-19 pandemic caused significant economic volatility, uncertainty and disruption in our operating environment. We began 2020 in an environment exhibiting strong economic conditions combined with the successful launch of our new product category, the Smart Mirror at the 2020 CES Show. However, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, and the various containment and mitigation measures adopted by governments and institutions globally and in the U.S. began to have a severe economic impact, including causing the U.S. to enter an economic recession. • Placed restrictions on business travel for our employees. • Closed our Corporate offices both in the U.S. and in Hong Kong. • Modified our corporate and division office functions to allow all employees to work remotely. During the months of February and March 2020, the Company’s Chinese suppliers were impacted by the closedown of facilities by local and regional authorities in their efforts to combat the spread of COVID-19. The factory closures delayed shipment of certain orders from the first quarter of 2020 until the second and third quarter 2020. During the end of March 2020, the Company’s Chinese suppliers that had been previously closed started to gradually reopen their factories. Company orders that had been previously delayed because of the close started to ship. These factories are fully functioning, and orders are being produced both in Thailand and in China. CIHK staff have continued to work remotely from home. On March 20, 2020, the Company’s U.S. staff started to work remotely from their homes. With the State of Florida lifting its “Stay at Home” requirement on May 20, 2020, the Corporate office reopened with staff working on a rotating schedule between the office and remotely from home. While all the above-referenced steps were, and some remain, necessary and appropriate in light of COVID-19, they impacted the Company’s ability to operate the business in its ordinary and traditional course. As the result of COVID-19 and the economic uncertainties, our core LED lighting orders declined significantly starting in March 2020 and the Company was unable to expand on the marketing success of the launch of the Smart Mirror at the CES Show in January 2020. As the pandemic spread and federal, state and local government mandated movement restrictions, management maintained its focus on shifting production into Thailand, expansion of the Smart Mirror portfolio, protecting our liquidity and closely managing our cash flows. In the fiscal second and third quarters, 2020, the Company implemented cost controls to mitigate the loss of revenue. The Company took action to reduce expenses, including promotional activities, travel, meetings, and compensation expenses with the elimination of certain positions overseas and the deferment of senior executive compensation and consulting expenses. Our business operations and financial performance for the year ended December 31, 2020 was adversely impacted by the developments discussed above, The Company reported a decrease in net revenue from $12.4 million in 2019 to $2.7 million in 2020, a reduction of approximately $9.7 million. The net loss for the period ended December 31, 2020 was approximately $2.4 million as compared to approximately $891.7 thousand in 2019. With these recurring losses, the cash generated from operations was negatively impacted and the Company utilized approximately $1.9 million of cash during the year ended December 31, 2020. The decrease in net sales for the year was driven by the uncertainty felt by retail buyers as to the continuing impact on the retail market of COVID-19 and its overall long-term negative impact on the U.S. economy. However, the Warehouse Club channel, which includes our customers Costco Wholesale and Sam’s Club, has seen a substantial increase in foot traffic because of the changed buying trend of consumers during the pandemic, which has recently resulted in the resumption of some promotional opportunities. Management believes that with the national distribution of vaccines now occurring, the impact of the pandemic on the general brick and mortar retail market will carry through to mid-2021. As a result of the economic uncertainties caused by the COVID-19 pandemic, during the year ended December 31, 2020, management determined sufficient indicators existed to trigger quarterly goodwill impairment analyses. The total impairment charge for the year ended December 31, 2020 was approximately $623.5 thousand. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, which we refer to as the “CARES Act.” was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOLs”) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. The Company was able to carryback the 2018 and the 2019 NOLs to 2017 tax year and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of $575,645 which was recorded in the first quarter 2020. The Company expects to carryback a portion of its 2020 NOL, for which it recorded a further net benefit of $286,433. In the third quarter 2020, the Company recorded a $21,222 net tax benefit for deferred tax liability adjustment related to goodwill impairment. For the year ended December 31, 2020, the Company has recorded $862,078 in net tax benefits. The CARES Act also provided for the Paycheck Protection Program (“PPP”). On May 11, 2020, the Company received a $89.6 thousand loan under PPP which was processed through Sterling National Bank. The Company filed SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application. On October 30, 2020, the SBA notified the Company that the PPP loan principal of $89,600 and $428 of accumulated interest had been fully forgiven. This forgiveness has been reflected in Other Income on the consolidated statements of operations. |
Liquidity and Going Concern | Liquidity and Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The uncertainty and the continuing negative impact that the COVID-19 disruption could have on the future retail business and consumers’ willingness to visit retail stores, causing reduced consumer foot traffic and consumer spending, could negatively impact the demand for our products or delay future planned promotional opportunities. However, with a successful relaunch of the Smart Mirror portfolio using the online retail platform, the Company may need a purchase order credit line to support increased U.S. domestic inventory to facilitate revenue growth in that category. During the year ended December 31, 2020, the Company used cash in operations of approximately $1.9 million and generated net operating losses of $2.4 million. As of December 31, 2020, the Company has working capital of approximately $1.4 million and an accumulated deficit of $4.5 million. The Company’s cash balance dropped by approximately $1.9 million from $3.1 million as of December 31, 2019 to $1.2 million as of December 31, 2020. As of December 31, 2020, the Company does not have sufficient cash on hand to finance its plan of operations and will need to seek additional capital through debt and/or equity financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern. As discussed above, the overall impact of the COVID-19 pandemic to our business, financial condition, cash flow and results of operations remains uncertain. For example, if any of our major wholesale customers fail to maintain normal operations, our revenue could further decline, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Management believes that with the ongoing national distribution of vaccines, the economic impact of the COVID-19 pandemic in the U.S. will continue through to mid-2021, but ultimately should not impact the Company’s long-term strategy and initiatives. On July 31, 2020, the Company terminated its factoring agreement with Sterling National Bank. The Company has been in discussions with alternate funding sources that offer extensive programs that are more in line with the Company’s future business model, particularly a facility that provides funding options that are suitable for the e-commerce business that the Company is transitioning into. The borrowing costs associated with such financing are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future. In addition, we could seek alternative sources of liquidity, including but not limited to accessing the capital markets, or other alternative financing measures. However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital markets on terms acceptable to us. An economic recession or a slow recovery could adversely affect our business and liquidity. The ongoing impact of the COVID-19 pandemic on the Company’s business and financial performance may also affect the Company’s ability to obtain fundin g. The Company may be able to raise the required additional capital through debt or equity financing. However, the Company can make no assurances that it will be able to raise the required capital, on acceptable terms or at all. Unless the Company succeeds in raising additional capital or successfully increases cash generated from operations, management believes there is substantial doubt about the Company’s ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this report. However, there are compensating factors and actions that are being and have been taken to address these uncertainties, including the following: • The Company has no outstanding debt or other outstanding obligations, outside of normal trade obligations. • The Company has working capital of approximately $1.4 million consisting mostly of cash of $1.2 million. • The Company had an estimated income tax refundable as of December 31,2020 of approximately $861 thousand of which approximately $576 thousand and $10.3 thousand of interest was received on February 3, 2021, (see Note 8). • On July 31, 2020 with the termination of the Sterling National Bank factoring agreement, the Company has been in discussions with alternate funding sources that offers varying programs that are more in line with the Company’s future business model, particularly a facility that provides funding options that are more suitable for the e-commerce business that the Company is transitioning into. • The Company has entered a $750,000 working capital loan agreement effective January 4, 2021 for up to a one year term, (see Note 8). • The Company’s plan is to sell direct to consumers. The funding and cashflow requirements for this business model will require e-commerce funding. The Company has been in discussions with a funding source that provides this option. • The Company has in place a mitigation plan that reduces discretionary expenses, executive managements compensation, and significantly reduces the cost of the Hong Kong operation and also reduces future travel, lodging and show expenses. • Since September 1, 2020 through December 31, 2020 in order to conserve operating cashflow, the Company’s executive management has deferred 50% of their compensation until later in 2021. The compensation deferral has been further extended until March 31, 2021, (see Note 8). |
Accounts Receivable | Accounts Receivable For product revenue, the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivable are recognized at the amount expected to be collected and are not subject to any interest or finance charges. The Company does not have any off-balance sheet credit exposure related to any of its customers. Previously in the factoring agreement with Sterling National Bank, accounts receivable served as collateral when the Company borrowed against its credit facilities. With the termination of the Sterling National Bank factoring agreement, the accounts receivables are unencumbered. As of December 31, 2020, accounts receivable has not been collateralized against debt. As of December 31, 2019, accounts receivable served as collateral when the Company borrowed against its credit facility at that time. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company becomes aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will recognize an allowance against amounts due, and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes an allowance for doubtful accounts based on the length of time the receivables are past due and consideration of other factors such as industry conditions, the current business environment and the Company’s historical payment experience. An allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available. As of both Decembers 31, 2020 and 2019, management determined that accounts receivable are fully collectible. As such, management has not recorded an allowance for doubtful accounts. The following table summarizes the components of Accounts Receivable, net: December 31, December 31, 2020 2019 Trade Accounts Receivables at year end $ 197,166 $ 276,551 Reserve for estimated marketing allowances, cash discounts and other incentives (77,102 ) (263,092 ) Total Accounts Receivable, net $ 120,064 $ 13,459 The following table summarizes the changes in the Company’s reserve for marketing allowances, cash discounts and other incentives which is included in net accounts receivable: December 31, December 31, 2020 2019 Balance at beginning of the year $ (263,092 ) $ (364,894 ) Accrued allowances - ( 89,668 ) Reclassification of allowance from accounts receivable to accounts payable and accrued liabilities 173,426 - Expenditures 12,564 191,468 Balance at year-end $ (77,102 ) $ (263,092 ) Marketing allowances include the cost of underwriting an in store instant rebate coupon or a target markdown allowance on a specific product. Cash discounts represent discounts offered to the retailer off outstanding accounts receivable in order to initiate early payment. During 2020, the Company reclassified an accrued allowance from accounts receivable to accounts payable and accrued liabilities due to the decline in revenues and accounts receivable to offset these credits. The Company could have to pay cash to settle certain marketing allowances and other incentives issued to customers with no outstanding accounts receivable. |
Inventory | Inventory The Company's inventory, which consists of finished LED lighting products for resale by Capstone, is recorded at the lower of cost (first-in, first-out) or net realizable value. The Company writes down its inventory balances for estimates of excess and obsolete amounts. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when the expected realizable value of a specific inventory item falls below its original cost. Management regularly reviews the Company’s investment in inventories for such declines in value. The write-downs are recognized as a component of cost of sales. During the fiscal year 2020 and 2019, inventory write downs were $0 for each year. As of December 31, 2020, and 2019, respectively, the inventory was valued at $8,775 and $24,818. |
Prepaid Expenses | Prepaid Expenses The Company’s prepaid expenses consist primarily of deposits on inventory purchases for future orders as well as prepaid insurance, trade show and subscription expense. As of December 31, 2020 and 2019, respectively, prepaid expenses were $75,622 and $182,782, respectively. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives of the related assets as follows: Useful Life December 31, 2020 December 31, 2019 Computer equipment and software 3-7 years $ 53,819 $ 53,819 Machinery and equipment 3-7 years 119,323 157,267 Furniture and fixtures 3-7 years 6,828 6,828 Less: Accumulated depreciation (125,118 ) (152,265 ) Property and Equipment, Net $ 54,852 $ 65,649 Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. Long-lived assets to be disposed of, if any, are reported at the lower of carrying amount or fair value less cost to sell. No impairment losses were recognized by the Company during 2020 or 2019. Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss. Expenditures for maintenance and repairs are charged to expense as incurred. Major overhauls and betterments are capitalized and depreciated over their estimated economic useful lives. Depreciation and amortization expense was $24,297 and $44,194 for the years ended December 31, 2020 and 2019, respectively. |
Leases | Leases In February 2016, the FASB issued ASU no 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet and disclose key information about the leasing arrangements. The Company adopted the new standard with an effective date of January 1, 2019 on a modified retrospective approach. The Company has elected to take the practical expedient to separate lease and non-lease components for its operating lease. See Note 5 “Operating Leases” for additional disclosures as required by the new standard. |
Goodwill | Goodwill On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation (“Capstone”). Capstone was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of Capstone’s Common Stock, and recorded goodwill of $1,936,020. Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired. Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds its fair value, an impairment loss is recognized. Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company's market capitalization. As a result of the economic uncertainties caused by the COVID-19 pandemic during the year ended December 31, 2020, management determined sufficient indicators existed to trigger the performance of interim goodwill impairment analyses for each reporting quarter. The total impairment charge for the year ended December 31, 2020 was approximately $623.5 thousand. The following table summarizes the changes in the Company’s goodwill asset which is included in the total assets in the accompanying consolidated balance sheets: December 31, December 31, 2020 2019 Balance at the beginning of the period $ 1,936,020 $ 1,936,020 Impairment charges (623,538 ) - Balance at December 31, 2020 $ 1,312,482 $ 1,936,020 With the continuing economic uncertainties caused by the COVID-19 pandemic, the capital markets may continue to have a downturn and adversely affect the Company’s stock price which will require the Company to test its goodwill for impairment in future reporting periods. The Company’s stock is deemed a “penny stock” under Commission rules. The Company estimates the fair value of its single reporting unit relative to the Company’s market capitalization. |
Fair Value Measurement | Fair Value Measurement The accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), “Fair Value Measurements and Disclosures” (ASC 820-10) requires the Company to make disclosures about the fair value of certain of its assets and liabilities. ASC 820-10 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. ASC 820-10 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are as follows: Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3: Significant unobservable inputs. |
Earnings Per Common Share | Earnings Per Common Share Basic earnings per common share is computed by dividing net income(loss) by the weighted average number of shares of common stock outstanding as of December 31, 2020 and 2019. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of December 31, 2020 and 2019, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 990,000 and 1,000,000, respectively. Basic weighted average shares outstanding is reconciled to diluted share outstanding as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 Basic and Diluted weighted average shares outstanding 46,337,198 46,863,467 |
Revenue Recognition | Revenue Recognition The Company generates revenue from developing, marketing and selling consumer lighting products through national and regional retailers. The Company’s products are targeted for applications such as home indoor and outdoor lighting and have different functionalities Capstone currently operates in the consumer lighting products category and is expanding into the Smart Mirror category in the United States and in certain overseas markets. These products may be offered either under the Capstone brand or licensed brands. A sales contract occurs when the customer-retailer submits a purchase order to buy a specific product, a specific quantity, at an agreed-fixed price, within a ship window, from a specific location and on agreed payment terms. The selling price in all of our customers’ orders has been previously negotiated and agreed to including any applicable discount prior to receiving the customer’s purchase order. The stated unit price in the customer’s order has already been determined and is fixed at the time of invoicing. The Company recognizes product revenue when the Company’s performance obligations as per the terms in the customers purchase order have been fully satisfied, specifically, when the specified product and quantity ordered has been manufactured and shipped pursuant to the customers requested ship window, when the sales price as detailed in the purchase order is fixed, when the product title and risk of loss for that order has passed to the customer, and collection of the invoice is reasonably assured. This means that the product ordered and to be shipped has gone through quality assurance inspection, customs and commercial documentation preparation, the goods have been delivered, title transferred to the customer and confirmed by a signed cargo receipt or bill of lading. Only at the time of shipment when all performance obligations have been satisfied will the judgement be made to invoice the customer and complete the sales contract. The Company may enter into a licensing agreement with globally recognized companies, that allows the Company to market products under a licensed brand to retailers for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage of licensed product revenue to the licensor in order to market the licensed product. The Company expenses license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale is recorded. These costs are recorded within sales and marketing expenses. The following table presents net revenue by geographic location which is recognized at a point in time: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 2,066,519 75 % $ 11,218,714 90 % Lighting Products-International 703,839 25 % 1,185,731 10 % Total Revenue $ 2,770,358 100 % $ 12,404,445 100 % We provide our customers with limited rights of return for non-conforming product warranty claims. As a policy, the Company does not accept product returns from customers, however occasionally as part of a customers in store test for new product, we may receive back residual inventory. Customer orders received are not long-term orders and are typically shipped within six months of the order receipt, but certainly within a one-year period. Our payment terms may vary by the type of customer, the customer’s credit standing, the location where the product will be picked up from and for international customers and which country their corporate office is located. The time between invoicing date and when payment is due may vary between 30 days and 90 days depending on the customer type. To ensure there are no payment issues, overseas customers or new customers may be required to provide a deposit or full payment before the order is delivered to the customer. The Company selectively supports retailer’s initiatives to maximize sales of the Company’s products on the retail floor or to assist in developing consumer awareness of new products launches, by providing marketing fund allowances to the customer. The Company recognizes these incentives at the time they are offered to the customers and records a credit to their account with an offsetting charge as either a reduction to revenue, increase to cost of sales, or marketing expenses depending on the type of sales incentives. Sales reductions for anticipated discounts, allowances and other deductions are recognized during the period the related revenue is recorded. The reduction of accrued allowances is included in net revenues and amounted to $341.2 thousand and $1.18 million for the years ended December 31, 2020 and 2019, respectively. |
Warranties | Warranties The Company provides the end user with limited rights of return as a consumer assurance warranty on all products sold, stipulating that the product will function properly for the warranty period. The warranty period for all products is one year from date of consumer purchase. Certain retail customers may receive an off-invoice based discount such as a defective/warranty allowance, that will automatically reduce the unit selling price at the time the order is invoiced. This allowance will be used by the retail customer to defray the cost of any returned units from consumers and therefore negate the need to ship defective units back to the Company. Such allowances are charged to cost of sales at the time the order is invoiced. For those customers that do not receive a discount off-invoice, the Company recognizes a charge to cost of sales for anticipated non-conforming returns based upon an analysis of historical product warranty claims and other relevant data. We evaluate our warranty reserves based on various factors including historical warranty claims assumptions about frequency of warranty claims, and assumptions about the frequency of product failures derived from our reliability estimates. Actual product failure rates that materially differ from our estimates could have a significant impact on our operating results. Product warranty reserves are reviewed each quarter and recognized at the time we recognize revenue. The following table summarizes the changes in the Company’s product warranty liabilities which are included in accounts payable and accrued liabilities in the accompanying December 31, 2020 and 2019 balance sheets: December 31, December 31, 2020 2019 Balance at the beginning of the year $ 247,850 $ 212,495 Amount accrued 46,322 180,797 Payments and credits (237,707 ) (145,442 ) Balance at year-end $ 56,465 $ 247,850 |
Advertising and Promotion | Advertising and Promotion Advertising and promotion costs, including advertising, public relations, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expense was $214,856 and $254,283 for the years ended December 31, 2020 and 2019, respectively. |
Product Development | Product Development Our research and development team located in Hong Kong working with our designated factories, are responsible for the design, development, testing, and certification of new product releases. Our engineering efforts support product development across all products, as well as product testing for specific overseas markets. All research and development costs are charged to results of operations as incurred. For the year ended December 31, 2020 and 2019, product development expenses were $249,879 and $348,745, respectively. |
Shipping and Handling | Shipping and Handling The Company’s shipping and handling costs are included in sales and marketing expenses and are recognized as an expense during the period in which they are incurred and amounted to $16,870 and $25,730 for the years ended December 31, 2020 and 2019, respectively. |
Accounts Payable and Accrued Liabilities | Accounts Payable and Accrued Liabilities The following table summarizes the components of accounts payable and accrued liabilities at December 31, 2020 and 2019, respectively: December 31, December 31, 2020 2019 Accounts payable $ 246,158 $ 273,606 Accrued warranty reserve 56,465 247,850 Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities 523,067 114,137 Total accrued liabilities 579,532 361,987 Total $ 825,690 $ 635,593 |
Income Taxes | Income Taxes The Company is subject to income taxes in the U.S. federal jurisdiction, various state jurisdictions and certain other jurisdictions. The Company accounts for income taxes under the provisions of 740 Income Taxes The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Tax regulations within each jurisdiction are subject to the interpretation of the relaxed tax laws and regulations and require significant judgement to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities generally for a period of 3 years from the later of each return due date or date filed. On March 27, 2020, the CARES Act was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOLs”) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be recorded as a component of income tax expense. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation- Stock Compensation Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. In conjunction with the adoption of ASC 718, the Company adopted the straight-line single option method of attributing the value of stock-based compensation expense. The Company accounts for forfeitures as they occur. Stock-based compensation expense recognized during the years ended December 31, 2020 and 2019 was $28,068 and $40,707, respectively. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. The Company evaluates its estimates on an ongoing basis, including those related to revenue recognition, product warranty obligations, valuation of inventories, impairments, tax related contingencies, valuation of stock-based compensation, other contingencies and litigation, among others. The Company generally bases its estimates on historical experience, agreed obligations, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Historically, past changes to these estimates have not had a material impact on the Company’s financial statements. However, circumstances could change, and actual results could differ materially from those estimates. |
Recent Accounting Standards | Recent Accounting Standards To be Adopted in a Future Period In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “ Financial Instruments – Credit Losses In December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740)” consistent application and simplify GAAP in other areas of Topic 740. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2019-12 may have on the Company’s consolidated financial statements. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – “ Changes to the Disclosure Requirements for Fair Value Measurement.” In March 2016, the FASB issued ASU 2016-02, Topic 842, as amended, “ Leases”. The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date. The liability is equal to the present value of the remaining minimum lease payments. The asset is based on the liability, subject to certain adjustments. Operating leases result in a straight-line expense (similar to operating leases under the prior accounting standard). The Company utilizes its incremental borrowing rate to discount the lease payments. See Note 5 “Operating Leases” for additional disclosures as required by the new standard. The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. |
Organization And Summary Of S_3
Organization And Summary Of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Organization And Summary Of Significant Accounting Policies | |
Schedule of Components of Accounts Receivable, net | The following table summarizes the components of Accounts Receivable, net: December 31, December 31, 2020 2019 Trade Accounts Receivables at year end $ 197,166 $ 276,551 Reserve for estimated marketing allowances, cash discounts and other incentives (77,102 ) (263,092 ) Total Accounts Receivable, net $ 120,064 $ 13,459 |
Schedule of Changes in Reserve Included in Net Accounts Receivable | The following table summarizes the changes in the Company’s reserve for marketing allowances, cash discounts and other incentives which is included in net accounts receivable: December 31, December 31, 2020 2019 Balance at beginning of the year $ (263,092 ) $ (364,894 ) Accrued allowances - ( 89,668 ) Reclassification of allowance from accounts receivable to accounts payable and accrued liabilities 173,426 - Expenditures 12,564 191,468 Balance at year-end $ (77,102 ) $ (263,092 ) |
Schedule of Useful Lives, Depreciation of Property and Equipment | Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives of the related assets as follows: Useful Life December 31, 2020 December 31, 2019 Computer equipment and software 3-7 years $ 53,819 $ 53,819 Machinery and equipment 3-7 years 119,323 157,267 Furniture and fixtures 3-7 years 6,828 6,828 Less: Accumulated depreciation (125,118 ) (152,265 ) Property and Equipment, Net $ 54,852 $ 65,649 |
Schedule of Goodwill Impairment Charges | The following table summarizes the changes in the Company’s goodwill asset which is included in the total assets in the accompanying consolidated balance sheets: December 31, December 31, 2020 2019 Balance at the beginning of the period $ 1,936,020 $ 1,936,020 Impairment charges (623,538 ) - Balance at December 31, 2020 $ 1,312,482 $ 1,936,020 |
Schedule of Basic Weighted Average Shares Outstanding is Reconciled to Diluted | Basic weighted average shares outstanding is reconciled to diluted share outstanding as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 Basic and Diluted weighted average shares outstanding 46,337,198 46,863,467 |
Schedule of Net Revenue by Major Source | The following table presents net revenue by geographic location which is recognized at a point in time: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 2,066,519 75 % $ 11,218,714 90 % Lighting Products-International 703,839 25 % 1,185,731 10 % Total Revenue $ 2,770,358 100 % $ 12,404,445 100 % |
Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities | The following table summarizes the changes in the Company’s product warranty liabilities which are included in accounts payable and accrued liabilities in the accompanying December 31, 2020 and 2019 balance sheets: December 31, December 31, 2020 2019 Balance at the beginning of the year $ 247,850 $ 212,495 Amount accrued 46,322 180,797 Payments and credits (237,707 ) (145,442 ) Balance at year-end $ 56,465 $ 247,850 |
Schedule of Components of Accounts Payable and Accrued Liabilities | The following table summarizes the components of accounts payable and accrued liabilities at December 31, 2020 and 2019, respectively: December 31, December 31, 2020 2019 Accounts payable $ 246,158 $ 273,606 Accrued warranty reserve 56,465 247,850 Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities 523,067 114,137 Total accrued liabilities 579,532 361,987 Total $ 825,690 $ 635,593 |
Concentrations Of Credit Risk_2
Concentrations Of Credit Risk And Economic Dependence (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Concentrations Of Credit Risk And Economic Dependence | |
Schedule of Concentration of Credit Risk of Major Customers And Major Vendors | As of December 31, 2020, and 2019, approximately $120.1 thousand or 100% and approximately $13.5 thousand or 100% of accounts receivable, respectively, was from one customer. Major Customers Net Revenue % Net Accounts Receivable Year Ended December 31, Year Ended December 31, 2020 2019 2020 2019 Customer A 63 % 15 % $ - $ - Customer B 26 % 83 % 120,064 13,459 Total 89 % 98 % $ 120,064 $ 13,459 Major Vendors As of December 31, 2020, and 2019, approximately 47% and 37%, respectively, of accounts payable were due to one vendor. Purchases % Accounts Payable Year Ended December 31, Year Ended December 31, 2020 2019 2020 2019 Vendor A 68 % 97 % $ - $ 100,705 Vendor B 23 % - % 114,870 - Total 91 % 97 % $ 114,870 $ 100,705 |
Commitments And Contingencies A
Commitments And Contingencies And Subsequent Events (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Commitments And Contingencies And Subsequent Events | |
Schedule of Right Of Use Asset and Lease Liability | Supplemental balance sheet information related to leases as of December 31, 2020 is as follows: Assets Operating lease - right-of-use asset $ 158,504 Liabilities Current Current portion of operating lease $ 63,307 Noncurrent Operating lease liability, net of current portion $ 107,690 Supplemental statement of operations information related to leases for the year ended December 31, 2020 is as follows: Operating lease expense as a component of other general and administrative expenses $ 69,837 Supplemental cash flow information related to leases for the year ended December 31, 2020 is as follows: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow paid for operating lease $ 128,760 Lease term and Discount Rate Weighted average remaining lease term (months) Operating lease 30 Weighted average Discount Rate Operating lease 7 % |
Scheduled Maturities of Operating Lease Liabilities Outstanding | Scheduled maturities of operating lease liabilities outstanding as of December 31, 2020 are as follows: Year Operating Lease 2021 $ 73,290 2022 75,492 2023 38,304 Total Minimum Future Payments 187,086 Less: Imputed Interest 16,089 Present Value of Lease Liabilities $ 170,997 |
Summary of Potential Payments upon Termination of Employment | The following table summarizes potential payments upon termination of employment: Salary Severance Bonus Severance Gross up Taxes Benefit Compensation Grand Total Stewart Wallach $ 301,521 $ - $ 12,600 $ 6,600 $ 320,721 Gerry McClinton $ 191,442 $ - $ 11,000 $ 6,600 $ 209,042 |
Stock Transations (Tables)
Stock Transations (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stock Transations | |
Schedule of Assumptions Used in Valuing the Stock Options | The following weighted average assumptions were used in the fair value calculations during the year ended December 31, 2019: Risk free interest rate – 1.53 – 1.73% Expected term – 5 to 10 years Expected volatility of stock – 500% Expected dividend yield – 0% Suboptimal Exercise Behavior Multiple – 2.0 Number of Steps – 150 Risk free interest rate – 0.21% – 0.55% Expected term – 5 to 10 years Expected volatility of stock – 500% Expected dividend yield – 0% Suboptimal Exercise Behavior Multiple – 2.0 Number of Steps – 150 |
Schedule of Stock Options Outstanding and Activity | The following table sets forth the Company’s stock options outstanding as of December 31, 2020 and 2019 and activity for the years then ended. Shares Weighted Average Exercise Price Weighted Average Fair Value Weighted Average Remaining Contractual Term (Years) Intrinsic Value Outstanding, January 1, 2019 970,001 $ 0.435 $ 0.308 2.77 $ (272,570 ) Granted 210,000 0.435 0.210 4.84 (64,050 ) Exercised - - - - - Forfeited/expired (180,001 ) 0.435 0.283 - 54,900 Outstanding,December 31, 2019 1,000,000 0.435 0.284 2.88 (305,000 ) Granted 210,000 0.435 0.080 6.27 - Exercised - - - - - Forfeited/expired (220,000 ) 0.435 0.179 - 83,820 Outstanding,December 31, 2020 990,000 $ 0.435 $ 0.264 3.07 - Vested/exercisable at December 31, 2019 790,000 $ 0.435 $ 0.314 2.36 $ (240,950 ) Vested/exercisable at December 31, 2020 780,000 $ 0.435 $ 0.314 2.60 $ - |
Schedule of Options Granted, Outstanding and Exercisable Under the 2005 Plan | The following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 Plan: Exercise Price Options Outstanding Remaining Contractual Life in Years Average Exercise Price Number of Options Currently Exercisable $ .435 10,000 0.50 $ .435 10,000 $ .435 10,000 3.00 $ .435 10,000 $ .435 10,000 4.50 $ .435 10,000 $ .435 10,000 4.60 $ .435 10,000 $ .435 100,000 0.60 $ .435 100,000 $ .435 10,000 5.60 $ .435 10,000 $ .435 200,000 1.60 $ .435 200,000 $ .435 10,000 6.60 $ .435 10,000 $ .435 200,000 2.60 $ .435 200,000 $ .435 10,000 7.60 $ .435 10,000 $ .435 200,000 3.60 $ .435 200,000 $ .435 10,000 8.60 $ .435 10,000 $ .435 200,000 4.60 $ .435 - $ .435 10,000 9.60 $ .435 - |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax Benefit Computed Using US Statutory Federal Tax Rate | Tax benefit for income taxes differs from the amount computed using the federal US statutory income tax rate as follows: Year Ended December 31, 2020 2019 Tax benefit at U.S. statutory rate $ (629,108 ) $ (88,547 ) State income taxes, net of federal benefit (86,744 ) (13,260 ) Tax effect of foreign operations 119,558 (3,801 ) Non-deductible items 57 792 NOL carryback rate difference (329,618 ) - Valuation allowance 345,397 89.959 Other (31,520 ) (76 ) Income tax benefit $ (611,978 ) $ (14,933 ) |
Schedule of Income Tax (Benefit) | The income tax benefit for the years ended December 31, 2020 and 2019 consists of: 2020 2019 Current: Federal $ (874,000 ) $ - State 2,000 1,000 Foreign - (4,000 ) Deferred: Federal 231,000 (11,000 ) State 29,000 (1,000 ) Income Tax Benefit $ (612,000 ) $ (15,000 ) |
Schedule of Deferred Tax Assets and Liabilities | Deferred tax assets: Net operating loss $ 343,000 $ 416,000 Liabilities and reserves 28,000 25,000 Property and equipment and inventory (1,000 ) 6,000 Stock options 62,000 85,000 Business interest expense limitation 1,000 - Right of use asset 3,000 - 436,000 532,000 Deferred tax liabilities: Gain/loss on disposal (9,000 ) (9,000 ) Intangible assets (251,000 ) (433,000 ) Valuation allowance (436,000 ) (90,000 ) (696,000 ) (532,000 ) Net deferred tax assets and liabilities $ (260,000 ) $ - |
Organization And Summary Of S_4
Organization And Summary Of Significant Accounting Policies (Components Of Accounts Receivable, Net) (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Organization And Summary Of Significant Accounting Policies Components Of Accounts Receivable Net | |||
Trade Accounts Receivables at year end | $ 197,166 | $ 276,551 | |
Reserve for estimated marketing allowances, cash discounts and other incentives | 77,102 | 263,092 | $ 364,894 |
Total Accounts Receivable, net | $ 120,064 | $ 13,459 |
Organization And Summary Of S_5
Organization And Summary Of Significant Accounting Policies (Schedule Of Changes In Reserve) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies Schedule Of Changes In Reserve | ||
Balance at beginning of the year | $ 263,092 | $ 364,894 |
Accrued allowances | 89,666 | |
Reclassification of allowance from accounts receivable to accounts payable and accrued liabilities | 173,426 | |
Expenditures | 12,564 | 191,468 |
Balance at year-end | $ 77,102 | $ 263,092 |
Organization And Summary Of S_6
Organization And Summary Of Significant Accounting Policies (Property And Equipments) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Less: Accumulated depreciation | $ 125,118 | $ 152,265 |
Property and Equipment, Net | 54,852 | 65,649 |
Computer Equipment And Software[Member] | ||
Property and Equipment, Net | $ 53,819 | 53,819 |
Computer Equipment And Software[Member] | Minimum [Member] | ||
Estimated useful lives | 3 years | |
Computer Equipment And Software[Member] | Maximum [Member] | ||
Estimated useful lives | 7 years | |
Machinery and Equipment [Member] | ||
Property and Equipment, Net | $ 119,323 | 157,267 |
Machinery and Equipment [Member] | Minimum [Member] | ||
Estimated useful lives | 3 years | |
Machinery and Equipment [Member] | Maximum [Member] | ||
Estimated useful lives | 7 years | |
Furniture and Fixtures [Member] | ||
Property and Equipment, Net | $ 6,828 | $ 6,828 |
Furniture and Fixtures [Member] | Minimum [Member] | ||
Estimated useful lives | 3 years | |
Furniture and Fixtures [Member] | Maximum [Member] | ||
Estimated useful lives | 7 years |
Organization And Summary Of S_7
Organization And Summary Of Significant Accounting Policies (Schedule Of Goodwill Impairment Charges) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies Schedule Of Goodwill Impairment Charges | ||
Balance at December 31, 2019 | $ 1,936,020 | $ 1,936,020 |
Impairment charges | 623,538 | 0 |
Balance at December 31, 2020 | $ 1,312,482 | $ 1,936,020 |
Organization And Summary Of S_8
Organization And Summary Of Significant Accounting Policies (Schedule Of Basic Weighted Average Shares) (Details) - shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies Schedule Of Basic Weighted Average Shares | ||
Basic and Diluted weighted average shares outstanding | 46,337,198 | 46,863,467 |
Organization And Summary Of S_9
Organization And Summary Of Significant Accounting Policies (Schedule Of Net Revenue By Major Source) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Total Revenue | $ 2,770,358 | $ 12,404,445 |
Capstone Brand [Member] | ||
Total Revenue | $ 2,770,358 | $ 12,404,445 |
Percentage of revenue | 100.00% | 100.00% |
Lighting Products - U.S. [Member] | Capstone Brand [Member] | ||
Total Revenue | $ 2,066,519 | $ 11,218,714 |
Percentage of revenue | 75.00% | 90.00% |
Lighting Products-International [Member] | Capstone Brand [Member] | ||
Total Revenue | $ 703,839 | $ 1,185,731 |
Percentage of revenue | 25.00% | 10.00% |
Organization And Summary Of _10
Organization And Summary Of Significant Accounting Policies (Schedule Of Product Warranty Liabilities) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies Schedule Of Product Warranty Liabilities | ||
Balance at the beginning of the year | $ 247,850 | $ 212,495 |
Amount accrued | 46,322 | 180,797 |
Payments and credits | 237,707 | 145,442 |
Balance at end of the year | $ 56,465 | $ 247,850 |
Organization And Summary Of _11
Organization And Summary Of Significant Accounting Policies (Components Of Accounts Payable) (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Organization And Summary Of Significant Accounting Policies Components Of Accounts Payable | |||
Accounts payable | $ 246,158 | $ 273,606 | |
Accrued warranty reserve | 56,465 | 247,850 | $ 212,495 |
Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities | 523,067 | 114,137 | |
Total accrued liabilities | 579,532 | 361,987 | |
Total | $ 825,690 | $ 635,593 |
Concentrations Of Credit Risk_3
Concentrations Of Credit Risk And Economic Dependence (Major Customers) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | $ 197,166 | $ 276,551 |
Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | ||
Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | 120,064 | 13,459 |
Major Customers [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | $ 120,064 | $ 13,459 |
Net Revenue [Member] | Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 63.00% | 15.00% |
Net Revenue [Member] | Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 26.00% | 83.00% |
Net Revenue [Member] | Major Customers [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 89.00% | 98.00% |
Concentrations Of Credit Risk_4
Concentrations Of Credit Risk And Economic Dependence (Major Vendors) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | ||
Accounts Payable | $ 246,158 | $ 273,606 |
Vendor A [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | 100,705 | |
Vendor B [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | 114,870 | |
Major Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | $ 114,870 | $ 100,705 |
Purchases [Member] | Vendor A [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 68.00% | 97.00% |
Purchases [Member] | Vendor B [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 23.00% | |
Purchases [Member] | Major Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 91.00% | 97.00% |
Commitments And Contingencies (
Commitments And Contingencies (Schedule Of Right Of Use Asset And Lease Liability) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Assets | ||
Operating lease - right-of-use asset | $ 158,504 | $ 214,202 |
Liabilities Current | ||
Current portion of operating lease | 63,307 | 51,174 |
Noncurrent | ||
Operating lease liability, net of current portion | 107,690 | $ 170,998 |
Commitments [Member] | ||
Assets | ||
Operating lease - right-of-use asset | 158,504 | |
Liabilities Current | ||
Current portion of operating lease | 63,307 | |
Noncurrent | ||
Operating lease liability, net of current portion | 107,690 | |
Supplemental statement of operations information related to leases for the year ended December 31, 2020 is as follows: | ||
Operating lease expense as a component of other general and administrative | 69,837 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flow paid for operating lease | $ 128,760 | |
Lease term and Discount Rate | ||
Weighted average remaining lease term (months) operating lease | 30 months | |
Weighted average Discount Rate | ||
Operating lease | 7.00% |
Commitments And Contingencies_2
Commitments And Contingencies (Scheduled Maturities Of Operating Lease Liabilities Outstanding) (Details) | Dec. 31, 2020USD ($) |
Year | |
2021 | $ 73,290 |
2022 | 75,492 |
2023 | 38,304 |
Total Minimum Future Payments | 187,086 |
Less: Imputed Interest | 16,089 |
Present Value of Lease Liabilities | $ 170,997 |
Commitments And Contingencies_3
Commitments And Contingencies (Summary Of Payments Upon Termination Of Employment) (Details) | Dec. 31, 2020USD ($) |
Stewart Wallach [Member] | |
Salary Severance | $ 301,521 |
Bonus Severance | |
Gross up Taxes | 12,600 |
Benefit Compensation | 6,600 |
Grand Total | 320,721 |
Gerry McClinton [Member] | |
Salary Severance | 191,442 |
Bonus Severance | |
Gross up Taxes | 11,000 |
Benefit Compensation | 6,600 |
Grand Total | $ 209,042 |
Stock Transactions (Schedule Of
Stock Transactions (Schedule Of Assumptions Used In Valuing The Stock Options) (Details) - Options [Member] | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Assumptions - Binomial Lattice (Suboptimal) Option Pricing Model: | ||
Expected volatility of stock | 500.00% | 500.00% |
Expected dividend yield | 0.00% | 0.00% |
Suboptimal Exercise Behavior Multiple | 2.0 | 2.0 |
Number of Steps | 150 | 150 |
Minimum [Member] | ||
Assumptions - Binomial Lattice (Suboptimal) Option Pricing Model: | ||
Risk free interest rate | 0.21% | 1.53% |
Expected term | 5 years | 5 years |
Maximum [Member] | ||
Assumptions - Binomial Lattice (Suboptimal) Option Pricing Model: | ||
Risk free interest rate | 0.55% | 1.73% |
Expected term | 10 years | 10 years |
Stock Transactions (Schedule _2
Stock Transactions (Schedule Of Stock Options Outstanding And Activity) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Shares | ||
Outstanding, beginning | 1,000,000 | 970,001 |
Granted | 210,000 | 210,000 |
Exercised | ||
Forfeited/expired | 220,000 | 180,001 |
Outstanding, end | 990,000 | 1,000,000 |
Vested/exercisable | 780,000 | 790,000 |
Weighted Average Exercise Price | ||
Outstanding, beginning | $ 0.435 | $ 0.435 |
Granted | 0.435 | 0.435 |
Exercised | ||
Forfeited/expired | 0.435 | 0.435 |
Outstanding, end | 0.435 | 0.435 |
Vested/exercisable | 0.435 | 0.435 |
Weighted Average Fair Value | ||
Outstanding, beginning | 0.284 | 0.308 |
Granted | 0.080 | 0.210 |
Exercised | ||
Forfeited/expired | 0.179 | 0.283 |
Outstanding, end | 0.264 | 0.284 |
Vested/exercisable | $ 0.314 | $ 0.314 |
Weighted Average Remaining Contractual Term (Years) | ||
Outstanding, beginning | 2 years 10 months 17 days | 2 years 9 months 7 days |
Granted | 6 years 3 months 7 days | 4 years 10 months 2 days |
Outstanding, end | 3 years 25 days | 2 years 10 months 17 days |
Vested/exercisable | 2 years 7 months 6 days | 2 years 4 months 10 days |
Intrinsic Value | ||
Outstanding, beginning | $ (305,000) | $ (272,570) |
Granted | (64,050) | |
Exercised | ||
Forfeited/expired | 83,820 | 54,900 |
Outstanding, end | (305,000) | |
Vested/exercisable | $ (240,950) |
Stock Transactions (Schedule _3
Stock Transactions (Schedule Of Options Granted, Outstanding And Exercisable) (Details) - Exercise Price - .435 [Member] - 2005 Plan [Member] | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 6 months |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 3 years |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 4 years 6 months |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 4 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 100,000 |
Remaining Contractual Life in Years | 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 100,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 5 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 1 year 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 6 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 2 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 7 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 3 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 8 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 4 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 9 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Income Taxes (Schedule Of Recon
Income Taxes (Schedule Of Reconciliation Of Income Tax Provision) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Taxes Schedule Of Reconciliation Of Income Tax Provision | ||
Tax benefit at U.S. statutory rate | $ (629,108) | $ (88,547) |
State income taxes, net of federal benefit | (86,744) | (13,260) |
Tax effect of foreign operations | 119,558 | (3,801) |
Non-deductible items | 57 | 792 |
NOL carryback rate difference | (329,618) | |
Valuation allowance | 345,397 | 89,959 |
Other | (31,520) | (76) |
Income tax benefit | $ (611,978) | $ (14,933) |
Income Taxes (Schedule Of Incom
Income Taxes (Schedule Of Incometax Provision Benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Current: | ||
Federal | $ (874,000) | |
State | 2,000 | 1,000 |
Foreign | (4,000) | |
Deferred: | ||
Federal | 231,000 | (11,000) |
State | 29,000 | (1,000) |
Income Tax Benefit | $ (612,000) | $ (15,000) |
Income Taxes (Schedule Of Defer
Income Taxes (Schedule Of Deferred Tax Assets And Liabilities) (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred tax assets: | ||
Net operating loss | $ 343,000 | $ 416,000 |
Liabilities and reserves | 28,000 | 25,000 |
Property and equipment and inventory | 1,000 | 6,000 |
Stock options | 62,000 | 85,000 |
Business interest expense limitation | (1,000) | |
Right of use asset | 3,000 | |
Deferred tax assets, net | 436,000 | 532,000 |
Deferred tax liabilities: | ||
Gain/loss on disposal | 9,000 | 9,000 |
Intangible assets | 251,000 | 433,000 |
Valuation allowance | 436,000 | 90,000 |
Deferred tax liabilities, net | 696,000 | 532,000 |
Net deferred tax assets and liabilities | $ (260,000) |
Organization And Summary Of _12
Organization And Summary Of Significant Accounting Policies (Narrative) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Working capital | $ 1,400,000 | |
Inventory write down | $ 0 | $ 0 |
Potentially dilutive common stock equivalents excluded from diluted earnings per share | 990,000 | 1,000,000 |
Reversal of prior year accrued allowances | $ 341,200 | $ 1,180,000 |
Sales and Marketing Expenses [Member] | ||
Advertising and promotion expense | 214,856 | 254,283 |
Shipping and handling costs | $ 16,870 | $ 25,730 |
Concentrations Of Credit Risk_5
Concentrations Of Credit Risk And Economic Dependence (Narrative) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | ||
FIDC insurance limits | $ 431,300 | |
Accounts receivable approximately | $ 120,064 | $ 13,459 |
Net Revenue [Member] | One Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 63.00% | 26.00% |
Net Revenue [Member] | Two Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 83.00% | 15.00% |
Net Revenue [Member] | International Sales [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 25.00% | 10.00% |
Accounts Payable [Member] | One Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 100.00% | 100.00% |
Accounts receivable approximately | $ 120,100 | $ 13,500 |
Accounts Payable [Member] | Purchase [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 23.00% | |
Accounts Payable [Member] | One Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 47.00% | 37.00% |
Purchase [Member] | Two Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 68.00% | |
Sold [Member] | One Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 97.00% |
Notes Payable (Narrative) (Deta
Notes Payable (Narrative) (Details) - USD ($) | Jan. 21, 2021 | Oct. 30, 2020 | May 11, 2020 | Sep. 08, 2010 | Dec. 31, 2020 | Dec. 31, 2019 |
Line of Credit Facility [Line Items] | ||||||
Notes payable | $ 0 | $ 0 | ||||
Financing Agreement With Sterling National Bank [Member] | Line Of Credit [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Line of credit funding description | The assignments provide funding for an amount up to 85% of net invoices submitted. | |||||
Line of credit collateral description | The amounts borrowed under this agreement are due on demand and collateralized by substantially all the assets of Capstone. | |||||
Line of credit processing fees | $ 3,307 | $ 40,006 | ||||
Line of credit interest rate description | The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. | |||||
Proceeds from loan | $ 89,600 | $ 89,600 | ||||
Accumulated interest | $ 428 | |||||
Financing Agreement With Sterling National Bank [Member] | Line Of Credit [Member] | Subsequent Event [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Line of credit funding description | The Company submitted a PPP2 loan application for $139,350 through our bank’s loan processor for consideration by the SBA and is still pending approval.The unforgiven portion of the PPP2 loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. If approved, the Company will use the proceeds for purposes consistent with the PPP forgiveness rules. Under the Small Business Administration (“SBA”) and U.S. Treasury Department, a borrower could apply for the forgiveness of the loans by filing SBA Form 3508, Paycheck Protection Program Loan Forgiveness. |
Commitments And Contingencies_4
Commitments And Contingencies And Subsequent Events (Operating Leases) (Narrative) (Details) - USD ($) | Sep. 30, 2020 | Feb. 17, 2020 | Nov. 01, 2019 | Aug. 17, 2019 | May 15, 2018 | Feb. 01, 2017 | Dec. 01, 2016 | Feb. 17, 2014 | Dec. 31, 2018 | Dec. 31, 2020 | Dec. 31, 2019 |
Operating Leased Assets [Line Items] | |||||||||||
Base annual / monthly rent payable | $ 187,086 | ||||||||||
Rent expenses | $ 165,706 | $ 100,616 | |||||||||
Operating Lease Agreement - Office Space [Member] | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Base annual / monthly rent payable | $ 92,256 | ||||||||||
Operating lease description | Effective November 1, 2019, the Company entered into a new prime operating lease with the landlord “431 Fairway Associates, LLC” ending June 30, 2023, for the Company's executive offices located on the second floor of 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441 with an annualized base rent of $70,104 and with a base rental adjustment of 3% commencing July 1, 2020 and on July 1st of each subsequent year during the term. Under the lease agreement, Capstone is also responsible for a portion of common area maintenance charges in the leased premises which has been estimated at $12.00 per square foot on an annualized basis of which the premises is approximately 4,694 square feet. | On May 15, 2018, the Company entered into a lease agreement with the previous landlord to provide for a premise's relocation, lease termination and new sublease agreement. Under the agreement the Company relocated its principal executive offices located at 350 Jim Moran Blvd, Suite 120, Deerfield Beach, Florida 33442 to 4,694 square feet of office space on the second floor of 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. The original lease terminated on the relocation date, being July 1, 2018, and the parties proceeded under the terms of the sublease which expired on January 31, 2020. The base annual rent in the sublease remained at the same rate as the previous agreement until January 31, 2020. At the expiration of the sublease, the Company had the option to accept the prime lease with another 3 years renewal and with an option to renew for an additional 5-year period. If the Company decided to further extend the sublease after January 31, 2020, the Company would be subject to the terms and conditions of the prime lease. The base monthly rent was $7,312 to January 31, 2019 and then base rent would be $7,514 until January 31, 2020 which includes an estimate for portion of the common area maintenance. | Effective February 1, 2017, the Company renewed the office lease for 3 years ending January 31, 2020. | ||||||||
Operating lease renewal term | 3 years | ||||||||||
Total rental expenses | $ 281,711 | ||||||||||
Amount agreed to pay by Landlord on completion of relocation | $ 150,000 | ||||||||||
Lease incentive income per month | $ 870 | ||||||||||
Operating Lease Agreement - Office Space [Member] | Capstone International Hong Kong Ltd (CIHK) [Member] | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Base annual / monthly rent payable | $ 5,100 | $ 1,290 | |||||||||
Operating lease description | The lease was further extended with a base monthly rate of $5,100 for six months until February 16, 2020. As the premises was no longer required as the employees were working remotely from their homes, the Company decided not to renew and allowed this lease to expire. | CIHK entered into a six month rental agreement effective from December 1, 2016 for a showroom space at 3F, Wing Kin Industrial Building, 4-6 Wing Kin Road, Kwai Chung, NT, Hong Kong. This agreement has been extended various times. The current lease expires August 16, 2019 and was further renewed for six-months expiring on February 16, 2020 | The original agreement which was effective from February 17, 2014 has been extended various times. | ||||||||
Operating Lease Agreement - Showroom Space [Member] | Capstone International Hong Kong Ltd (CIHK) [Member] | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Base annual / monthly rent payable | $ 516 | $ 1,285 | |||||||||
Operating lease description | To further reduce costs, effective September 30, 2020 the Company reduced its space requirements and entered a three-month lease expiring on December 31, 2020, with a base rate of $516 per month. The Company decided not to renew allowed this lease to expire. | Effective February 17, 2020, the Company entered a new six-month lease expiring on September 30, 2020, with a base rate of $1,285 per month and the space is available to renew as required. |
Commitments And Contingencies_5
Commitments And Contingencies (Consulting Agreements) (Narrative) (Details) - Consulting Agreement With George Wolf [Member] - USD ($) | Jan. 02, 2019 | Jan. 02, 2018 | Jan. 02, 2016 | Jul. 01, 2015 | Dec. 31, 2020 | Dec. 31, 2020 | Sep. 02, 2020 |
Other Commitments [Line Items] | |||||||
Amount payable per month under the agreement | $ 13,750 | $ 13,750 | $ 12,500 | $ 10,500 | $ 6,875 | ||
Agreement description | On January 1, 2019, the agreement was further amended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2019 through December 31, 2020. | On January 1, 2018, the agreement was further amended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2018 through December 31, 2018. | Increasing to $12,500 per month from January 1, 2016 through December 31, 2017. | Mr. Wolf will be paid $10,500 per month through December 31, 2015. | Effective September 1, 2020 through December 31, 2020, payment for fifty percent or $6,875 of the monthly consulting fee or approximately $27,500 for the effective period, was deferred until 2021 | The agreement can be terminated upon 30 days' notice by either party. The Company may, in its sole discretion at any time convert Mr. Wolf to a full-time Executive status. The annual salary and term of employment would be equal to that outlined in the consulting agreement. Mr. Wolf is an independent contractor of the Company. |
Commitments And Contingencies_6
Commitments And Contingencies (Employment Agreements) (Narrative) (Details) - USD ($) | Feb. 05, 2020 | Dec. 31, 2020 | Jun. 30, 2020 |
Employment Agreement With Stewart Wallach [Member] | |||
Other Commitments [Line Items] | |||
Amount payable per annum under the agreement | $ 301,521 | ||
Agreement description | The initial term of this new agreement began February 5, 2020 and ends February 5, 2023. | ||
Employment Agreement With James McClinton [Member] | |||
Other Commitments [Line Items] | |||
Amount payable per annum under the agreement | $ 191,442 | ||
Agreement description | The term of this new agreement began February 5, 2020 and ends February 5, 2022. | ||
Employment Agreement With Mr. Wallach And Mr. McClintons Member] | |||
Other Commitments [Line Items] | |||
Agreement description | Effective September 1, 2020 through December 31, 2020, payments equivalent to fifty percent of both Mr. Wallach and Mr. McClinton’s salary or approximately $48,707 and $30,925, respectively, will be deferred until 2021 | ||
Employment Agreements [Member] | |||
Other Commitments [Line Items] | |||
Agreement description | There is a common provision in both Mr. Wallach and Mr. McClinton's employment agreements: If the officer's employment is terminated by death or disability or without cause, the Company is obligated to pay to the officer's estate or the officer, an amount equal to accrued and unpaid base salary as well as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal to the sum of twelve (12) months base salary at the rate the Executive was earning as of the date of termination and (b) the sum of "merit" based bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by the Company shall be paid from a normal payroll account on a bi-weekly basis in accordance with the normal payroll policies of the Company. The amount owed by the Company to the Executive, from the effective Termination date, will be payout bi-weekly over the course of the year but at no time will be no more than twenty (26) installments. The Company will also continue to pay the Executive's health and dental insurance benefits for 6 months starting at the Executives date of termination. If the Executive had family health coverage at the time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive's severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment. |
Commitments And Contingencies_7
Commitments And Contingencies (Directors Compensation) (Narrative) (Details) - Directors Compensation [Member] - USD ($) | Jun. 10, 2020 | May 31, 2019 |
Jeffrey Guzy - Director [Member] | ||
Other Commitments [Line Items] | ||
Director compensation payable per calendar month | $ 750 | $ 750 |
Agreement description | On June 10, 2020 the Company approved that effective on August 1, 2020 until August 1, 2021, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. | On May 31, 2019 the Company approved that effective on June 1, 2019, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. |
Jeffrey Postal - Director [Member] | ||
Other Commitments [Line Items] | ||
Director compensation payable per calendar month | $ 750 | |
Agreement description | On May 31, 2019, the Company also approved that the independent directors would be offered effective from June 1, 2019, the opportunity to participate as a non-employee in the Company's Health Benefit Plan, subject to compliance with all plan participation requirements and on acceptance into the plan the director will be responsible to pay 100% of their plan's participation cost. |
Commitments And Contingencies(L
Commitments And Contingencies(Licensing Agreements) (Narrative) (Details) - Licensing Agreement With Floorcare Company - USD ($) | Feb. 03, 2020 | Apr. 12, 2018 | Dec. 29, 2016 | Feb. 04, 2015 | Dec. 31, 2020 | Dec. 31, 2019 |
Other Commitments [Line Items] | ||||||
Agreement description | The Company did not achieve the stated net sales volume for the renewal period, the License expired on February 3, 2020. | On April 12, 2018, the Company finalized the second amendment to the February 4, 2015 Licensing Agreement in which the license was further expanded to add an additional product category. | On December 29, 2016, the Company finalized the first amendment to the February 4, 2015 Licensing Agreement with the floorcare company in which the initial term was extended through February 3, 2020 and additional renewal terms and periods were also finalized. During this initial extended period through February 3, 2020, if the Company achieved net sales of $5,000,000, then the Licensing Agreement would automatically be extended 2 years until February 3, 2022 and if during this second extended period the Company achieved net sales of $5,000,000, then the Licensing Agreement would automatically be further extended 2 years until February 3, 2024. This license amendment also added an additional product category. | Under a February 4, 2015 Licensing Agreement with a floorcare company, Company markets home lighting products under the licensed brand of the floorcare company, to discount retailers, warehouse clubs, home centers, on-line retailers and other retail distribution channels in the U.S., Canada and Mexico. The initial term of the agreement is for 3 years. The Licensing Agreement did not have a guaranteed royalty stipulation. | ||
Royalty expenses | $ 0 | $ 0 |
Commitments And Contingencies_8
Commitments And Contingencies (Public Relations Agreement) (Narrative) (Details) - USD ($) | Sep. 27, 2018 | Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Other Commitments [Line Items] | ||||
Service charges | $ 422,820 | $ 435,143 | ||
Public Relations Services Agreement With Max Borges Agency (MBA) [Member] | ||||
Other Commitments [Line Items] | ||||
Agreement description | On September 27, 2018, the Company executed a public relations services agreement with Max Borges Agency, (“MBA”), a full – service public relations and communications agency with offices in Miami and San Francisco. The Company entered into the Agreement to obtain assistance from a nationally recognized firm, specializing in the development of product branding, marketing and launching of technology products. The agreement was effective on October 1, 2018 with an initial 180 day term, which either party can cancel with 60 days advanced notice in writing on or after the 120th day of the effective date. | |||
Amount payable per month under the agreement | $ 11,250 | |||
Subscription fee due on the first of each month | $ 476 | |||
Service charges | $ 33,750 | |||
Subscription fees | $ 952 |
Stock Transactions (Options) (N
Stock Transactions (Options) (Narrative) (Details) - USD ($) | Jun. 10, 2020 | May 31, 2019 | May 02, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Term of options | 2 years 7 months 6 days | 2 years 4 months 10 days | ||||
Stock options outstanding | 990,000 | 1,000,000 | 970,001 | |||
Weighted average exercise price of options | $ 0.435 | $ 0.435 | $ 0.435 | |||
Stock based compensation expense | $ 28,068 | $ 40,707 | ||||
Options [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Expected volatility of stock | 500.00% | 500.00% | ||||
Expected dividend yield | 0.00% | 0.00% | ||||
Number of Steps | 150 | 150 | ||||
Options [Member] | Minimum [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Risk free interest rate | 0.21% | 1.53% | ||||
Expected term | 5 years | 5 years | ||||
Options [Member] | Maximum [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Risk free interest rate | 0.55% | 1.73% | ||||
Expected term | 10 years | 10 years | ||||
2005 Equity Plan [Member] | Stock Options [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock options amendment terms | 2005 Equity Incentive Plan to extend the Plan's expiration date from December 31, 2016 to December 31, 2021. | |||||
Stock options outstanding | 990,000 | |||||
Stock options vested | 780,000 | |||||
Weighted average exercise price of options | $ 0.435 | |||||
Unrecognized stock based compensation expense to be recognized in 2021 | $ 10,015 | |||||
Stock based compensation expense | $ 28,068 | $ 40,707 | ||||
2005 Equity Plan [Member] | Stock Options [Member] | Director [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
No of options granted | 100,000 | 100,000 | ||||
Options description | The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2020. | The Director options have a strike price of $.435 with an effective date of August 6, 2019 | ||||
Strike price of options | $ 0.435 | $ 0.435 | ||||
Vesting date of options | Will vest on August 5, 2021 and have a term of 5 years. | Will vest on August 5, 2020 | ||||
Term of options | 5 years | 5 years | ||||
2005 Equity Plan [Member] | Stock Options [Member] | Director Two [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
No of options granted | 100,000 | 100,000 | ||||
Options description | The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2020. | The Director options have a strike price of $.435 with an effective date of August 6, 2019 | ||||
Strike price of options | $ 0.435 | $ 0.435 | ||||
Vesting date of options | Will vest on August 5, 2021 and have a term of 5 years. | Will vest on August 5, 2020 | ||||
Term of options | 5 years | 5 years | ||||
2005 Equity Plan [Member] | Stock Options [Member] | Company Secretary [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
No of options granted | 100,000 | 10,000 | ||||
Options description | The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2020. | The Company Secretary options have an exercise price of $.435 with an effective date of August 6, 2019 | ||||
Strike price of options | $ 0.435 | $ 0.435 | ||||
Vesting date of options | Will vest on August 5, 2021 and have a term of 5 years. | Will vest on August 5, 2020 | ||||
Term of options | 10 years | 10 years |
Stock Transactions (Adoption Of
Stock Transactions (Adoption Of Stock Repurchase Plan) (Narrative) (Details) - USD ($) | Mar. 30, 2020 | Sep. 23, 2019 | May 31, 2019 | Dec. 19, 2018 | Aug. 29, 2018 | Dec. 15, 2017 | May 01, 2017 | Feb. 13, 2017 | Aug. 23, 2016 | Dec. 31, 2020 | Dec. 31, 2019 |
Repurchase of shares, value | $ 36,333 | $ 71,407 | |||||||||
Common Stock [Member] | |||||||||||
Repurchase of shares, shares | (283,383) | (466,617) | |||||||||
Repurchase of shares, value | $ (28) | $ (46) | |||||||||
Stock Repurchase Plan [Member] | Common Stock [Member] | |||||||||||
Value of shares authorized to be repurchased | $ 750,000 | $ 750,000 | $ 1,000,000 | $ 750,000 | $ 1,000,000 | $ 750,000 | $ 750,000 | ||||
Repurchase of shares, shares | 666,667 | 1,000,000 | 283,383 | 466,617 | |||||||
Exercise price of shares repurchased | $ 0.15 | $ 0.15 | |||||||||
Repurchase of shares, value | $ 36,333 | $ 71,407 | |||||||||
Stock Repurchase Plan [Member] | Common Stock-Total [Member] | |||||||||||
Repurchase of shares, shares | 750,000 | ||||||||||
Repurchase of shares, value | $ 107,740 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) | Mar. 27, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Operating loss carryforward limitations on use | Offset against future taxable income through 2034. | Offset against future taxable income through 2034. | |
Net deferred tax liability | $ 260,000 | $ 0 | |
Changes in income tax rate description | On March 27, 2020, the CARES Act was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOLs”) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. The Company was able to carryback the NOL to 2017 tax years and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. | ||
Income tax expenses benefit | $ (611,939) | $ (14,933) | |
Effective income tax rate | 20.43% | 1.60% | |
Statutory income tax rate | 24.46% | 24.40% | |
Valuation allowance increased | $ 345,397 | ||
Federal Net Operating Loss Carry Forward [Member] | |||
Operating loss carryforward | 1,044,000 | ||
Statel Net Operating Loss Carry Forward [Member] | |||
Operating loss carryforward | $ 3,500,000 |
Subsequent Events (Narrative) (
Subsequent Events (Narrative) (Details) - USD ($) | Feb. 03, 2021 | Jan. 04, 2021 | Jan. 02, 2019 | Jan. 02, 2018 | Jan. 02, 2016 | Jul. 01, 2015 | Mar. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Jan. 01, 2021 | Sep. 02, 2020 |
Income tax refund | $ 861,000 | |||||||||||
Consulting Agreement With George Wolf [Member] | ||||||||||||
Amount payable per month under the agreement | $ 13,750 | $ 13,750 | $ 12,500 | $ 10,500 | $ 6,875 | |||||||
Agreement description | On January 1, 2019, the agreement was further amended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2019 through December 31, 2020. | On January 1, 2018, the agreement was further amended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2018 through December 31, 2018. | Increasing to $12,500 per month from January 1, 2016 through December 31, 2017. | Mr. Wolf will be paid $10,500 per month through December 31, 2015. | Effective September 1, 2020 through December 31, 2020, payment for fifty percent or $6,875 of the monthly consulting fee or approximately $27,500 for the effective period, was deferred until 2021 | The agreement can be terminated upon 30 days' notice by either party. The Company may, in its sole discretion at any time convert Mr. Wolf to a full-time Executive status. The annual salary and term of employment would be equal to that outlined in the consulting agreement. Mr. Wolf is an independent contractor of the Company. | ||||||
Employment Agreement With Mr. Wallach And Mr. McClintons Member] | ||||||||||||
Agreement description | Effective September 1, 2020 through December 31, 2020, payments equivalent to fifty percent of both Mr. Wallach and Mr. McClinton’s salary or approximately $48,707 and $30,925, respectively, will be deferred until 2021 | |||||||||||
Subsequent Event [Member] | ||||||||||||
Agreement description | Effective January 1, 2021 through March 31, 2021, payment for fifty percent or $6,875 of the monthly consulting fee or approximately $20,625 for the effective period, will be deferred until later in 2021 | |||||||||||
Income tax | $ 576,000 | |||||||||||
Income tax interest | $ 10,400 | |||||||||||
Subsequent Event [Member] | Consulting Agreement With George Wolf [Member] | ||||||||||||
Amount payable per month under the agreement | $ 13,750 | |||||||||||
Agreement description | The sales operations consulting agreement with George Wolf, was further extended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2021 through December 31, 2021 | |||||||||||
Subsequent Event [Member] | Employment Agreement With Mr. Wallach And Mr. McClintons Member] | ||||||||||||
Agreement description | Effective January 1, 2021 through March 31, 2021, compensation payments equivalent to fifty percent of both Mr. Wallach and Mr. McClinton’s salary or approximately $40,589 and $25,771, respectively, will be deferred until later in 2021. | |||||||||||
Subsequent Event [Member] | Loan Agreement With Directors Stewart Wallach And Jeff Postal As Joint Lenders The Lenders [Member] | Director [Member] | ||||||||||||
Loan agreement description | The Company entered a Loan Agreement with Directors Stewart Wallach and Jeff Postal as joint lenders (the “Lenders”) whereby Lenders will make a maximum of Seven Hundred and Fifty Thousand Dollars and No Cents ($750,000) (principal) available as a credit line to the Company for working capital purposes. As requested by the Company, funds will be advanced by the Lenders in tranches which must be at least for an amount of $25,000. The term of the loan starts January 4, 2021 and ends June 30, 2021 (“Initial Period’). The Company may extend the Initial Period for an additional six consecutive months, ending December 31, 2021, under the same terms and conditions of the Initial Period, by providing written notice of the election to extend to the Lenders prior to the expiration of the Initial Period. | |||||||||||
Loan principal amount | $ 750,000 | |||||||||||
Advanced loan amount | $ 25,000 | |||||||||||
Annual interest rate | 1.00% | |||||||||||
Subsequent Event [Member] | Loan Agreement With Directors Stewart Wallach And Jeff Postal As Joint Lenders The Lenders [Member] | Director [Member] | Convertible Preferred Stock [Member] | ||||||||||||
Convertible preferred stock | 7,500 | |||||||||||
Preferred stock conversion rights | The Preferred Shares shall have the appropriate restrictive legends. Each Preferred Share converts into 66.66 shares of Common Stock at option of Lender. | |||||||||||
Shares issued to lenders | 500,000 | |||||||||||
Common share price | $ 0.0001 | |||||||||||
Subsequent Event [Member] | Working Capital Loan Agreement With Directors Stewart Wallach And Jeff Postal As Joint Lenders The Lenders [Member] | ||||||||||||
Loan agreement description | The Company entered a $750,000 working capital loan agreement with Directors, Stewart Wallach and Jeffrey Postal. The term of the loan started January 4, 2021 and ends June 30, 2021 (“Initial Period’). The Company may extend the Initial Period for an additional six consecutive months, ending December 31, 2021, under the same terms and conditions of the Initial Period, by providing written notice of the election to extend to the lenders prior to the expiration of the Initial Period. The Company may borrow and reborrow under the agreement up to $750,000 and prepay wholly or partially the unpaid principal amount at any time and do so without pre-pay penalty or charge. The unpaid principal amount and all accrued interest is due and payable in full at the end of the Initial Period or expiration of the extended date, being December 31, 2021 (the “Maturity Date”). |