Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 22, 2023 | Jun. 30, 2022 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2022 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2022 | ||
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, City or Town | Deerfield Beach | ||
Entity Address, State or Province | FL | ||
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 | $ 3,625,952 | ||
Entity Common Stock, Shares Outstanding | 48,826,864 | ||
Documents Incorporated by Reference [Text Block] | None | ||
Auditor Firm ID | 4048 | ||
Auditor Name | D. Brooks and Associates CPAs, P.A. | ||
Auditor Location | Palm Beach Gardens, Florida |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Current Assets: | ||
Cash | $ 61,463 | $ 1,277,492 |
Accounts receivable | 7,716 | 1,481 |
Inventories, net of allowances of $533,254 and $0, respectively | 412,261 | 508,920 |
Prepaid expenses | 37,090 | 500,748 |
Income tax refundable | 284,873 | |
Total Current Assets | 518,530 | 2,573,514 |
Property and equipment, net | 76,928 | |
Operating lease- right of use asset, net | 34,151 | 98,651 |
Deposit | 24,039 | 11,148 |
Goodwill | 1,312,482 | 1,312,482 |
Total Assets | 1,889,202 | 4,072,723 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 309,439 | 538,551 |
Notes payable related parties and accrued interest-current | 413,425 | |
Notes payable unrelated party and accrued interest-current | 206,712 | |
Operating lease- current portion | 37,535 | 70,157 |
Total Current Liabilities | 967,111 | 608,708 |
Long-Term Liabilities: | ||
Operating lease- long-term portion | 37,533 | |
Notes payable related parties and accrued interest-less current portion | 821,647 | 1,030,340 |
Notes payable unrelated parties and accrued interest-less current portion | 360,446 | |
Deferred tax liabilities -long-term | 285,379 | 273,954 |
Total Long-Term Liabilities | 1,467,472 | 1,341,827 |
Total Liabilities | 2,434,583 | 1,950,535 |
Stockholders' Equity: | ||
Common Stock, par value $.0001 per share, authorized 56,666,667 shares, issued and outstanding 48,826,864 shares at December 31, 2022 and 48,893,031 shares at December 31, 2021. | 4,884 | 4,892 |
Additional paid-in capital | 8,550,510 | 8,554,320 |
Accumulated deficit | (9,100,777) | (6,437,026) |
Total Stockholders' Equity | (545,381) | 2,122,188 |
Total Liabilities and Stockholders’ Equity | 1,889,202 | 4,072,723 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity: | ||
Preferred stock, value, issued | ||
Preferred Stock, Series B-1 [Member] | ||
Stockholders' Equity: | ||
Preferred stock, value, issued | 2 | 2 |
Series C Preferred Stock [Member] | ||
Stockholders' Equity: | ||
Preferred stock, value, issued |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
Common stock, par value per share | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 56,666,667 | 56,666,667 |
Common stock, shares issued | 48,826,864 | 48,893,031 |
Common stock, shares outstanding | 48,826,864 | 48,893,031 |
Series A Preferred Stock [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, shares outstanding | 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 | 15,000 | 15,000 |
Preferred stock, shares outstanding | 15,000 | 15,000 |
Series C Preferred Stock [Member] | ||
Preferred stock, par value per share | $ 1 | $ 1 |
Preferred stock, shares authorized | 67 | 67 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income Statement [Abstract] | ||
Revenues, net | $ 346,474 | $ 685,854 |
Increase in inventory reserve and write offs | (692,154) | |
Cost of sales | (256,868) | (638,644) |
Gross Profit | (602,548) | 47,210 |
Operating Expenses: | ||
Sales and marketing | 359,535 | 28,568 |
Compensation | 817,409 | 1,276,503 |
Professional fees | 457,500 | 368,229 |
Product development | 203,751 | 308,823 |
Other general and administrative | 480,771 | 420,962 |
Total Operating Expenses | 2,318,966 | 2,403,085 |
Operating Loss | (2,921,514) | (2,355,875) |
Other Income (Expense): | ||
Other income, net | 394,952 | 456,275 |
Interest expense, net | (69,686) | (48,974) |
Total Other Income (Expense), net | 325,266 | 407,301 |
Loss Before Income Taxes | (2,596,248) | (1,948,574) |
Income Tax Expense | 67,503 | 15,055 |
Net Loss | $ (2,663,751) | $ (1,963,629) |
Net Loss per Common Share | ||
Basic and Diluted | $ (0.05) | $ (0.04) |
Weighted Average Shares Outstanding | ||
Basic and Diluted | 48,852,204 | 48,196,903 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Preferred Stock Series A [Member] | Preferred Stock Series B 1 [Member] | Preferred Stock Series C [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2020 | $ 4,630 | $ 7,053,328 | $ (4,473,397) | $ 2,584,561 | |||
Beginning balance, shares at Dec. 31, 2020 | 46,296,364 | ||||||
Stock options for compensation | 15,619 | 15,619 | |||||
Stock issued to Directors for loan | $ 2 | 48,994 | 48,996 | ||||
Stock issued to Director's for loan, shares | 15,000 | ||||||
Stock option exercised | $ 10 | 43,490 | 43,500 | ||||
Stock option exercised, shares | 100,000 | ||||||
Common stock for cash, net of fees | $ 252 | 1,392,889 | 1,393,141 | ||||
Common stock for cash, net of fees, shares | 2,496,667 | ||||||
Net Loss | (1,963,629) | (1,963,629) | |||||
Ending balance, value at Dec. 31, 2021 | $ 2 | $ 4,892 | 8,554,320 | (6,437,026) | 2,122,188 | ||
Ending balance, shares at Dec. 31, 2021 | 15,000 | 48,893,031 | |||||
Stock options for compensation | 7,844 | 7,844 | |||||
Net Loss | (2,663,751) | (2,663,751) | |||||
Repurchase of shares | $ 8 | 11,654 | 11,662 | ||||
Repurchase of shares, shares | (66,167) | ||||||
Ending balance, value at Dec. 31, 2022 | $ 2 | $ 4,884 | $ 8,550,510 | $ (9,100,777) | $ (545,381) | ||
Ending balance, shares at Dec. 31, 2022 | 15,000 | 48,826,864 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Loss | $ (2,663,751) | $ (1,963,629) |
Depreciation | 25,643 | 9,852 |
Stock based compensation expense | 7,844 | 15,619 |
Noncash lease expense | 64,500 | 59,853 |
Impairment of equipment | 51,285 | |
Increase in slow moving inventory allowance | 533,524 | |
Write off of prepaid inventory deposit | 158,900 | |
Amortization of stock issued to Director's for loan | 48,996 | |
Accrued interest added to note payable related parties | 71,890 | 10,340 |
Increase in deferred income tax liabilities- long term | 11,425 | 14,255 |
(Increase) decrease in accounts receivable, net | (6,235) | 118,583 |
Increase in inventories | (436,595) | (500,145) |
(Increase) decrease in prepaid expenses | 304,758 | (425,126) |
(Increase) decrease in deposits | (12,891) | 14,412 |
Decrease in accounts payable and accrued liabilities | (229,112) | (287,139) |
Decrease in tax refundable | 284,873 | 576,445 |
Decrease in operating lease liabilities | (70,155) | (63,307) |
Net cash used in operating activities | (1,904,367) | (2,370,991) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (31,928) | |
Net cash used in investing activities | (31,928) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from sale of common stock and stock option exercise, net of costs | 1,436,641 | |
Proceeds from notes payable related parties | 500,000 | 1,020,000 |
Proceeds from notes payable unrelated party | 200,000 | |
Repurchase of shares | (11,662) | |
Net cash provided by financing activities | 688,338 | 2,456,641 |
Net Increase (Decrease) in Cash | (1,216,029) | 53,722 |
Cash at Beginning of Year | 1,277,492 | 1,223,770 |
Cash at End of Year | 61,463 | 1,277,492 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Interest cash paid | ||
Income taxes paid | ||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | ||
Stocks issued to Directors for loan fee | $ 48,996 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2022 | |
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, 2022 and 2021, include the accounts of the parent entity and its wholly-owned subsidiaries. All 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 and is incorporated under the laws of the State of Florida. 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. With the shift of manufacturing to Thailand from China, the CIHK operation was downsized and dormant as of March 2022 Since 2007, the Company, through Capstone Industries, 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 Lighting Products are targeted for applications such as home indoor and outdoor lighting and have different functionalities to meet consumer’s needs. Over the last few years there has been significant LED price erosion, which has commoditized LED consumer products. The LED category has matured and is no longer the innovative “must have” consumer product as in previous years. As such, the Company entered into another home goods product segment by developing a smart interactive mirror (“Smart Mirror”) for residential use. The Company planned for the Smart Mirror product launch in 2021, but its release to the retail market was delayed until March 2022 due to product development delays at the Company’s suppliers, resulting from the impact of COVID-19. The development of the Smart Mirrors is part of the Company’s strategic effort to find new product lines to replace the Lighting 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 development of a “Connected Surfaces” portfolio. The Connected Surfaces portfolio is designed to tap into consumer’s ever-expanding Internet of Things, wireless connected lifestyles prevalent today, with the initial product launch of the Smart Mirror, an internet connected and interactive mirror. The Company intends to expand the new line of Connected Surfaces for the next several years. The Company’s product roadmap outlines the plan for an additional product launch in 2023, branded the “Connected Chef”, a kitchen utility item, and this will continue to expand as consumer product acceptance validates its innovations. The Company believes this program will leverage existing relationships with its current retail partners and collectively contribute organic growth for the Company. The Company’s operations in 2022 consist of one reportable segment for financial reporting purposes: consumer home goods. Effects of COVID-19 During the year ended December 31, 2021, 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. Our business operations and financial performance for the years ended December 31, 2022 and 2021 were significantly and adversely impacted by the long term impacts of the global pandemic. The planned 2021 launch of the Smart Mirror was delayed until March 2022 due to COVID-19 related supply chain bottlenecks, shipping delays, and increased cost of freight containers. When the global pandemic restrictions gradually lifted during 2022, the consumer’s buying habits had been altered. After stocking up on home goods, home improvements and electronics during the stay-at-home orders, once those orders were lifted, consumers chose to spend their money on things to do versus things to have. This change in consumer spending on activities versus goods negatively impacted the 2022 launch of the Smart Mirror significantly. Sales of the Smart Mirror severely underperformed management’s expectations, generating approximately $74,000 in net sales for an approximate 105 units sold. In addition to the change in consumer spending, the Company changed its marketing course in late 2021 and 2022 by moving away from the Big Box retailers and put all of its marketing effort into the e-commerce marketing industry. The Company’s first parlay into e-commerce proved to be very costly and a difficult market to secure customer acquisition with the Company spending approximately $285,000 in 2022 on social media, advertising and trade shows, included in sales and marketing expense on the statement of operations as of December 31, 2022, which was an increase of $260,000 over the prior year. The Company has decided to re-focus their marketing strategy in 2023 and move back to brick and mortar and Big Box retailers, which was their core strength with the Lighting Products. 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. During the year ended December 31, 2022, the Company used cash in operations of approximately $ 1.9 2.7 448 9.1 1.3 61 We are seeking 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 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 received Purchase Order Funding Agreement note payable proceeds of $680,000 from related parties and $340,000 from unrelated parties during 2021. ● The Company received working capital note payable proceeds of $500,000 from related parties and $200, 000 from unrelated parties during 2022. Subsequent to December 31, 2022, and through the date of this filing, the Company has received an additional $183,500 in working capital note payable proceeds from related parties, See subsequent events, Note 7 . ● The Company has modified its marketing strategy for the Connected Surfaces product lines and will not pursue e-commerce selling directly to consumers as its primary strategy. In 2023, the Company will return to retail marketing targeting home good retailers and the Big Box warehouses, which was their core strength with the product lighting consumer goods. ● The Company has a mitigation plan in place that reduced discretionary expenses, executive managements’ compensation, resulted in the closure of our Hong Kong operation and also reduced future travel, lodging and show expenses. ● In order to conserve operating cashflow, the Company’s executive management has agreed to defer compensation until working capital is improved. See Note 4 and Note 7. Concentrations of Credit Risk Cash is deposited with major banks in the United States. From time to time, such deposits may be in excess of insured limit. Generally, the FDIC limit per bank is $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows. Accounts Receivable For product revenue, the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivables 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. 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, 2022 and 2021, management determined that the accounts receivable is fully collectible. As such, management has not recorded an allowance for doubtful accounts. As of December 31, 2022 and 2021, accounts receivable has not been collateralized against debt. Inventory The Company’s inventory, which consists of finished Thin Cast Smart Mirror products for resale to consumers by Capstone, is recorded at the lower of landed 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 2021, $150,874 of the initial Smart Mirror inventory order arrived at the Company’s fulfillment center damaged. This damaged inventory was expensed to cost of goods sold upon receipt. As of December 31, 2021, no reserve against the inventory was deemed necessary. During 2022, Management reviewed the valuation of inventory on hand as of the year ended December 31, 2022, and considered the need for a reserve for slow moving inventory due to sales not meeting projected forecasts during 2022. Management estimated a 50% reserve for inventory held in domestic warehouses and a 100% reserve for inventory held in international warehouses , which resulted in an increase in the inventory reserve of $533,254 . 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 expenses. As of December 31, 2022 and 2021, respectively, prepaid expenses were $37,090 and $500,748, respectively. During the year ended December 31, 2022, the Company wrote off a deposit on inventory in the amount of $158,900, which has been included in increase in inventory reserve and write offs on the consolidated statements of operations, as the Company does not anticipate completing the manufacturing of the product. 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: Schedule of Useful Lives, Depreciation of Property and Equipment Useful Life December 31, 2022 December 31, 2021 Computer equipment and software 3 7 $ 53,819 $ 53,819 Machinery and equipment 3 7 76,928 151,251 Furniture and fixtures 3 7 6,828 6,828 Less: Accumulated depreciation (86,290 ) (134,970 ) Less: Impairment of equipment (51,285 ) — Property and Equipment, Net $ — $ 76,928 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. 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. In 2022, the Company began a re-engineering of the Smart Mirror for its next rollout for version two and decided the current tooling and product molds will not manufacture the mold for version two. The Company determined its Smart Mirror tooling machine was impaired as of December 31, 2022 and recorded an impairment loss of $51,285, included in product development expenses on the consolidated statements o f operations . The Company wrote off fully depreciated fixed assets with a net book value of $74,323 during the year ended December 31, 2022. Depreciation and amortization expense was $ 25,643 9,852 Leases The Company accounts for leases under ASU 2016-02 which requires leases with durations greater than twelve months to be recognized on the balance sheet and disclose key information about the leasing arrangements. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheets. See Note 6 “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. The total impairment charges for the year ended December 31, 2022 and 2021 was $ 0 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, 2022 and 2021. 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, 2022 and 2021, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 608,288 199,733 888,288 199,733 Revenue Recognition The Company generates revenue from developing, marketing and selling consumer products through national and regional retailers. The Company’s products are targeted for applications such as home indoor and outdoor lighting as well as Internet-of-Thing devices and will have different functionalities. Capstone currently operates in the consumer electronic products category in the Unites States and in specific overseas markets. These products may be offered either under the Capstone brand or a private brand. 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. Revenue Recognition The Company recognizes lighting 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. Marketing allowances include the cost of underwriting an in-store instant rebate coupon or a target markdown allowance on a specific product. The Company retains these allowances for a period of 3 to 5 years in the event the customer chargebacks for a promotional allowance against an open invoice or submits an invoice for their claim. Cash discounts represent discounts offered to the retailer off outstanding accounts receivable in order to initiate early payment. These allowances are evaluated when our relationship with a customer is terminated, or we cease selling a specific product to a customer and may be released as other income if deemed not required. During the year ended December 31, 2022, the Company reversed into other income approximately $39,300 of previously accrued marketing and promotional allowances for previous product sales that are deemed highly unlikely for the customer to chargeback the Company due to the age of the allowance and the sales of the specific item ceasing . With the Company launching the Connected Surfaces Smart Mirror program, the direct-to-consumer orders are sold initially through e-commerce platforms. The Company also sells the Connected Surfaces Smart Mirror program through independent retailers. The Company will only bill the customer and recognize revenue upon the customer obtaining control of the Smart Mirror order which generally occurs upon delivery. 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: Schedule of Net Revenue by Major Source For the Year Ended For the Year Ended Capstone Brand % of Capstone Brand % of Lighting Products- U.S. $ 228,680 66 % $ 340,896 49 % Smart Mirror Products- U.S. 73,154 13 % 3,795 1 Lighting Products-International 44,640 21 % 341,163 50 % Total Revenue $ 346,474 100 % $ 685,854 100 % We provide our Smart Mirror customers with limited rights of return for non-conforming product warranty claims. We provide our Lighting Product 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. Smart Mirror customer orders are shipped within one to two days of receipt. Revenue is recorded upon processing of the sale with a third-party merchant processor such as Stripe or Amazon Pay. Lighting Product 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 Smart Mirror customers are charged when executing the e-commerce purchase. We do not have extended payment terms for our Smart Mirror customers. Our Lighting Product 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. Revenue Recognition 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 product 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 $ 26,700 8,000 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. For the new online Smart Mirror customers the product has a One Year Limited Warranty. The purchaser must register the product within 30 days from date of purchase with specific product information to activate the warranty. Capstone warrants the product to be free from defects in workmanship and materials for the warranty period. If the product fails during normal and proper use within the warranty period, Capstone at its discretion, will repair or replace the defective parts of the product, or the product itself. 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, 2022 and 2021 balance sheets: Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities December 31, December 31, 2022 2021 Balance at the beginning of the year $ 46,322 $ 56,465 Amount accrued 1,926 — Payments and credits (4,580 ) (10,142 ) Reversal of prior years accrual unclaimed (41,742 ) — Balance at year-end $ 1,926 $ 46,322 Advertising and Promotion Advertising and promotion costs, including advertising, social media, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expenses were $284,659 and $23,425 for the years ended December 31, 2022 and 2021, respectively. Product Development Our research and development team located in Thailand 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, 2022 and 2021, product development expenses were $ 203,751 308,823 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 $ 50,150 1,237 Accounts Payable and Accrued Liabilities The following table summarizes the components of accounts payable and accrued liabilities at December 31, 2022 and 2021: Schedule of Components of Accounts Payable and Accrued Liabilities December 31, December 31, 2022 2021 Accounts payable $ 38,056 $ 126,281 Accrued warranty reserve 1,926 46,322 Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities 269,457 365,948 Total $ 309,439 $ 538,551 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. 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 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, 2022 and 2021 was $ 7,844 15,619 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 valuation of inventories, impairments, valuation of deferred tax assets, and valuation of stock-based compensation. 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 consolidated financial statements. However, circumstances could change, and actual results could differ materially from those estimates. Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “ Financial Instruments – Credit Losses 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. |
CONCENTRATIONS OF CREDIT RISK A
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE | 12 Months Ended |
Dec. 31, 2022 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS 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 (“FDIC ”) 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, 2022, the Company did no t have cash balances in excess of FDIC 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. As the Company’s ecommerce revenue starts to increase the makeup of the accounts receivable change significantly. Stripe is the company that processes online payments for our website, we should receive payment from them within 3 days of the product shipment. If the product is shipped through Amazon it could take between 20 and 30 days for collection. For the years ended December 31, 2022 and 2021, approximately 13 50 Major Customers Schedule of Concentration of Credit Risk of Major Customers And Major Vendors Net Revenue % Net Accounts Receivable Year Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Customer A 58 % 50 % $ — $ — Customer B 13 % 37 % 7,716 — Total 71 % 87 % $ 7,716 — Major Vendors The Company had two vendors from which it purchased 73 22 59 23 As of December 31, 2022, and 2021 , approximately 8 73 Purchases % Accounts Payable Year Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Vendor A 73 % 59 % $ 3,200 $ 92,761 Vendor B 22 % 23 % — — Total 95 % 82 % $ 3,200 $ 92,761 |
NOTES PAYABLE TO RELATED AND UN
NOTES PAYABLE TO RELATED AND UNRELATED PARTIES | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE TO RELATED AND UNRELATED PARTIES | NOTE 3 – NOTES PAYABLE TO RELATED AND UNRELATED PARTIES Working Capital Loan with Directors On January 4, 2021, the Company entered a $750,000 working capital loan agreement with Directors, Stewart Wallach and Jeffrey Postal. The short-term facility ended June 30, 2021 (“Initial Period’). The Company had the option to extend the Initial Period for an additional six consecutive months, ending December 31, 2021, but decided not to renew. There were no advances taken by the Company on this working capital loan agreement. 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 issued 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. The Preferred Shares and any shares of Common Stock issued under the loan agreement are “restricted” securities under Rule 144 of the Securities Act of 1933, as amended. The Preferred Shares have no further rights, preferences, or privileges. The fair value of the Preferred Shares was determined to be $48,996 based on the number of shares of Common Stock to be issued upon conversion and the market price of the Common Stock on the date the working capital loan agreement was executed. The Company amortized the $48,996 Finance Fee into interest expense over the six months of the agreement. The Finance Fee was recognized as expense and included in interest expense on the consolidated statements of operations during the year ended December 31, 2021. See Note 5. Purchase Funding Agreement with Directors and Unrelated Party On July 2, 2021, the Board of Directors (“Board”) resolved that the Company required a purchase order funding facility to procure additional inventory to support the online Smart Mirror business. The Board resolved that certain Directors could negotiate the terms of a Purchase Order Funding Agreement for up to $1,020,000 with Directors S. Wallach and J. Postal and E. Fleisig, a natural person who is not affiliated with the Company. This agreement was finalized on October 18, 2021, and the Company has received the funding of $1,020,000 on October 18, 2021, which is due 18 months from receipt of the funds. Under this agreement the interest terms are 5% based on a 365- day year. At December 31, 2022 and 2021, the note payable of $1,030,340 includes accrued interest of $61,340 and $10,340, respectively. On February 13, 2023 the note payable was amended, extending the maturity date from April 13, 2023 to April 13, 2024. See Note 7. Therefore, the outstanding note balance and accrued interest have been included in long-term liabilities as of December 31, 2022. Working Capital Loan with Directors and Unrelated Party On May 1, 2022, the Company negotiated three $200,000 working capital funding agreements, to provide $600,000 in funding for daily operations. The Board resolved that certain Directors could negotiate the terms of a Working Capital Funding Agreement for up to a total of $600,000, with Directors S. Wallach (through Group Nexus, a company controlled by Mr. Wallach), J. Postal and Mouhaned Khoury, a natural person. On May 1 st On October 13, 2022, the Company negotiated a $50,000 Working Capital Funding agreement with Jeffrey Postal, a director, to provide funding for daily operations (the “Working Capital Funding Agreement”). The term of this agreement is 18 months and principal accrues simple interest at a rate of 5 percent per annum, maturing April 13, 2024. The loan may be prepaid in full or partially without any penalty. At December 31, 2022 the working capital funding agreement note payable principle balance was $50,000 with accrued interest of $541. On December 1, 2022, the Company negotiated a $50,000 Working Capital Funding agreement with Jeffrey Postal, a director, to provide funding for daily operations (the “Working Capital Funding Agreement”). The term of this agreement is 18 months and principal accrues simple interest at a rate of 5 percent per annum, maturing June 1, 2024. The loan may be prepaid in full or partially without any penalty. At December 31, 2022 the working capital funding agreement note payable principle balance was $50,000 with accrued interest of $212. As of December 31, 2022 and 2021, the Company had a total of $ 1,802,230 1,030,340 82,230 10,340 Notes Payable Year Ended December 31, 2022 2021 Current portion of notes payable and accrued interest, related parties $ 413,425 $ — Current portion of notes payable and accrued interest, unrelated parties 206,712 — Long-term portion of notes payable and accrued interest, related parties 821,647 1,030,340 Long-term portion of notes payable and accrued interest, unrelated parties 360,446 — Less accrued interest ( 82,230 ) ( 10,340 ) Total notes payable $ 1,720,000 $ 1,020,000 Management believes that without additional capital or increased cash generated from operations, 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. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 4 – COMMITMENTS AND CONTINGENCIES Operating Leases The Company has operating lease agreements for offices in Fort Lauderdale, Florida expiring June 2023. The Company’s principal executive office is located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. 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 at 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 years ended December 31, 2022 and 2021 amounted to $ 145,693 144,916 Schedule of Right Of Use Asset and Lease Liability Supplemental balance sheet information related to leases as of December 31, 2022 is as follows: Assets Operating lease – right-of-use asset $ 34,151 Liabilities Current portion of operating lease $ 37,535 Noncurrent Operating lease liability, net of current portion $ — Lease term and Discount Rate Weighted average remaining lease term (months) 6 Weighted average Discount Rate 7 % Scheduled maturities of operating lease liabilities outstanding as of December 31, 2022 are as follows: Scheduled Maturities of Operating Lease Liabilities Outstanding Year Operating 2023 $ 38,304 Total Minimum Future Payments 38,304 Less: Imputed Interest 769 Present Value of Lease Liabilities $ 37,535 The Company has a short-term storage rental with durations of less than twelve months with rent expense of $ 2,958 and $ 3,291 recorded in other general and administrative expenses as of December 31, 2022 and 2021, respectively. 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, 2023, the employment agreement was extended, See Note 7. On February 5, 2020, the Company entered into an Employment Agreement with James McClinton, whereby Mr. McClinton will be paid $191,442 per annum. The term of agreement began February 5, 2020 and ended February 5, 2022. On February 6, 2022, the Company entered into an Employment Agreement with James McClinton (Chief Financial Officer and Director), whereby Mr. McClinton was paid $736 per day. On November 30, 2022, Mr. McClinton retired from the Company. Beginning in 2020 and through 2022, executive salaries and consulting fees have been deferred from time to time to conserve cash flow. Deferrals amounted to approximately $252,000 and $140,000, respectively, and are included in accounts payable and accrued liabilities as of December 31, 2022 and 2021, respectively. Employment Agreements There is a provision in Mr. Wallach’s employment agreement, 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: Summary of Potential Payments upon Termination of Employment Salary Bonus Gross up Benefit Grand Total Stewart Wallach $ 301,521 $ — $ 12,600 $ 6,600 $ 320,721 Directors Compensation On July 5, 2022, The Board of Directors voted to suspend compensation to the independent directors for the remainder of the fiscal year 2022. 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, 2022 | |
Equity [Abstract] | |
STOCK TRANSACTIONS | NOTE 5 - STOCK TRANSACTIONS Stock Purchase Agreements On April 5, 2021, the Company entered into a Private Equity Placement with five separate securities purchase agreements (“SPAs”) whereby the Company privately placed an aggregate of 2,496,667 shares (“Shares”) of its common stock, $0.0001 par value per share, (“common stock”) for an aggregate purchase price $1,498,000. The five unrelated investors in the Private Placement consisted of four private equity funds and one individual – all being “accredited investors” (under Rule 501(a) of Regulation D under the Securities Act of 1933, as amended, (“Securities Act”). The $1,498,000 in proceeds from the Private Placement was used to purchase start up inventory for the Company’s Smart Mirror product line, as well as for advertising and working capital. Under the SPA, each investor is granted five-year piggyback, ‘best efforts’ registration rights with no penalties. The Shares are ‘restricted securities” under Rule 144 of the Securities Act and are subject to a minimum six month hold period. Based on representations made to the Company, the five investors do not constitute a “group” under 17 C.F.R. 240.13d-3 and have purchased the Shares solely as an investment for each investor’s own account. No individual investor owns more than 2% of the issued and outstanding shares of common stock. The Company engaged Wilmington Capital Securities, LLC, a FINRA and SEC registered broker to act as a placement agent to assist to raise capital through a private placement from one or more accredited investors. As compensation for their services Wilmington was paid 7% of the gross proceeds or $104,860 as a placement fee. The placement fee was offset against the $1,498,000 proceeds and the net amount of $1,393,140. This increased the Company’s additional paid in capital as presented on the accompanying condensed consolidated statement of stockholders’ equity statement as of December 31, 2021. In addition, the Company issued to Wilmington as consideration for their placement fee services, warrants equal to 8% of the shares issued or 199,733 warrants. The warrants can be exercised for five years from date of issuance, exercisable at a price per share equal to 110% or $0.66 of the price per share paid by the investors. Warrants On April 28, 2021, Company issued common stock warrants to purchase 199,733 shares of common stock at an exercise price of $0.66 and exercisable for five years from the issuance date. The warrants were issued to Wilmington Capital Securities, LLC, a FINRA and SEC registered broker under a financial services and placement agreement with a broker-dealer in connection with the Company’s placement of $1.4 million of restricted shares of common stock to five investors on April 5, 2021. The issuance of these warrants were made an exemption from registration under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act. The estimated fair value of these warrants since issued as issuance costs, had no impact on the Company’s consolidated financial statements as of December 31, 2021. As of December 31, 2022, and 2021, the Company had 199,733 Series “B-1” Preferred Stock On June 7, 2016, the Company authorized 3,333,333 of the B-1 preferred stock(“B-1”). The B-1 preferred stock are convertible into common shares, at a rate of 66.66 of common stock for each share of B-1 convertible preferred stock. The par value of the B-1 preferred shares is $0.0001. The B-1 shares shall not be entitled to any dividends and have no voting rights. In the event of a liquidation, the B-1 holders are entitled to distribution prior to common stockholders but not before any other preferred stockholders. On January 4, 2021, the Company entered a $750,000 working capital loan agreement with Directors, Stewart Wallach and Jeffrey Postal (“Lenders”). In consideration for the Lenders allowing for loan advances under the loan agreement, a below market rate of interest and the loan made on an unsecured basis, as payment of a finance fee for the loan, the Company issued a total of 7,500 shares of Company’s Series B-1 Convertible Preferred Stock, $0.0001 par value per share, (“Preferred Shares”) to each of the Lenders. Each preferred share converts into 66.66 shares of common stock at option of Lender. The Preferred Shares and any shares of common stock issued under the loan agreement are “restricted” securities under Rule 144 of the Securities Act of 1933, as amended. See Note 3. The B-1 shares have a liquidation preference of $1.0 per share or $15,000 as of December 31, 2022 and 2021. 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 6, 2021, the Company approved the following basic compensation arrangement for independent directors of the Company, effective August 6, 2021 and ending August 5, 2022: A total compensation value of $15,000 per annum, payable $750 monthly cash compensation or $9,000 or (60% of total value) and remainder $6,000 payable in non- qualified stock options vesting as of August 6, 2022 and with an exercise price equal to $1.4448 per share and exercisable for a period of five years. On July 15, 2021, Jeffrey Guzy a Company director, exercised a previously granted non-qualified stock option and purchased 100,000 shares of Company common stock for an aggregate purchase price of $43,500 or a per share price of $.435. The shares are restricted shares under federal securities laws and were acquired by independent Director Guzy. The proceeds will be used by the Company for general working capital to support the rollout of the Smart Mirror product line. As of December 31, 2022, there were 608,288 0.449 1.62 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, 2021: Risk free interest rate – 0.8 Expected term – 5 Expected volatility of stock – 140 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, 2022 and 2021, the Company recognized stock-based compensation expense of $ 7,844 5,619 The following table sets forth the Company’s stock options outstanding as of December 31, 2022 and 2021 and activity for the years then ended. Schedule of Stock Options Outstanding and Activity Shares Weighted Average Exercise Price Weighted Average Fair Value Weighted Average Remaining Contractual Term (Years) Intrinsic Value Outstanding, January 1, 2021 990,000 0.435 0.264 3.07 — Granted 8,288 1.448 1.620 4.6 — Exercised (100,000 ) — 0.390 1.40 — Forfeited/expired (10,000 ) 0.435 0.150 — — Outstanding, December 31, 2021 888,288 0.444 0.249 2.40 48,856 Granted — — — — — Exercised — — — — — Forfeited/expired (280,000 ) 0.435 0.150 — — Outstanding, December 31, 2022 608,288 0.449 0.18 1.62 (229,202 ) Vested/exercisable at December 31, 2022 608,288 0.449 0.18 1.62 — The following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 Plan: Schedule of 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 $ .435 200,000 0.60 $ .435 200,000 $ .435 200,000 1.60 $ .435 200,000 $ .435 200,000 2.60 $ .435 200,000 $ 1.448 8,288 3.60 $ 1.448 8,288 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 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 19, 2018, Company entered 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 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 May 6, 2021, the Company’s Board of Directors approved a further extension of Rule 10b-5, the Company’s stock purchase agreement with Wilson-Davis & Company, Inc. through August 31, 2022. During May and June 2022, the Company repurchased 66,167 shares of the Company’s outstanding common stock in the open market. The total purchase cost was $11,662. On July 7, 2022, the Board of Directors resolved to discontinue the stock purchase agreement. As of December 31, 2022, and December 31, 2021, a total of 816,167 750,000 119,402 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 6 - INCOME TAXES As of December 31, 2022, the Company had federal and state net operating loss carry forwards of approximately $ 5,028,000 offset up to 80% of future taxable income each year. 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 included 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 approximately $862,000 which was recorded in the first quarter 2020 of which a total of $806,800 was subsequently received. During the year ended December 31, 2022, the difference of $55,265 was reflected in income tax expense on the consolidated statement of operations. Tax benefit for income taxes differs from the amount computed using the federal US statutory income tax rate as follows: Schedule of income tax reconciliation Years Ended December 31, 2022 2021 Tax benefit at U.S. statutory rate $ (545,212 ) $ (409,203 ) State income taxes, net of federal benefit (153,085 ) (25,607 ) Tax effect of foreign operations 2,285 47,428 Non-deductible items (31,914 ) 5 Valuation allowance 740,508 420,570 Other 55,265 (18,138 ) Income Tax Expense (Benefit) $ 67,847 $ 15,055 The effective tax rate for the years ended December 31, 2022 and 2021, respectively, was ( 2.61 0.77 25.39 23.70 The income tax benefit for the years ended December 31, 2022 and 2021 consists of: Schedule of income tax benefit 2022 2021 Current: Federal $ 55,278 $ — State 800 823 Deferred: Federal (2,835 ) 18,070 State 14,604 (3,838 ) Income Tax Expense (Benefit) $ 67,847 $ 15,055 The tax effects of temporary differences and carry forwards that give rise to significant portions of deferred tax assets and liabilities consist of the following : Schedule of deferred tax assets and liabilities Years Ended December 31, Deferred tax assets: 2022 2021 Accruals and allowances $ 187,320 $ 82,906 Stock based compensation 70,559 63,999 Net operating allowances 1,338,208 705,996 1,596,087 852,901 Deferred tax liabilities: Intangible assets (285,379 ) (270,932 ) Valuation allowance (1,596,087 ) (855,579 ) Net deferred tax assets and liabilities $ (285,379 ) $ (273,610 ) 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, 2022 and 2021. 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 $285,000 and $274,000 is presented on the company’s balance sheet, respectively. The Company’s valuation allowance increased by $319,938 in 2022. 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, 2022 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 7 - SUBSEQUENT EVENTS Employment Agreements On February 5, 2023, 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, 2023 and ends February 5, 2025. 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. Effective January 1, 2023, Mr. Wallach’s salary was deferred until further notice. Related Party Notes Payable Subsequent to December 31, 2022, and through the date of this filing, the Company has received $183,500 in working capital note payable proceeds from Director, Stewart Wallach. Principal accrues simple interest at a rate of 5 percent per annum, maturing June 26, 2023 with the ability for the Company to request a 90-day extension. The loan may be prepaid in full or partially without any penalty. On January 3, 2023, the Company negotiated a $40,000 Working Capital Funding agreement with Director S. Wallach (through Group Nexus, a company controlled by Mr. Wallach), to provide funding for daily operations (the “Working Capital Loan Agreement”). The term was originally 60 days but allowed for the maturity date to be extended 90 days by the Company with written notice to Mr. Wallach. Therefore, the $40,000 working capital advance plus accrued interest matures June 2023. Principal accrues simple interest at a rate of 5 percent per annum. The loan may be prepaid in full or partially without any penalty. Extension of Purchase Order Funding Agreement On February 13, 2023, the $1,020,000 Purchase Order Funding Agreement note payable was amended, extending the maturity date from April 13, 2023 to April 13, 2024. All other terms remain unchanged (see Note 3) . |
ORGANIZATION AND SUMMARY OF S_2
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements for the years ended December 31, 2022 and 2021, include the accounts of the parent entity and its wholly-owned subsidiaries. All 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 and is incorporated under the laws of the State of Florida. 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. With the shift of manufacturing to Thailand from China, the CIHK operation was downsized and dormant as of March 2022 Since 2007, the Company, through Capstone Industries, 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 Lighting Products are targeted for applications such as home indoor and outdoor lighting and have different functionalities to meet consumer’s needs. Over the last few years there has been significant LED price erosion, which has commoditized LED consumer products. The LED category has matured and is no longer the innovative “must have” consumer product as in previous years. As such, the Company entered into another home goods product segment by developing a smart interactive mirror (“Smart Mirror”) for residential use. The Company planned for the Smart Mirror product launch in 2021, but its release to the retail market was delayed until March 2022 due to product development delays at the Company’s suppliers, resulting from the impact of COVID-19. The development of the Smart Mirrors is part of the Company’s strategic effort to find new product lines to replace the Lighting 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 development of a “Connected Surfaces” portfolio. The Connected Surfaces portfolio is designed to tap into consumer’s ever-expanding Internet of Things, wireless connected lifestyles prevalent today, with the initial product launch of the Smart Mirror, an internet connected and interactive mirror. The Company intends to expand the new line of Connected Surfaces for the next several years. The Company’s product roadmap outlines the plan for an additional product launch in 2023, branded the “Connected Chef”, a kitchen utility item, and this will continue to expand as consumer product acceptance validates its innovations. The Company believes this program will leverage existing relationships with its current retail partners and collectively contribute organic growth for the Company. The Company’s operations in 2022 consist of one reportable segment for financial reporting purposes: consumer home goods. |
Effects of COVID-19 | Effects of COVID-19 During the year ended December 31, 2021, 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. Our business operations and financial performance for the years ended December 31, 2022 and 2021 were significantly and adversely impacted by the long term impacts of the global pandemic. The planned 2021 launch of the Smart Mirror was delayed until March 2022 due to COVID-19 related supply chain bottlenecks, shipping delays, and increased cost of freight containers. When the global pandemic restrictions gradually lifted during 2022, the consumer’s buying habits had been altered. After stocking up on home goods, home improvements and electronics during the stay-at-home orders, once those orders were lifted, consumers chose to spend their money on things to do versus things to have. This change in consumer spending on activities versus goods negatively impacted the 2022 launch of the Smart Mirror significantly. Sales of the Smart Mirror severely underperformed management’s expectations, generating approximately $74,000 in net sales for an approximate 105 units sold. In addition to the change in consumer spending, the Company changed its marketing course in late 2021 and 2022 by moving away from the Big Box retailers and put all of its marketing effort into the e-commerce marketing industry. The Company’s first parlay into e-commerce proved to be very costly and a difficult market to secure customer acquisition with the Company spending approximately $285,000 in 2022 on social media, advertising and trade shows, included in sales and marketing expense on the statement of operations as of December 31, 2022, which was an increase of $260,000 over the prior year. The Company has decided to re-focus their marketing strategy in 2023 and move back to brick and mortar and Big Box retailers, which was their core strength with the Lighting Products. |
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. During the year ended December 31, 2022, the Company used cash in operations of approximately $ 1.9 2.7 448 9.1 1.3 61 We are seeking 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 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 received Purchase Order Funding Agreement note payable proceeds of $680,000 from related parties and $340,000 from unrelated parties during 2021. ● The Company received working capital note payable proceeds of $500,000 from related parties and $200, 000 from unrelated parties during 2022. Subsequent to December 31, 2022, and through the date of this filing, the Company has received an additional $183,500 in working capital note payable proceeds from related parties, See subsequent events, Note 7 . ● The Company has modified its marketing strategy for the Connected Surfaces product lines and will not pursue e-commerce selling directly to consumers as its primary strategy. In 2023, the Company will return to retail marketing targeting home good retailers and the Big Box warehouses, which was their core strength with the product lighting consumer goods. ● The Company has a mitigation plan in place that reduced discretionary expenses, executive managements’ compensation, resulted in the closure of our Hong Kong operation and also reduced future travel, lodging and show expenses. ● In order to conserve operating cashflow, the Company’s executive management has agreed to defer compensation until working capital is improved. See Note 4 and Note 7. |
Concentrations of Credit Risk | Concentrations of Credit Risk Cash is deposited with major banks in the United States. From time to time, such deposits may be in excess of insured limit. Generally, the FDIC limit per bank is $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows. |
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 receivables 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. 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, 2022 and 2021, management determined that the accounts receivable is fully collectible. As such, management has not recorded an allowance for doubtful accounts. As of December 31, 2022 and 2021, accounts receivable has not been collateralized against debt. |
Inventory | Inventory The Company’s inventory, which consists of finished Thin Cast Smart Mirror products for resale to consumers by Capstone, is recorded at the lower of landed 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 2021, $150,874 of the initial Smart Mirror inventory order arrived at the Company’s fulfillment center damaged. This damaged inventory was expensed to cost of goods sold upon receipt. As of December 31, 2021, no reserve against the inventory was deemed necessary. During 2022, Management reviewed the valuation of inventory on hand as of the year ended December 31, 2022, and considered the need for a reserve for slow moving inventory due to sales not meeting projected forecasts during 2022. Management estimated a 50% reserve for inventory held in domestic warehouses and a 100% reserve for inventory held in international warehouses , which resulted in an increase in the inventory reserve of $533,254 . |
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 expenses. As of December 31, 2022 and 2021, respectively, prepaid expenses were $37,090 and $500,748, respectively. During the year ended December 31, 2022, the Company wrote off a deposit on inventory in the amount of $158,900, which has been included in increase in inventory reserve and write offs on the consolidated statements of operations, as the Company does not anticipate completing the manufacturing of the product. |
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: Schedule of Useful Lives, Depreciation of Property and Equipment Useful Life December 31, 2022 December 31, 2021 Computer equipment and software 3 7 $ 53,819 $ 53,819 Machinery and equipment 3 7 76,928 151,251 Furniture and fixtures 3 7 6,828 6,828 Less: Accumulated depreciation (86,290 ) (134,970 ) Less: Impairment of equipment (51,285 ) — Property and Equipment, Net $ — $ 76,928 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. 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. In 2022, the Company began a re-engineering of the Smart Mirror for its next rollout for version two and decided the current tooling and product molds will not manufacture the mold for version two. The Company determined its Smart Mirror tooling machine was impaired as of December 31, 2022 and recorded an impairment loss of $51,285, included in product development expenses on the consolidated statements o f operations . The Company wrote off fully depreciated fixed assets with a net book value of $74,323 during the year ended December 31, 2022. Depreciation and amortization expense was $ 25,643 9,852 |
Leases | Leases The Company accounts for leases under ASU 2016-02 which requires leases with durations greater than twelve months to be recognized on the balance sheet and disclose key information about the leasing arrangements. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the consolidated balance sheets. See Note 6 “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. The total impairment charges for the year ended December 31, 2022 and 2021 was $ 0 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, 2022 and 2021. 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, 2022 and 2021, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 608,288 199,733 888,288 199,733 |
Revenue Recognition | Revenue Recognition The Company generates revenue from developing, marketing and selling consumer products through national and regional retailers. The Company’s products are targeted for applications such as home indoor and outdoor lighting as well as Internet-of-Thing devices and will have different functionalities. Capstone currently operates in the consumer electronic products category in the Unites States and in specific overseas markets. These products may be offered either under the Capstone brand or a private brand. 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. Revenue Recognition The Company recognizes lighting 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. Marketing allowances include the cost of underwriting an in-store instant rebate coupon or a target markdown allowance on a specific product. The Company retains these allowances for a period of 3 to 5 years in the event the customer chargebacks for a promotional allowance against an open invoice or submits an invoice for their claim. Cash discounts represent discounts offered to the retailer off outstanding accounts receivable in order to initiate early payment. These allowances are evaluated when our relationship with a customer is terminated, or we cease selling a specific product to a customer and may be released as other income if deemed not required. During the year ended December 31, 2022, the Company reversed into other income approximately $39,300 of previously accrued marketing and promotional allowances for previous product sales that are deemed highly unlikely for the customer to chargeback the Company due to the age of the allowance and the sales of the specific item ceasing . With the Company launching the Connected Surfaces Smart Mirror program, the direct-to-consumer orders are sold initially through e-commerce platforms. The Company also sells the Connected Surfaces Smart Mirror program through independent retailers. The Company will only bill the customer and recognize revenue upon the customer obtaining control of the Smart Mirror order which generally occurs upon delivery. 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: Schedule of Net Revenue by Major Source For the Year Ended For the Year Ended Capstone Brand % of Capstone Brand % of Lighting Products- U.S. $ 228,680 66 % $ 340,896 49 % Smart Mirror Products- U.S. 73,154 13 % 3,795 1 Lighting Products-International 44,640 21 % 341,163 50 % Total Revenue $ 346,474 100 % $ 685,854 100 % We provide our Smart Mirror customers with limited rights of return for non-conforming product warranty claims. We provide our Lighting Product 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. Smart Mirror customer orders are shipped within one to two days of receipt. Revenue is recorded upon processing of the sale with a third-party merchant processor such as Stripe or Amazon Pay. Lighting Product 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 Smart Mirror customers are charged when executing the e-commerce purchase. We do not have extended payment terms for our Smart Mirror customers. Our Lighting Product 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. Revenue Recognition 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 product 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 $ 26,700 8,000 |
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. For the new online Smart Mirror customers the product has a One Year Limited Warranty. The purchaser must register the product within 30 days from date of purchase with specific product information to activate the warranty. Capstone warrants the product to be free from defects in workmanship and materials for the warranty period. If the product fails during normal and proper use within the warranty period, Capstone at its discretion, will repair or replace the defective parts of the product, or the product itself. 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, 2022 and 2021 balance sheets: Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities December 31, December 31, 2022 2021 Balance at the beginning of the year $ 46,322 $ 56,465 Amount accrued 1,926 — Payments and credits (4,580 ) (10,142 ) Reversal of prior years accrual unclaimed (41,742 ) — Balance at year-end $ 1,926 $ 46,322 |
Advertising and Promotion | Advertising and Promotion Advertising and promotion costs, including advertising, social media, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expenses were $284,659 and $23,425 for the years ended December 31, 2022 and 2021, respectively. |
Product Development | Product Development Our research and development team located in Thailand 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, 2022 and 2021, product development expenses were $ 203,751 308,823 |
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 $ 50,150 1,237 |
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, 2022 and 2021: Schedule of Components of Accounts Payable and Accrued Liabilities December 31, December 31, 2022 2021 Accounts payable $ 38,056 $ 126,281 Accrued warranty reserve 1,926 46,322 Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities 269,457 365,948 Total $ 309,439 $ 538,551 |
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. 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, 2022 and 2021 was $ 7,844 15,619 |
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 valuation of inventories, impairments, valuation of deferred tax assets, and valuation of stock-based compensation. 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 consolidated financial statements. However, circumstances could change, and actual results could differ materially from those estimates. |
Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “ Financial Instruments – Credit Losses 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, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Useful Lives, Depreciation of Property and Equipment | Schedule of Useful Lives, Depreciation of Property and Equipment Useful Life December 31, 2022 December 31, 2021 Computer equipment and software 3 7 $ 53,819 $ 53,819 Machinery and equipment 3 7 76,928 151,251 Furniture and fixtures 3 7 6,828 6,828 Less: Accumulated depreciation (86,290 ) (134,970 ) Less: Impairment of equipment (51,285 ) — Property and Equipment, Net $ — $ 76,928 |
Schedule of Net Revenue by Major Source | Schedule of Net Revenue by Major Source For the Year Ended For the Year Ended Capstone Brand % of Capstone Brand % of Lighting Products- U.S. $ 228,680 66 % $ 340,896 49 % Smart Mirror Products- U.S. 73,154 13 % 3,795 1 Lighting Products-International 44,640 21 % 341,163 50 % Total Revenue $ 346,474 100 % $ 685,854 100 % |
Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities | Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities December 31, December 31, 2022 2021 Balance at the beginning of the year $ 46,322 $ 56,465 Amount accrued 1,926 — Payments and credits (4,580 ) (10,142 ) Reversal of prior years accrual unclaimed (41,742 ) — Balance at year-end $ 1,926 $ 46,322 |
Schedule of Components of Accounts Payable and Accrued Liabilities | Schedule of Components of Accounts Payable and Accrued Liabilities December 31, December 31, 2022 2021 Accounts payable $ 38,056 $ 126,281 Accrued warranty reserve 1,926 46,322 Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities 269,457 365,948 Total $ 309,439 $ 538,551 |
CONCENTRATIONS OF CREDIT RISK_2
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Risks and Uncertainties [Abstract] | |
Schedule of Concentration of Credit Risk of Major Customers And Major Vendors | Schedule of Concentration of Credit Risk of Major Customers And Major Vendors Net Revenue % Net Accounts Receivable Year Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Customer A 58 % 50 % $ — $ — Customer B 13 % 37 % 7,716 — Total 71 % 87 % $ 7,716 — Major Vendors The Company had two vendors from which it purchased 73 22 59 23 As of December 31, 2022, and 2021 , approximately 8 73 Purchases % Accounts Payable Year Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Vendor A 73 % 59 % $ 3,200 $ 92,761 Vendor B 22 % 23 % — — Total 95 % 82 % $ 3,200 $ 92,761 |
NOTES PAYABLE TO RELATED AND _2
NOTES PAYABLE TO RELATED AND UNRELATED PARTIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE TO RELATED PARTIES | Notes Payable Year Ended December 31, 2022 2021 Current portion of notes payable and accrued interest, related parties $ 413,425 $ — Current portion of notes payable and accrued interest, unrelated parties 206,712 — Long-term portion of notes payable and accrued interest, related parties 821,647 1,030,340 Long-term portion of notes payable and accrued interest, unrelated parties 360,446 — Less accrued interest ( 82,230 ) ( 10,340 ) Total notes payable $ 1,720,000 $ 1,020,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Right Of Use Asset and Lease Liability | Schedule of Right Of Use Asset and Lease Liability Supplemental balance sheet information related to leases as of December 31, 2022 is as follows: Assets Operating lease – right-of-use asset $ 34,151 Liabilities Current portion of operating lease $ 37,535 Noncurrent Operating lease liability, net of current portion $ — Lease term and Discount Rate Weighted average remaining lease term (months) 6 Weighted average Discount Rate 7 % |
Scheduled Maturities of Operating Lease Liabilities Outstanding | Scheduled Maturities of Operating Lease Liabilities Outstanding Year Operating 2023 $ 38,304 Total Minimum Future Payments 38,304 Less: Imputed Interest 769 Present Value of Lease Liabilities $ 37,535 |
Summary of Potential Payments upon Termination of Employment | Summary of Potential Payments upon Termination of Employment Salary Bonus Gross up Benefit Grand Total Stewart Wallach $ 301,521 $ — $ 12,600 $ 6,600 $ 320,721 |
STOCK TRANSACTIONS (Tables)
STOCK TRANSACTIONS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Equity [Abstract] | |
Schedule of Stock Options Outstanding and Activity | Schedule of Stock Options Outstanding and Activity Shares Weighted Average Exercise Price Weighted Average Fair Value Weighted Average Remaining Contractual Term (Years) Intrinsic Value Outstanding, January 1, 2021 990,000 0.435 0.264 3.07 — Granted 8,288 1.448 1.620 4.6 — Exercised (100,000 ) — 0.390 1.40 — Forfeited/expired (10,000 ) 0.435 0.150 — — Outstanding, December 31, 2021 888,288 0.444 0.249 2.40 48,856 Granted — — — — — Exercised — — — — — Forfeited/expired (280,000 ) 0.435 0.150 — — Outstanding, December 31, 2022 608,288 0.449 0.18 1.62 (229,202 ) Vested/exercisable at December 31, 2022 608,288 0.449 0.18 1.62 — |
Schedule of Options Granted, Outstanding and Exercisable Under the 2005 Plan | Schedule of 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 $ .435 200,000 0.60 $ .435 200,000 $ .435 200,000 1.60 $ .435 200,000 $ .435 200,000 2.60 $ .435 200,000 $ 1.448 8,288 3.60 $ 1.448 8,288 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax reconciliation | Schedule of income tax reconciliation Years Ended December 31, 2022 2021 Tax benefit at U.S. statutory rate $ (545,212 ) $ (409,203 ) State income taxes, net of federal benefit (153,085 ) (25,607 ) Tax effect of foreign operations 2,285 47,428 Non-deductible items (31,914 ) 5 Valuation allowance 740,508 420,570 Other 55,265 (18,138 ) Income Tax Expense (Benefit) $ 67,847 $ 15,055 |
Schedule of income tax benefit | Schedule of income tax benefit 2022 2021 Current: Federal $ 55,278 $ — State 800 823 Deferred: Federal (2,835 ) 18,070 State 14,604 (3,838 ) Income Tax Expense (Benefit) $ 67,847 $ 15,055 |
Schedule of deferred tax assets and liabilities | Schedule of deferred tax assets and liabilities Years Ended December 31, Deferred tax assets: 2022 2021 Accruals and allowances $ 187,320 $ 82,906 Stock based compensation 70,559 63,999 Net operating allowances 1,338,208 705,996 1,596,087 852,901 Deferred tax liabilities: Intangible assets (285,379 ) (270,932 ) Valuation allowance (1,596,087 ) (855,579 ) Net deferred tax assets and liabilities $ (285,379 ) $ (273,610 ) 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, 2022 and 2021. 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 $285,000 and $274,000 is presented on the company’s balance sheet, respectively. The Company’s valuation allowance increased by $319,938 in 2022. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes. |
ORGANIZATION AND SUMMARY OF S_4
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Property, Plant and Equipment [Line Items] | ||
Less: Accumulated depreciation | $ (86,290) | $ (134,970) |
Less: Impairment of long-lived asset | (51,285) | |
Property and Equipment, Net | 76,928 | |
Computer Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and Equipment, Gross | $ 53,819 | 53,819 |
Computer Equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 3 years | |
Computer Equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 7 years | |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and Equipment, Gross | $ 76,928 | 151,251 |
Machinery and Equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 3 years | |
Machinery and Equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 7 years | |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and Equipment, Gross | $ 6,828 | $ 6,828 |
Furniture and Fixtures [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 3 years | |
Furniture and Fixtures [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 7 years |
ORGANIZATION AND SUMMARY OF S_5
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 346,474 | $ 685,854 |
Capstone Brand [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 346,474 | $ 685,854 |
Percentage of revenue | 100% | 100% |
Geographic Distribution, Domestic [Member] | Capstone Brand [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 228,680 | $ 340,896 |
Percentage of revenue | 66% | 49% |
Smart Mirror Products U S [Member] | Capstone Brand [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 73,154 | $ 3,795 |
Percentage of revenue | 13% | 1% |
Geographic Distribution, Foreign [Member] | Capstone Brand [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 44,640 | $ 341,163 |
Percentage of revenue | 21% | 50% |
ORGANIZATION AND SUMMARY OF S_6
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Balance at the beginning of the year | $ 46,322 | $ 56,465 |
Amount accrued | 1,926 | |
Payments and credits | (4,580) | (10,142) |
Reversal of prior years accrual unclaimed | (41,742) | |
Balance at end of the year | $ 1,926 | $ 46,322 |
ORGANIZATION AND SUMMARY OF S_7
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Accounts payable | $ 38,056 | $ 126,281 | |
Accrued warranty reserve | 1,926 | 46,322 | $ 56,465 |
Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities | 269,457 | 365,948 | |
Total | $ 309,439 | $ 538,551 |
ORGANIZATION AND SUMMARY OF S_8
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Cash generated from operations | $ 1,900,000 | |
Net loss | 2,700,000 | |
Working capital | 448,000 | |
Accumulated Deficit | 9,100,000 | |
Cash | 61,000 | $ 1,300,000 |
Depreciation and amortization expense | 25,643 | 9,852 |
Impairment charges on goodwill | 0 | 0 |
Reduction of accrued allowances | 26,700 | 8,000 |
Research and Development Expense | 203,751 | 308,823 |
Selling Expense | 50,150 | 1,237 |
Stock-based compensation expense | $ 7,844 | $ 15,619 |
Options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares | 608,288 | 888,288 |
Warrant [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive shares | 199,733 | 199,733 |
CONCENTRATIONS OF CREDIT RISK_3
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Concentration Risk [Line Items] | ||
Accounts Payable | $ 38,056 | $ 126,281 |
Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | ||
Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | 7,716 | |
Customer Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | 7,716 | |
Vendor A [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | 3,200 | 92,761 |
Vendor B [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | ||
Supplier Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | $ 3,200 | $ 92,761 |
Revenue Benchmark [Member] | Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 58% | 50% |
Revenue Benchmark [Member] | Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 13% | 37% |
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 71% | 87% |
Cost of Goods and Service Benchmark [Member] | Vendor A [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 73% | 59% |
Cost of Goods and Service Benchmark [Member] | Vendor B [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 22% | 23% |
Cost of Goods and Service Benchmark [Member] | Supplier Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 95% | 82% |
CONCENTRATIONS OF CREDIT RISK_4
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Concentration Risk [Line Items] | ||
FIDC insurance limits | $ 0 | |
Revenue Benchmark [Member] | Geographic Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 13% | 50% |
Cost of Goods and Service Benchmark [Member] | One Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 73% | 59% |
Cost of Goods and Service Benchmark [Member] | Two Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 22% | 23% |
Accounts Payable [Member] | One Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 8% | 73% |
NOTES PAYABLE TO RELATED PARTIE
NOTES PAYABLE TO RELATED PARTIES (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Debt Disclosure [Abstract] | ||
Current portion of notes payable and accrued interest, related parties | $ 413,425 | |
Current portion of notes payable and accrued interest, unrelated parties | 206,712 | |
Long-term portion of notes payable and accrued interest, related parties | 821,647 | 1,030,340 |
Long-term portion of notes payable and accrued interest, unrelated parties | 360,446 | |
Less accrued interest | 82,230 | 10,340 |
Total notes payable | $ 1,720,000 | $ 1,020,000 |
NOTES PAYABLE TO RELATED AND _3
NOTES PAYABLE TO RELATED AND UNRELATED PARTIES (Details Narrative) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Debt Disclosure [Abstract] | ||
Notes payable related parties | $ 1,802,230 | $ 1,030,340 |
Accrued interest | $ 82,230 | $ 10,340 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Operating lease - right-of-use asset | $ 34,151 | $ 98,651 |
Current portion of operating lease | 37,535 | 70,157 |
Operating lease liability, net of current portion | $ 37,533 | |
Commitments [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Operating lease - right-of-use asset | 34,151 | |
Current portion of operating lease | 37,535 | |
Operating lease liability, net of current portion | ||
Weighted average remaining lease term (months) operating lease | 6 years | |
Operating lease | 7% |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details 1) | Dec. 31, 2022 USD ($) |
Year | |
2023 | $ 38,304 |
Total Minimum Future Payments | 38,304 |
Less: Imputed Interest | 769 |
Present Value of Lease Liabilities | $ 37,535 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details 2) - Stewart Wallach [Member] | Dec. 31, 2022 USD ($) |
Defined Benefit Plan Disclosure [Line Items] | |
Salary Severance | $ 301,521 |
Bonus Severance | |
Gross up Taxes | 12,600 |
Benefit Compensation | 6,600 |
Grand Total | $ 320,721 |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Other Commitments [Line Items] | ||
Operating Leases, Rent Expense | $ 145,693 | $ 144,916 |
Licensing Agreement With Floorcare Company | ||
Other Commitments [Line Items] | ||
Royalty Expense | $ 2,958 | $ 3,291 |
STOCK TRANSACTIONS (Details)
STOCK TRANSACTIONS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Equity [Abstract] | ||
Shares Outstanding, beginning | 888,288 | 990,000 |
Weighted Average Exercise Price Outstanding, Beginning | $ 0.444 | $ 0.435 |
Weighted Average Fair Value Outstanding, beginning | $ 0.249 | $ 0.264 |
Weighted Average Remaining Contractual Term (Years) Outstanding, beginning | 2 years 4 months 24 days | 3 years 25 days |
Intrinsic Value Outstanding, beginning | $ 48,856 | |
Shares Granted | 8,288 | |
Weighted Average Exercise Price Granted | $ 1.448 | |
Weighted Average Fair Value Granted | $ 1.620 | |
Weighted Average Remaining Contractual Term (Years) Granted | 4 years 7 months 6 days | |
Intrinsic Value Granted | ||
Shares Exercised | (100,000) | |
Weighted Average Exercise Price Exercised | ||
Weighted Average Fair Value Exercised | $ 0.390 | |
Weighted Average Remaining Contractual Term (Years) Exercised | 1 year 4 months 24 days | |
Intrinsic Value Exercised | ||
Shares Forfeited/expired | (280,000) | (10,000) |
Weighted Average Exercise Price Forfeited/expired | $ 0.435 | $ 0.435 |
Weighted Average Fair Value Forfeited/expired | $ 0.150 | $ 0.150 |
Intrinsic Value Forfeited/expired | ||
Shares Outstanding, end | 608,288 | 888,288 |
Weighted Average Exercise Price Outstanding, end | $ 0.449 | $ 0.444 |
Weighted Average Fair Value Outstanding, end | $ 0.18 | $ 0.249 |
Weighted Average Remaining Contractual Term (Years) Outstanding, end | 1 year 7 months 13 days | |
Intrinsic Value Outstanding, end | $ (229,202) | $ 48,856 |
Shares Vested/exercisable | 608,288 | |
Weighted Average Exercise Price Vested/exercisable | $ 0.449 | |
Weighted Average Fair Value Vested/exercisable | $ 0.18 | |
Weighted Average Remaining Contractual Term (Years) Vested/exercisable | 1 year 7 months 13 days | |
Intrinsic Value Vested/exercisable |
STOCK TRANSACTIONS (Details 1)
STOCK TRANSACTIONS (Details 1) - 2005 Plan [Member] | 12 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Exercise Price 1 [Member] | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price 2 [Member] | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
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 3 [Member] | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
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 4 [Member] | |
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 1.448 |
Options Outstanding | shares | 8,288 |
Remaining Contractual Life in Years | 3 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 1.448 |
Number of Options Currently Exercisable | shares | 8,288 |
STOCK TRANSACTIONS (Details Nar
STOCK TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Warrants outstanding | $ 199,733 | $ 199,733 | |
Stock options outstanding | 608,288 | 888,288 | 990,000 |
Weighted average exercise price of options | $ 0.449 | $ 0.444 | $ 0.435 |
Term of options | 1 year 7 months 13 days | ||
Stock-based compensation expense | $ 7,844 | $ 15,619 | |
Stock Repurchase Plan [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Repurchase of shares, shares | 816,167 | 750,000 | |
Repurchase of shares, value | $ 119,402 | $ 119,402 | |
Equity Option [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Stock options outstanding | 608,288 | ||
Weighted average exercise price of options | $ 0.449 | ||
Term of options | 1 year 7 months 13 days | ||
Risk free interest rate | 0.80% | ||
Expected term | 5 years | ||
Expected volatility of stock | 140% | ||
Expected dividend yield | 0% | ||
Expected dividend yield | $ 2 | ||
Number of Steps | 150 | ||
Stock-based compensation expense | $ 7,844 | $ 5,619 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | ||
Tax benefit at U.S. statutory rate | $ (545,212) | $ (409,203) |
State income taxes, net of federal benefit | (153,085) | (25,607) |
Tax effect of foreign operations | 2,285 | 47,428 |
Non-deductible items | (31,914) | 5 |
Valuation allowance | 740,508 | 420,570 |
Other | 55,265 | (18,138) |
Income Tax Expense (Benefit) | $ 67,847 | $ 15,055 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Current: | ||
Federal | $ 55,278 | |
State | 800 | 823 |
Deferred: | ||
Federal | (2,835) | 18,070 |
State | 14,604 | (3,838) |
Income Tax Expense (Benefit) | $ 67,847 | $ 15,055 |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets: | ||
Accruals and allowances | $ 187,320 | $ 82,906 |
Stock based compensation | 70,559 | 63,999 |
Net operating allowances | 1,338,208 | 705,996 |
Deferred Tax Assets, Gross | 1,596,087 | 852,901 |
Deferred tax liabilities: | ||
Intangible assets | (285,379) | (270,932) |
Valuation allowance | (1,596,087) | (855,579) |
Net deferred tax assets and liabilities | $ (285,379) | $ (273,610) |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Operating Loss Carryforwards [Line Items] | ||
Operating Loss Carryforwards, Limitations on Use | offset up to 80% of future taxable income each year. | |
Effective income tax rate | 2.61% | 0.77% |
Statutory income tax rate | 25.39% | 23.70% |
Statel Net Operating Loss Carry Forward [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating Loss Carryforwards | $ 5,028,000 |