Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2015shares | |
Document and Entity Information | |
Entity Registrant Name | CAPSTONE COMPANIES, INC. |
Entity Trading Symbol | capc |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2015 |
Amendment Flag | false |
Entity Central Index Key | 814,926 |
Current Fiscal Year End Date | --12-31 |
Entity Common Stock, Shares Outstanding | 721,989,957 |
Entity Filer Category | Smaller Reporting Company |
Entity Current Reporting Status | Yes |
Entity Voluntary Filers | No |
Entity Well-known Seasoned Issuer | No |
Document Fiscal Year Focus | 2,015 |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash | $ 258,321 | $ 313,856 |
Accounts receivable, net | 7,551,247 | 977,597 |
Advances | 0 | 14,456 |
Inventory | 90,649 | 128,984 |
Prepaid expenses | 729,359 | 358,046 |
Total Current Assets | 8,629,576 | 1,792,939 |
Fixed Assets: | ||
Computer equipment and software | 19,767 | 12,272 |
Machinery and equipment | 350,393 | 299,693 |
Furniture and fixtures | 5,665 | 5,665 |
Less: Accumulated depreciation | (272,901) | (223,589) |
Total Fixed Assets | 102,924 | 94,041 |
Other Non-current Assets: | ||
Deposit | 12,193 | 12,193 |
Investment (AC Kinetics) | 500,000 | 500,000 |
Goodwill | 1,936,020 | 1,936,020 |
Total Other Non-current Assets | 2,448,213 | 2,448,213 |
Total Assets | 11,180,713 | 4,335,193 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 1,812,358 | 644,629 |
Note payable - Sterling Factors | 4,183,663 | 286,945 |
Notes and loans payable to related parties - current maturities | 3,485,064 | 1,936,679 |
Total Current Liabilities | $ 9,481,085 | $ 2,868,253 |
Commitments and Contingent Liabilities (Note 5) | ||
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 100,000,000 shares, issued -0- shares | $ 0 | $ 0 |
Preferred Stock, Series B-1, par value $.0001 per share, authorized 50,000,000 shares, issued -0- shares | 0 | 0 |
Preferred Stock, Series C, par value $1.00 per share, authorized 1,000 shares, issued -0- shares at September 30, 2015 and 1,000 shares at December 31, 2014 | 0 | 1,000 |
Common Stock, par value $.0001 per share, authorized 850,000,000 shares, issued 721,989,957 shares at September 30, 2015 and 654,010,532 at December 31, 2014 | 72,199 | 65,401 |
Additional paid-in capital | 7,262,479 | 7,187,058 |
Accumulated deficit | (5,635,050) | (5,786,519) |
Total Stockholders' Equity | 1,699,628 | 1,466,940 |
Total Liabilities and Stockholders' Equity | $ 11,180,713 | $ 4,335,193 |
CONSOLIDATED BALANCE SHEETS PAR
CONSOLIDATED BALANCE SHEETS PARENTHETICALS - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Parentheticals | ||
Preferred Stock, Series A, par value | $ 0.001 | $ 0.001 |
Preferred Stock, Series A, shares authorized | 100,000,000 | 100,000,000 |
Preferred Stock, Series A, shares issued | 0 | 0 |
Preferred Stock, Series B-1, par value | $ 0.0001 | $ 0.0001 |
Preferred Stock, Series B-1, shares authorized | 50,000,000 | 50,000,000 |
Preferred Stock, Series B-1, shares issued | 0 | 0 |
Preferred Stock, Series C, par value | $ 1 | $ 1 |
Preferred Stock, Series C, shares authorized | 1,000 | 1,000 |
Preferred Stock, Series C, shares issued | 0 | 1,000 |
Common Stock, par value | $ 0.0001 | $ 0.0001 |
Common Stock, shares authorized | 850,000,000 | 850,000,000 |
Common Stock, shares issued | 721,989,957 | 654,010,532 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues {1} | ||||
Revenues, net | $ 7,747,450 | $ 7,738,884 | $ 8,750,951 | $ 13,008,632 |
Cost of sales | (5,767,306) | (6,621,599) | (6,410,197) | (10,231,965) |
Gross Profit | 1,980,144 | 1,117,285 | 2,340,754 | 2,776,667 |
Operating Expenses: | ||||
Sales and marketing | 16,716 | 81,083 | 185,229 | 455,082 |
Compensation | 313,953 | 375,807 | 1,007,341 | 1,045,937 |
Professional fees | 56,947 | 38,656 | 202,511 | 144,681 |
Product development | 74,747 | 95,410 | 181,157 | 312,341 |
Other general and administrative | 158,796 | 168,260 | 407,114 | 455,243 |
Total Operating Expenses | 621,159 | 759,216 | 1,983,352 | 2,413,284 |
Net Operating Income | 1,358,985 | 358,069 | 357,402 | 363,383 |
Other Income (Expense): | ||||
Interest expense | (111,654) | (69,448) | (205,933) | (223,018) |
Total Other Income (Expense) | (111,654) | (69,448) | (205,933) | (223,018) |
Income Before Tax Provision | 1,247,331 | 288,621 | 151,469 | 140,365 |
Provision for Income Tax | 0 | (2,129) | 0 | (6,387) |
Net Income | $ 1,247,331 | $ 286,492 | $ 151,469 | $ 133,978 |
Net Income per Common Share | ||||
Basic | $ 0 | $ 0 | $ 0 | $ 0 |
Diluted | $ 0 | $ 0 | $ 0 | $ 0 |
Weighted Average Shares Outstanding | ||||
Basic | 721,989,957 | 654,010,532 | 690,863,847 | 655,046,444 |
Diluted | 721,989,957 | 809,072,109 | 690,863,847 | 809,758,922 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income | $ 151,469 | $ 133,978 |
Adjustments necessary to reconcile net income to net cash (used in) operating activities: | ||
Stock cancellation | 0 | (28,876) |
Depreciation and amortization | 49,311 | 60,566 |
Compensation expense from stock options | 81,219 | 43,500 |
Accrued sales allowance | (196,978) | 517,269 |
(Increase) decrease in accounts receivable | (6,376,672) | (1,189,147) |
(Increase) decrease in inventory | 38,337 | 84,915 |
(Increase) decrease in prepaid expenses | (371,317) | 680,306 |
(Increase) decrease in other assets | 14,456 | (12,193) |
Increase (decrease) in accounts payable and accrued liabilities | 1,167,729 | 968,744 |
Increase (decrease) in accrued interest on notes payable | 148,385 | 151,842 |
Net cash provided by (used in) operating activities | (5,294,061) | 1,410,904 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (58,194) | (44,728) |
Net cash (used in) investing activities | (58,194) | (44,728) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from notes payable | 5,791,914 | 11,686,401 |
Repayments of notes payable | (1,895,194) | (11,833,452) |
Proceeds from notes and loans payable to related parties | 2,500,000 | 950,000 |
Repayments of notes and loans payable to related parties | (1,100,000) | (2,287,982) |
Net cash provided by (used in) financing activities | 5,296,720 | (1,485,033) |
Net (Decrease) in Cash and Cash Equivalents | (55,535) | (118,857) |
Cash and Cash Equivalents at Beginning of Period | 313,856 | 436,592 |
Cash and Cash Equivalents at End of Period | 258,321 | 317,735 |
Cash paid during the period for: | ||
Interest | 57,549 | 314,158 |
Non-cash financing activities: | ||
Conversion of Series C Preferred Stock to Common Stock | $ 1,000 | $ 0 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2015 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of accounting policies for Capstone Companies, Inc. (CAPC or the Company), a Florida corporation (formerly, CHDT Corporation) and its wholly-owned subsidiaries is presented to assist in understanding the Company's 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 financial statements. Interim Financial Statements The unaudited financial statements for the three and nine month periods ended September 30, 2015 and 2014 reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the periods. Operating results for interim periods are not necessarily indicative of the results to be expected for the full fiscal year due to the seasonal nature of the Companys business. Certain prior period amounts have been reclassified in order to conform to the covered periods presentation. Organization and Basis of Presentation CAPC was initially incorporated September 18, 1986, under the laws of the State of Delaware under the name Yorkshire Leveraged Group, Incorporated, and then changed its domicile to Colorado in 1989 by merging into a Colorado corporation, named Freedom Funding, Inc. Freedom Funding, Inc. then changed its name to CBQ, Inc. by amendment of its Articles of Incorporation on November 25, 1998. In May 2004, the Company changed its name from CBQ, Inc. to China Direct Trading Corporation as part of a reincorporation from the State of Colorado to the State of Florida. On May 7, 2007, the Company amended its charter to change its name from China Direct Trading Corporation to CHDT Corporation. This name change was effective as of July 16, 2007, for purposes of the change of its name on the OTC Bulletin Board. With the name change, the trading symbol was changed to CHDO. On June 6, 2012, the Company amended its charter to change its name from CHDT Corporation to CAPSTONE COMPANIES, INC. This name change was effective as of July 6, 2012, for purposes of the change of its name on the OTC Bulletin Board. With the name change, the trading symbol was changed to CAPC. In February 2004, the Company established a new subsidiary, initially named China Pathfinder Fund, L.L.C., a Florida limited liability company. During 2005, the name was changed to Overseas Building Supply, LLC (OBS) to reflect its shift in business lines from business development consulting services in China for North American companies to trading Chinese-made building supplies in South Florida. This business line was ended in fiscal year 2007 and the OBS name was changed to Black Box Innovations, L.L.C. (BBI) on March 20, 2008. On January 31, 2012, the BBI name was changed to Capstone Lighting Technologies, L.L.C (CLT). 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 low technology consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement the Company acquired 100% of the issued and outstanding shares of Capstone Common Stock, and recorded goodwill of $1,936,020. On April 13, 2012, the Company established a wholly owned subsidiary in Hong Kong, named Capstone International Hong Kong Ltd (CIHK) which is engaged in selling the Companys products internationally and provides other services such as new product development, product sourcing, quality control, ocean freight logistics, product testing and factory certifications for the Companys other subsidiaries. Nature of Business Since the beginning of fiscal year 2007, the Company has been primarily engaged in the business of developing, marketing and selling consumer products through national and regional retailers and distributors in North America. Capstone currently operates in five primary product categories: Induction Charged Power Failure Lights; LED Night Lights and Power Failure Lights; Motion Sensor Lights; Wireless Remote Control Outlets and Wireless Remote Control Accent Lights. The Companys products are typically manufactured in China by third-party manufacturing companies. Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents, to the extent the funds are not being held for investment purposes. Allowance for Doubtful Accounts An allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. The allowance for bad debt is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the receivables. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available. As of both September 30, 2015 and December 31, 2014, management has determined that the accounts receivable are fully collectible. As such, management has not recorded an allowance for doubtful accounts. Accounts Receivable Pledged as Collateral As of both September 30, 2015 and December 31, 2014, 100% of the accounts receivable serve as collateral for the Companys notes payable. Inventory The Company's inventory, which is recorded at lower of cost (first-in, first-out) or market, consists of finished goods for resale by Capstone, totaling $90,649 and $128,984 at September 30, 2015 and December 31, 2014, respectively. Prepaid Expenses The Companys prepaid expenses consist primarily of deposits on inventories for future orders as well as other prepaid advertising expense. Property and Equipment Fixed assets 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: Computer equipment 3 - 7 years Computer software 3 - 7 years Machinery and equipment 3 - 7 years Furniture and fixtures 3 - 7 years Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. Long-lived assets to be disposed of, if any, are reported at the lower of carrying amount or fair value less cost to sell. No impairment losses were recognized by the Company during 2014 or during the nine month period ended September 30, 2015. Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss. Expenditures for maintenance and repairs are charged to expense as incurred. Major overhauls and betterments are capitalized and depreciated over their estimated economic useful lives. Depreciation expense was $20,072 and $15,740 for the three month periods ended September 30, 2015 and 2014, respectively. Depreciation expense was $49,311 and $45,818 for the nine month periods ended September 30, 2015 and 2014, respectively. Goodwill and Other Intangible Assets Intangible assets acquired, either individually or with a group of other assets (but not those acquired in a business combination), are initially recognized and measured based on fair value. 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. The cost of internally developing, maintaining and restoring intangible assets (including goodwill) that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, are recognized as an expense when incurred. An intangible asset (excluding goodwill) with a definite useful life is amortized; an intangible asset with an indefinite useful life is not amortized until its useful life is determined to be no longer indefinite. The remaining useful lives of intangible assets not being amortized are evaluated at least annually to determine whether events and circumstances continue to support an indefinite useful life. If and when an intangible asset is determined to no longer have an indefinite useful life, the asset shall then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangibles that are subject to amortization. An intangible asset (including goodwill) that is not subject to amortization shall be tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible assets with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. Goodwill is not amortized. It is the Company's policy to test for impairment no less than annually, or when conditions occur that may indicate impairment. The Company's intangible assets, which consist of goodwill of $1,936,020 recorded in connection with the Capstone acquisition, were tested for impairment and determined that no adjustment for impairment was necessary as of December 31, 2014, whereas the fair value of the intangible asset exceeds its carrying amount. Net Income (Loss) Per Common Share Basic earnings per common share were computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. 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. At September 30, 2015 and December 31, 2014, the total number of potentially dilutive common stock equivalents was 88,630,388 and 155,058,813, respectively. Principles of Consolidation The consolidated financial statements for the periods ended September 30, 2015 and 2014 include the accounts of the parent entity and its wholly-owned subsidiaries Capstone Lighting Technologies, L.L.C., Capstone Industries, Inc. and Capstone International HK, LTD. All significant intra-entity transactions and balances have been eliminated in consolidation. Fair Value of Financial Instruments The carrying value of the Company's financial instruments, including cash, prepaid expenses, accounts receivable, accounts payable and accrued liabilities at September 30, 2015 and December 31, 2014 approximates their fair values due to the short-term nature of these financial instruments. The fair value hierarchy under U.S. GAAP distinguishes between assumptions based on market data (observable inputs) and an entitys own assumptions (unobservable inputs). The hierarchy consists of three levels: · Level one · Level two · Level three Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter. Cost Method of Accounting for Investment Investments in equity securities that do not have readily determinable fair values and do not qualify for consolidation or the equity method are carried at cost. Dividends received from those companies are included in other income. Dividends received in excess of the Companys proportionate share of accumulated earnings are applied as a reduction of the cost of the investment. Other than temporary impairments to fair value are charged against current period income. Revenue Recognition Product sales are recognized when an agreement of sale exists, product delivery has occurred, pricing is fixed or determinable, and collection is reasonably assured. Allowances for sales returns, rebates and discounts are recorded as a component of net sales in the period the allowances are recognized. In addition, accrued liabilities contained in the accompanying balance sheets include accruals for estimated amounts of credits to be issued in future years based on potentially defective product, other product returns and various allowances. These estimates could change significantly in the near term. During the three and nine month period ending September 30, 2015, the Company determined that $0 and $196,977 of previously accrued promotional allowances were no longer required, respectively. The reduction of promotional allowances is included in net revenues for the periods ended September 30, 2015. Advertising and Promotion Advertising and promotion costs, including advertising, public relations, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expense was $3,301 and $14,806 for the three months and $98,461 and $138,518 for the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015 and December 31, 2014, the Company has $275,019 in capitalized advertising costs included in prepaid expenses on the balance sheets. Shipping and Handling The Companys shipping and handling costs, are included in sales and marketing expenses and amounted to $11,765 and $15,101 for the three months and $45,588 and $52,818 for the nine months ended September 30, 2015 and 2014, respectively. Accrued Liabilities Accrued liabilities contained in the accompanying balance sheets include accruals for estimated amounts of credits to be issued in future years based on potentially defective products, other product returns and various allowances. These estimates could change significantly in the near term. Income Taxes The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) 740 Income Taxes Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation- Stock Compensation ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expenses over the requisite service periods in the Companys consolidated statements of operations. 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. As stock-based compensation expense is recognized during the period is based on awards ultimately expected to vest, it is subject to reduction for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. As of and for periods ended September 30, 2015 and 2014, there were no material amounts subject to forfeiture. The Company recognizes compensation expense paid with common stock and other equity instruments issued for assets and services received based upon the fair value of the assets/services or the equity instruments issued, whichever is more readily determined. As of the date of this report the Company has not adopted a method to account for the tax effects of stock-based compensation pursuant to ASC 718 and related interpretations. However, whereas the Company has substantial net operating losses to offset future taxable income and its current deferred tax asset is completely reduced by the valuation allowance, no material tax effects are anticipated. Stock-Based Compensation Expense Stock-based compensation for the three month period ended September 30, 2015 and 2014 totaled $22,353 and $8,156, respectively. Stock-based compensation for the nine month period ended September 30, 2015 and 2014 totaled $81,219 and $43,500, respectively. Recent Accounting Standards In May 2014, the FASB made available ASU No. 2014-09, Revenue from Contracts with Customers Topic 606 Revenue Recognition Revenue RecognitionConstruction Type and Production-Type Contracts Property, Plant, and Equipment, and Intangible Assets IntangiblesGoodwill and Other Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the effective date of this guidance was deferred by one year and now will be effective for the Companys annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted. The Company does not expect the adoption of ASU 2014-09 to have a material impact on its consolidated financial statements. In June 2014, the FASB issued ASU No. 2014-12, Compensation Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period Compensation Stock Compensation (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this ASU as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. The Company does not expect the adoption of ASU 2014-12 to have a material impact on its consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, Consolidations (Topic 225-20): Amendments to the Consolidation Analysis In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Topic 225-20): Simplifying the Presentation of Debt Issue Costs In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory prospectively and is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted as of the beginning of an interim or annual reporting period. 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 Companys 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 Companys financials properly reflect the change. Liquidity The Company had net income of $151,469 for the nine months ended September 30, 2015 as compared to a net income of $133,978 in the same period 2014. As of September 30, 2015 the Company had a working capital deficit of ($851,509) compared to a working capital deficit of ($1,075,314) as of December 31, 2014. The Company has an accumulated deficit of ($5,635,050) and ($5,786,519) as of September 30, 2015 and December 31, 2014, respectively. The Companys liquidity is expected to be sufficient through 2015, resulting from the combination of our existing cash position, improved operational cash flow as a result of improvements to our operating results, the Companys borrowing capacity with Sterling National Bank and as needed, funding support from Company Directors (Note 4). Pervasiveness of Estimates |
CONCENTRATIONS OF CREDIT RISK A
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE | 9 Months Ended |
Sep. 30, 2015 | |
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE | |
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 cash equivalents 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 and Cash Equivalents The Company at times has cash and cash equivalents with its financial institution in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits. The Company places its cash and cash equivalents with high credit quality financial institutions which minimize these risks. As of both September 30, 2015 and 2014, the Company had no funds in excess of FDIC 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 Companys customer base and their dispersion across different geographical regions. The Company monitors exposure of credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. Major Customers The Company had two customers who comprised at least ten percent (10%) of gross revenue during the years ended December 31, 2014 and 2013. The loss of these customers would adversely impact the business of the Company. Major Vendors The Company had one vendor from which it purchased at least ten percent (10%) of merchandise during the years ended December 31, 2014 and 2013. The loss of this supplier would adversely impact the business of the Company. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2015 | |
NOTES PAYABLE | |
NOTES PAYABLE | NOTE 3 NOTES PAYABLE Sterling National Bank On September 8, 2010, in order to fund increasing accounts receivables and support working capital needs, Capstone secured a Financing Agreement from Sterling Capital Funding (now called Sterling National Bank), located in New York, whereby Capstone receives funds for assigned retailer shipments. The assignments provide funding for an amount up to 85% of net invoices submitted. There will be a base management fee equal to .45% of the gross invoice amount. The interest rate of the loan advance is .25% above Sterling National Banks Base Rate which at time of closing was 5%. The amounts borrowed under this agreement are secured by a right to set-off on or against any of the following (collectively as Collateral): all accounts including those at risk, all reserves, instruments, documents, notes, bills and chattel paper, letter of credit rights, commercial tort claims, proceeds of insurance, other forms of obligations owing to Sterling National Bank, bank and other deposit accounts whether or not reposed with affiliates, general intangibles (including without limitation all tax refunds, contract rights, trade names, trademarks, trade secrets, customer lists, software and all other licenses, rights, privileges and franchises), all balances, sums and other property at any time to our credit or in Sterling National Banks possession or in the possession of any Sterling Affiliates, together with all merchandise, the sale of which resulted in the creation of accounts receivable and in all such merchandise that may be returned by customers and all books and records relating to any of the foregoing, including the cash and non-cash proceeds of all of the foregoing. Capstone Companies, Inc., and Howard Ullman, the previous Chairman of the Board of Directors of CHDT, had personally guaranteed Capstones obligations under the Financing Agreement. As part of the agreement with Sterling National Bank, a subordination agreement was executed with Mr. Ullman. These agreements subordinated the debt of $121,263 (plus future interest) and $81,000 (plus future interest) due to Mr. Ullman (or his assignees), to the Sterling National Bank loan. No payments will be made on the subordinated debt until the Sterling loan is paid in full. As of September 30, 2015 and December 31, 2014, the balance due to Sterling was $4,183,663 and $286,945, respectively. On July 21, 2011, Stewart Wallach, the Chief Executive Officer and Director of Capstone Companies, Inc. and JWTR Holdings, LLC owned by a Director, Jeffrey Postal entered into a Securities and Notes Purchase Agreement with Howard Ullman, the previous Chairman of the Board of CHDT, whereby they would purchase equally all of Mr. Ullmans notes including the notes subordinated to Sterling National Bank. On July 15, 2011, Stewart Wallach individually and accepted by Sterling National Bank, agreed to replace Howard Ullman as the sole personal guarantor to Sterling National Bank for all of Capstones loans previously guaranteed by Howard Ullman. Effective July 12, 2011, Capstones credit line with Sterling National Bank was increased from $2,000,000 up to $4,000,000 to provide additional funding for increased revenue growth. During the period from July 2013 through February 2014, the Companys credit line with Sterling National Bank was temporarily increased from $4,000,000 to $6,000,000 to provide additional funding to cover the increased sales volume during the holiday season. During the period from July 2014 through September 2015, the Companys credit line with Sterling National Bank was temporarily increased from $4,000,000 to $7,000,000 to provide additional funding to cover the increased sales volume during the holiday season. As of September 30, 2015, the maximum amount that can be borrowed on this credit line is $7,000,000. |
NOTES AND LOANS PAYABLE TO RELA
NOTES AND LOANS PAYABLE TO RELATED PARTIES | 9 Months Ended |
Sep. 30, 2015 | |
NOTES AND LOANS PAYABLE TO RELATED PARTIES | |
NOTES AND LOANS PAYABLE TO RELATED PARTIES | NOTE 4 NOTES AND LOANS PAYABLE TO RELATED PARTIES Capstone Companies, Inc. - Notes Payable to Officers and Directors On May 30, 2007, the Company executed a $575,000 promissory note payable to a Director of the Company. This note was amended on July 1, 2009 and again on January 2, 2010. As amended, the note carries an interest rate of 8% per annum. All principal was payable in full, with accrued interest, on January 2, 2014. On November 2, 2007, the Company issued 12,074 shares of its Series B Preferred stock valued at $28,975 as payment towards this loan. The loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid principal. On July 12, 2011, Stewart Wallach, the Chief Executive Officer and Director of CHDT and JWTR Holdings, LLC owned by a Director, Jeffrey Postal entered into a Securities and Notes Purchase Agreement with Howard Ullman, the previous Chairman of the Board of CHDT, whereby they would purchase equally all of Mr. Ullmans notes including the subordinated notes net of any offsets, monies due from Mr. Ullman to the Company. The original terms of all notes would remain the same. On July 12, 2011, this note payable was reassigned by Howard Ullman, equally split between Stewart Wallach, Director, and JWTR Holdings LLC. The note balance of $466,886 was reduced by $47,940 for offsets due by Howard Ullman. The revised loan balance of $418,946 was reassigned equally $209,473 to Stewart Wallach and $209,473 to JWTR Holdings LLC. As amended the note is due on or before April 1, 2016. As of September 30, 2015 the total combined balance due on these two notes was $558,612, which includes accrued interest of $139,666. On March 11, 2010, the Company received a loan from a Director in the amount of $100,000. As amended, the note is due on or before April 1, 2016 and carries an interest rate of 8% per annum. At September 30, 2015, the total amount payable on this note was $144,449 including interest of $44,449. On May 11, 2010, the Company received a loan from a Director and Chief Executive Officer in the amount of $75,000. As amended, the note is due on or before April 1, 2016 and carries an interest rate of 8% per annum. The loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid principal. At September 30, 2015, the total amount payable on this note was $107,335 including interest of $32,335. On January 15, 2013, the Company received a loan in the amount of $250,000 from Stewart Wallach, the Chief Executive Officer and Director of Capstone Companies, Inc. The loan carries an interest rate of 8% per annum. This loan was amended and the due date has been extended until April 1, 2016. This loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid principal. At September 30, 2015, the total amount payable on this note was $304,137 including interest of $54,137. On January 15, 2013, the Company received a loan in the amount of $250,000 from a Director of Capstone Companies, Inc. The loan carries an interest rate of 8% per annum. This loan was amended and the due date has been extended until April 1, 2016. At September 30, 2015, the total amount payable on this note was $304,137, including interest of $54,137. This loan grants to the holder a security interest in the accounts receivable of the Company up to the amount of the unpaid principal. Purchase Order Assignment- Funding Agreements On February 9, 2015, Capstone Industries, Inc. received $200,000 against a note from Jeffrey Postal. The note was due on or before December 31, 2015, and carried an interest rate of 1.0% simple interest per month. This note was paid in full during the quarter ended June 30, 2015. On May 19, 2015, Capstone Companies, Inc. received $250,000 against a note from an entity related to the Companys Chief Executive Officer. The note is due on or before December 31, 2015, and carries an interest rate of 1.0% simple interest per month. As of September 30, 2015, the total amount due under this note was $261,014 including accrued interest of $11,014. On May 19, 2015, Capstone Companies, Inc. received $250,000 against a note from Jeffrey Postal. The note is due on or before December 31, 2015, and carries an interest rate of 1.0% simple interest per month. As of September 30, 2015, the total amount due under this note was $261,014 including accrued interest of $11,014. On May 20, 2015, Capstone Industries, Inc. received $500,000 against a note from Jeffrey Postal. The note was due on or before December 31, 2015, and carried an interest rate of 1.0% simple interest per month. This note was paid in full during the quarter ended September 30, 2015. On June 15, 2015, Capstone Industries, Inc. received $400,000 against a note from Phyllis Postal, mother of Jeffrey Postal. The note was due on or before December 31, 2015, and carried an interest rate of 1.0% simple interest per month. This note was paid in full during the quarter ended September 30, 2015. On June 16, 2015, Capstone Industries, Inc. received $500,000 against a note from Jeffrey Postal. The note is due on or before December 31, 2015, and carries an interest rate of 1.0% simple interest per month. As of September 30, 2015, the total amount due under this note was $517,425 including accrued interest of $17,425. On June 18, 2015, Capstone Industries, Inc. received $400,000 against a note from George Wolf, a consultant. The note is due on or before December 31, 2015, and carries an interest rate of 1.0% simple interest per month. As of September 30, 2015, the total amount due under this note was $413,677 including accrued interest of $13,677. Working Capital Loan Agreements On April 1, 2012, the Company signed a working capital loan agreement with Postal Capital Funding, LLC (PCF), a private capital funding company owned by Jeffrey Postal and James McClinton, the Companys Chief Financial Officer. Pursuant to the agreement, the Company may borrow up to a maximum of $1,000,000 of revolving credit from PCF. Amounts borrowed carry an interest rate of 8%. This loan was amended and the due date has been extended until April 1, 2016. As of September 30, 2015, the loan balance under this agreement was $613,264 including interest of $115,264. Notes and Loans Payable to Related Parties Maturities The total amount payable to officers, directors and related parties as of September 30, 2015, was $3,485,064 including accrued interest of $493,118. The notes and loan payable to related parties mature during 2015 and 2016. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2015 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 5 COMMITMENTS AND CONTINGENCIES Operating Leases On June 29, 2007, the Company relocated its principal executive offices and sole operations facility to 350 Jim Moran Blvd., Suite 120, Deerfield Beach, Florida 33442, which is located in Broward County. This space consists of 4,000 square rentable feet and was leased on a month to month basis. Capstone Industries entered into a new lease agreement for the same office space as currently located. The new lease agreement dated January 17, 2014, and effective February 1, 2014, has a 3 year term with a base annual rent of $87,678 paid in equal monthly installments. The Company has the one time option to renew the lease for three (3) years subject to a 3% increase per each year of the renewal term. Under the new lease agreement, Capstone is responsible for a portion of common area maintenance charges and any other utility consumed in the leased premises. Capstone International Hong Kong Ltd. entered into a two year lease agreement for office space at 303 Hennessy Road, Wanchai, Hong Kong. The agreement is for the period from February 17, 2014, to February 16, 2016. This lease has a base annual rent of $48,000 (HK$ 372,000) paid in equal monthly installments. Rent expense amounted to $35,144 and $34,655 for the three month periods ended September 30, 2015 and 2014, respectively. Rent expense amounted to $105,503 and $86,359 for the nine month periods ended September 30, 2015 and 2014, respectively. The lease obligations under these agreements for the next five years are as follows: Year Ended December, 31, US HK Total 2015 $89,150 $48,000 $137,150 2016 90,710 6,000 96,710 2017 7,559 - 7,559 Total lease obligation $187,419 $54,000 $241,419 Consulting Agreements On July 1, 2015, the Company entered into a consulting agreement with a Consultant, whereby the Consultant will be paid $10,500 per month through December 31, 2015 and $12,500 per month from January 1, 2016 through December 31, 2017. The agreement can be terminated upon 30 days notice by either party. The Company may, in its sole discretion at any time after December 31, 2015 convert the Consultant to full-time Executive status. The annual salary and term of employment would be equal to that outlined in the consulting agreement. Employment Agreements On February 5, 2008, the Company entered into an Employment Agreement with Stewart Wallach, whereby Mr. Wallach will be paid $225,000 per annum. As part of the agreement, Mr. Wallach will receive a minimum increase of 5% per year. During 2014 and 2013, Mr. Wallach was paid $287,164 and $285,586 under the Employment Agreement. An amount of $40,233 has been accrued and is included in the September 30, 2015 and December 31, 2014 consolidated balance sheets as part of accounts payable and accrued expenses for deferred wages in 2011. The initial term of the contract began February 5, 2008, and ended on February 5, 2011, but the term of the contract was extended for an additional two years through February 5, 2013. The Companys Compensation Committee has further extended the agreement with the same terms for an additional three years through February 5, 2016. On February 5, 2008, the Company entered into an Employment Agreement with James McClinton. Mr. McClinton will be paid $150,000 per annum. As part of the agreement, Mr. McClinton will receive a minimum increase of 5% per year. During 2014 and 2013, Mr. McClinton was paid $191,442 and $190,398, respectively under the Employment Agreement. An amount of $572 has been accrued and is included in the September 30, 2015 and December 31, 2014 consolidated balance sheets as part of accounts payable and accrued expenses for deferred wages in 2011. The term of the initial contract began February 5, 2008, and ended February 5, 2011, but the term of the contract was extended for an additional two years through February 5, 2013. The Companys Compensation Committee has further extended the agreement with the same terms for an additional three years through February 5, 2016. |
STOCK TRANSACTIONS
STOCK TRANSACTIONS | 9 Months Ended |
Sep. 30, 2015 | |
STOCK TRANSACTIONS | |
STOCK TRANSACTIONS | NOTE 6 - STOCK TRANSACTIONS Series C Preferred Stock On July 9, 2009, the Company authorized and issued 1,000 shares of Series C Preferred Stock in exchange for $700,000. The 1,000 shares of Series C Stock are convertible into 67,979,425 common shares. The par value of the Series C Preferred shares is $1.00. On May 5, 2015 the 1,000 Series C Preferred shares were fully converted into 67,979,425 common shares. Common Stock During 2014 the Company entered into a settlement agreement with a consultant under which 3,750,000 shares of previously issued common stock were surrendered and canceled in consideration for a payment to the consultant in the amount of $50,000. Warrants During September and October 2007, the Company issued 31,823,529 shares of common stock for cash at $.017 per share, or $541,000 total as part of a Private Placement under Rule 506 of Regulation D. Along with the stock, each investor also received a warrant to purchase 30% of the shares purchased in the Private Placement. A total of 9,547,055 warrants were issued. The warrants are ten year warrants and have an exercise price of $.025 per share. Options In 2005, the Company authorized the 2005 Equity Plan that made available 10,000,000 shares of common stock for issuance through awards of options, restricted stock, stock bonuses, stock appreciation rights and restricted stock units. On May 20, 2005, the Company granted non-qualified stock options under the Companys 2005 Equity Plan for a maximum of 250,000 shares of the Companys common stock for $0.02 per share. The options expired May 25, 2015. On May 1, 2007, the Company granted 4,000,000 stock options to five employees of the Company under the 2005 Plan. The options vested over two years. During 2008, 1,000,000 of these options were cancelled prior to vesting. During 2010, an additional 500,000 of these options were also cancelled prior to vesting. As of December 31, 2010, these options were fully vested and compensation expense fully recognized. On April 27, 2007, the Company granted a ten-year non-qualified, non-statutory stock option for 102,400,000 restricted shares of the Companys common stock to Stewart Wallach, as incentive compensation. The exercise price of the options is $.029 per share, which was the fair market value of the stock on the date of grant. Twenty percent of the options vested on the date of issuance, and twenty percent per year vested on the anniversary date through April 23, 2011. On May 23, 2008, 74,666,667 of these options were cancelled. On July 31, 2009, 5,000,000 of the fully vested options were amended and transferred to James McClinton. Also on April 23, 2007, the Company granted a ten-year non-qualified, non-statutory stock option for 28,100,000 restricted shares of the Companys common stock to James McClinton as incentive compensation. The exercise price of the options is $.029 per share, which was the fair market value of the stock on the date of grant. Twenty percent of the options vested on the date of issuance, and twenty percent per year vested on the anniversary date through April 23, 2011. On May 1, 2008, 850,000 of these options were cancelled. On October 22, 2007, the Company granted 700,000 stock options to a business associate of the Company. The options vested over two years. On January 10, 2008, the Company granted 1,000,000 stock options to an advisor of the Company. The options vested over one year. On February 5, 2008, the Company granted 3,650,000 stock options to four directors and one employee of the Company. The options vested over two years. During 2010, 3,500,000 of these options were cancelled. On May 1, 2008, the Company granted 850,000 stock options to an employee of the Company. The options vested over two years. On April 23, 2010, the Company granted 4,500,000 stock options to four Directors of the Company and 300,000 stock options to the Company Secretary. The options vested over one year. During the three month period ended June 30, 2015, 4,500,000 of these options expired. On July 1, 2011, the Company granted 4,500,000 stock options to four Directors of the Company and 150,000 stock options to the Company Secretary. The options vested over one year. On August 6, 2012, the Company granted 4,500,000 stock options to four Directors of the Company and 150,000 stock options to the Company Secretary. The options vested over one year. The Company Secretary has subsequently left the Company and the 150,000 granted options have been canceled. On January 1, 2014, the Company granted 3,000,000 stock options to two directors of the Company and 150,000 stock options to the Company Secretary. The options vested on August 5, 2014. On January 2, 2015, the Company granted 3,000,000 stock options to two directors of the Company and 150,000 stock options to the Company Secretary. The options vested on August 5, 2015. On August 6, 2015, the Company granted 3,000,000 stock options to two directors of the Company and 150,000 stock options to the Company Secretary. The options will vest on August 5, 2016. The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the options granted. The following assumptions were used in the fair value calculations: Risk free rate .65 3.0% Expected term 5 to 10 years Expected volatility of stock 500% Expected dividend yield 0% Suboptimal Exercise Behavior Multiple 2.0 Number of Steps 150 For the nine month period ended September, 30 2015, the Company recognized compensation expense of $81,219 related to these stock options. A further compensation expense of $14,250 will be recognized for these options in 2015 and $33,981 in 2016. The following table sets forth the Companys stock options outstanding as of September 30, 2015 and December 31, 2014 and activity for the periods then ended: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Term (Years) Value Outstanding, December 31, 2013 74,383,333 $ 0.029 3.28 $ - Granted 3,150,000 0.029 - - Exercised - - - - Outstanding, December 31 , 2014 77,533,333 $ 0.029 2.36 $ - Granted 6,300,000 0.029 - - Exercised - - - - Forfeited/expired (4,750,000) 0.029 - - Outstanding, September 30, 2015 79,083,333 $ 0.029 1.98 $ - Vested/exercisable at December, 31, 2014 77,533,333 $ 0.029 2.36 $ - Vested/exercisable at September 30, 2015 75,933,333 $ 0.029 1.85 $ - The following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 plan: Exercise Price Options Outstanding Remaining Contractual Life in Years Average Exercise Price Number of Options Currently Exercisable $.029 54,983,333 1.58 $.029 54,983,333 $.029 2,500,000 2.58 $.029 2,500,000 $.029 700,000 3.58 $.029 700,000 $.029 1,000,000 2.08 $.029 1,000,000 $.029 150,000 2.33 $.029 150,000 $.029 850,000 3.67 $.029 850,000 $.029 300,000 4.75 $.029 300,000 $.029 4,500,000 .75 $.029 4,500,000 $.029 150,000 5.75 $.029 150,000 $.029 4,500,000 1.83 $.029 4,500,000 $.029 3,000,000 3.25 $.029 3,000,000 $.029 150,000 8.25 $.029 150,000 $.029 3,000,000 4.25 $.029 3,000,000 $.029 150,000 9.25 $.029 150,000 $.029 3,000,000 4.83 $.029 - $.029 150,000 9.83 $.029 - |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2015 | |
INCOME TAXES | |
INCOME TAXES | NOTE 7 - INCOME TAXES As of September 30, 2015, the Company had significant net operating loss carry forwards remaining that will begin to expire in 2022. The Company has determined that a full valuation allowance against its net deferred taxes is necessary as of both September 30, 2015 and December 31, 2014. The Company is subject to income taxes in the U.S. federal jurisdiction, various state jurisdictions and certain other jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the relaxed tax laws and regulations and require significant judgment to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities for the years 2011 and prior. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be reported as a component of income tax expense. The provision for income taxes for the three and nine month periods ended September 30, 2015 and 2014 was calculated based on the estimated annual effective rate for the full 2015 and 2014 calendar years, adjusted for an income tax benefit from the expected utilization of net operating loss carryforwards. The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and cause a change in managements judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income. |
COST METHOD INVESTMENTS
COST METHOD INVESTMENTS | 9 Months Ended |
Sep. 30, 2015 | |
COST METHOD INVESTMENTS | |
COST METHOD INVESTMENTS | NOTE 8 COST METHOD INVESTMENTS On January 15, 2013, the Company entered into an agreement with AC Kinetics, Inc. to purchase 100 shares of AC Kinetics Series A Preferred Stock for $500,000. These shares carry a liquidation preference in the amount of $500,000, are convertible at the Companys demand into 3% of the outstanding shares of AC Kinetics common stock and have anti-dilution protection. In addition, the Company and AC Kinetics have agreed to cooperate in the development and commercialization of consumer and industrial products to be solely owned by the Company. AC Kinetics will be the Companys advanced product developer. AC Kinetics will notify the appropriate technology departments at the Massachusetts Institute of Technology (MIT) of the Companys ability and desire to commercialize consumer and industrial products developed in the MIT incubator departments. The Company and AC Kinetics also entered into a royalty agreement whereby, the Company will receive a 7% royalty on any licensing revenues received by AC Kinetics for products sold by them. This royalty agreement will terminate upon receipt by the Company of royalties of $500,000. The aggregate carrying amount of cost method investments at September 30, 2015 and December 31, 2014 consisted of the following: 2015 2014 AC Kinetics Series A Convertible Preferred Stock $500,000 $500,000 It was not practicable to estimate fair value of AC Kinetics Series A Convertible Preferred Stock and such an estimate was not made because, at September 30, 2015 and December 31, 2014, there were no events or changes in circumstances that could have had a significant adverse effect on the fair value of such investments. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
SIGNIFICANT ACCOUNTING POLICIES (Policies) | |
Interim Financial Statements | Interim Financial Statements The unaudited financial statements for the three and nine month periods ended September 30, 2015 and 2014 reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the periods. Operating results for interim periods are not necessarily indicative of the results to be expected for the full fiscal year due to the seasonal nature of the Companys business. Certain prior period amounts have been reclassified in order to conform to the covered periods presentation. |
Organization and Basis of Presentation | Organization and Basis of Presentation CAPC was initially incorporated September 18, 1986, under the laws of the State of Delaware under the name Yorkshire Leveraged Group, Incorporated, and then changed its domicile to Colorado in 1989 by merging into a Colorado corporation, named Freedom Funding, Inc. Freedom Funding, Inc. then changed its name to CBQ, Inc. by amendment of its Articles of Incorporation on November 25, 1998. In May 2004, the Company changed its name from CBQ, Inc. to China Direct Trading Corporation as part of a reincorporation from the State of Colorado to the State of Florida. On May 7, 2007, the Company amended its charter to change its name from China Direct Trading Corporation to CHDT Corporation. This name change was effective as of July 16, 2007, for purposes of the change of its name on the OTC Bulletin Board. With the name change, the trading symbol was changed to CHDO. On June 6, 2012, the Company amended its charter to change its name from CHDT Corporation to CAPSTONE COMPANIES, INC. This name change was effective as of July 6, 2012, for purposes of the change of its name on the OTC Bulletin Board. With the name change, the trading symbol was changed to CAPC. In February 2004, the Company established a new subsidiary, initially named China Pathfinder Fund, L.L.C., a Florida limited liability company. During 2005, the name was changed to Overseas Building Supply, LLC (OBS) to reflect its shift in business lines from business development consulting services in China for North American companies to trading Chinese-made building supplies in South Florida. This business line was ended in fiscal year 2007 and the OBS name was changed to Black Box Innovations, L.L.C. (BBI) on March 20, 2008. On January 31, 2012, the BBI name was changed to Capstone Lighting Technologies, L.L.C (CLT). 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 low technology consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement the Company acquired 100% of the issued and outstanding shares of Capstone Common Stock, and recorded goodwill of $1,936,020. On April 13, 2012, the Company established a wholly owned subsidiary in Hong Kong, named Capstone International Hong Kong Ltd (CIHK) which is engaged in selling the Companys products internationally and provides other services such as new product development, product sourcing, quality control, ocean freight logistics, product testing and factory certifications for the Companys other subsidiaries. |
Nature of Business | Nature of Business Since the beginning of fiscal year 2007, the Company has been primarily engaged in the business of developing, marketing and selling consumer products through national and regional retailers and distributors in North America. Capstone currently operates in five primary product categories: Induction Charged Power Failure Lights; LED Night Lights and Power Failure Lights; Motion Sensor Lights; Wireless Remote Control Outlets and Wireless Remote Control Accent Lights. The Companys products are typically manufactured in China by third-party manufacturing companies. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents, to the extent the funds are not being held for investment purposes. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts An allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. The allowance for bad debt is evaluated on a regular basis by management and is based upon managements periodic review of the collectability of the receivables. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available. |
Accounts Receivable Pledged as Collateral | Accounts Receivable Pledged as Collateral |
Inventory | Inventory |
Prepaid Expenses, Policy | Prepaid Expenses |
Property and Equipment | Property and Equipment Fixed assets 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: Computer equipment 3 - 7 years Computer software 3 - 7 years Machinery and equipment 3 - 7 years Furniture and fixtures 3 - 7 years Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. Long-lived assets to be disposed of, if any, are reported at the lower of carrying amount or fair value less cost to sell. No impairment losses were recognized by the Company during 2014 or during the nine month period ended September 30, 2015. Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss. Expenditures for maintenance and repairs are charged to expense as incurred. Major overhauls and betterments are capitalized and depreciated over their estimated economic useful lives. Depreciation expense was $20,072 and $15,740 for the three month periods ended September 30, 2015 and 2014, respectively. Depreciation expense was $49,311 and $45,818 for the nine month periods ended September 30, 2015 and 2014, respectively. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Intangible assets acquired, either individually or with a group of other assets (but not those acquired in a business combination), are initially recognized and measured based on fair value. 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. The cost of internally developing, maintaining and restoring intangible assets (including goodwill) that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, are recognized as an expense when incurred. An intangible asset (excluding goodwill) with a definite useful life is amortized; an intangible asset with an indefinite useful life is not amortized until its useful life is determined to be no longer indefinite. The remaining useful lives of intangible assets not being amortized are evaluated at least annually to determine whether events and circumstances continue to support an indefinite useful life. If and when an intangible asset is determined to no longer have an indefinite useful life, the asset shall then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangibles that are subject to amortization. An intangible asset (including goodwill) that is not subject to amortization shall be tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible assets with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. Goodwill is not amortized. It is the Company's policy to test for impairment no less than annually, or when conditions occur that may indicate impairment. The Company's intangible assets, which consist of goodwill of $1,936,020 recorded in connection with the Capstone acquisition, were tested for impairment and determined that no adjustment for impairment was necessary as of December 31, 2014, whereas the fair value of the intangible asset exceeds its carrying amount. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share Basic earnings per common share were computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. 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. At September 30, 2015 and December 31, 2014, the total number of potentially dilutive common stock equivalents was 88,630,388 and 155,058,813, respectively. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements for the periods ended September 30, 2015 and 2014 include the accounts of the parent entity and its wholly-owned subsidiaries Capstone Lighting Technologies, L.L.C., Capstone Industries, Inc. and Capstone International HK, LTD. All significant intra-entity transactions and balances have been eliminated in consolidation. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value of the Company's financial instruments, including cash, prepaid expenses, accounts receivable, accounts payable and accrued liabilities at September 30, 2015 and December 31, 2014 approximates their fair values due to the short-term nature of these financial instruments. The fair value hierarchy under U.S. GAAP distinguishes between assumptions based on market data (observable inputs) and an entitys own assumptions (unobservable inputs). The hierarchy consists of three levels: · Level one · Level two · Level three Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter. |
Cost Method of Accounting for Investment | Cost Method of Accounting for Investment Investments in equity securities that do not have readily determinable fair values and do not qualify for consolidation or the equity method are carried at cost. Dividends received from those companies are included in other income. Dividends received in excess of the Companys proportionate share of accumulated earnings are applied as a reduction of the cost of the investment. Other than temporary impairments to fair value are charged against current period income. |
Revenue Recognition, Policy | Revenue Recognition Product sales are recognized when an agreement of sale exists, product delivery has occurred, pricing is fixed or determinable, and collection is reasonably assured. Allowances for sales returns, rebates and discounts are recorded as a component of net sales in the period the allowances are recognized. In addition, accrued liabilities contained in the accompanying balance sheets include accruals for estimated amounts of credits to be issued in future years based on potentially defective product, other product returns and various allowances. These estimates could change significantly in the near term. During the three and nine month period ending September 30, 2015, the Company determined that $0 and $196,977 of previously accrued promotional allowances were no longer required, respectively. The reduction of promotional allowances is included in net revenues for the periods ended September 30, 2015. |
Advertising and Promotion | Advertising and Promotion |
Shipping and Handling | Shipping and Handling The Companys shipping and handling costs, are included in sales and marketing expenses and amounted to $11,765 and $15,101 for the three months and $45,588 and $52,818 for the nine months ended September 30, 2015 and 2014, respectively. |
Accrued Liabilities | Accrued Liabilities Accrued liabilities contained in the accompanying balance sheets include accruals for estimated amounts of credits to be issued in future years based on potentially defective products, other product returns and various allowances. These estimates could change significantly in the near term. |
Income Taxes | Income Taxes The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) 740 Income Taxes |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation- Stock Compensation ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expenses over the requisite service periods in the Companys consolidated statements of operations. 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. As stock-based compensation expense is recognized during the period is based on awards ultimately expected to vest, it is subject to reduction for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. As of and for periods ended September 30, 2015 and 2014, there were no material amounts subject to forfeiture. The Company recognizes compensation expense paid with common stock and other equity instruments issued for assets and services received based upon the fair value of the assets/services or the equity instruments issued, whichever is more readily determined. |
Stock-Based Compensation Expense | Stock-Based Compensation Expense Stock-based compensation for the three month period ended September 30, 2015 and 2014 totaled $22,353 and $8,156, respectively. Stock-based compensation for the nine month period ended September 30, 2015 and 2014 totaled $81,219 and $43,500, respectively. |
Recent Accounting Standards | Recent Accounting Standards In May 2014, the FASB made available ASU No. 2014-09, Revenue from Contracts with Customers Topic 606 Revenue Recognition Revenue RecognitionConstruction Type and Production-Type Contracts Property, Plant, and Equipment, and Intangible Assets IntangiblesGoodwill and Other Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the effective date of this guidance was deferred by one year and now will be effective for the Companys annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted. The Company does not expect the adoption of ASU 2014-09 to have a material impact on its consolidated financial statements. In June 2014, the FASB issued ASU No. 2014-12, Compensation Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period Compensation Stock Compensation (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this ASU as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. In addition, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. The Company does not expect the adoption of ASU 2014-12 to have a material impact on its consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, Consolidations (Topic 225-20): Amendments to the Consolidation Analysis In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Topic 225-20): Simplifying the Presentation of Debt Issue Costs In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory prospectively and is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted as of the beginning of an interim or annual reporting period. 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 Companys 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 Companys financials properly reflect the change. |
Liquidity | Liquidity The Company had net income of $151,469 for the nine months ended September 30, 2015 as compared to a net income of $133,978 in the same period 2014. As of September 30, 2015 the Company had a working capital deficit of ($851,509) compared to a working capital deficit of ($1,075,314) as of December 31, 2014. The Company has an accumulated deficit of ($5,635,050) and ($5,786,519) as of September 30, 2015 and December 31, 2014, respectively. The Companys liquidity is expected to be sufficient through 2015, resulting from the combination of our existing cash position, improved operational cash flow as a result of improvements to our operating results, the Companys borrowing capacity with Sterling National Bank and as needed, funding support from Company Directors (Note 4). |
Pervasiveness of Estimates | Pervasiveness of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and the differences could be material. |
ORGANIZATION AND SUMMARY OF S15
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | |
Property and Equipment | Property and Equipment Fixed assets 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: Computer equipment 3 - 7 years Computer software 3 - 7 years Machinery and equipment 3 - 7 years Furniture and fixtures 3 - 7 years |
LEASES (TABLES)
LEASES (TABLES) | 9 Months Ended |
Sep. 30, 2015 | |
LEASES (TABLES) | |
Schedule of Future Minimum Lease Payments for Capital Leases | The lease obligations under these agreements for the next five years are as follows: Year Ended December, 31, US HK Total 2015 $89,150 $48,000 $137,150 2016 90,710 6,000 96,710 2017 7,559 - 7,559 Total lease obligation $187,419 $54,000 $241,419 |
STOCK TRANSACTIONS (Tables)
STOCK TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
STOCK TRANSACTIONS (Tables) | |
Schedule of Company's stock options outstanding | The following table sets forth the Companys stock options outstanding as of September 30, 2015 and December 31, 2014 and activity for the periods then ended: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Term (Years) Value Outstanding, December 31, 2013 74,383,333 $ 0.029 3.28 $ - Granted 3,150,000 0.029 - - Exercised - - - - Outstanding, December 31 , 2014 77,533,333 $ 0.029 2.36 $ - Granted 6,300,000 0.029 - - Exercised - - - - Forfeited/expired (4,750,000) 0.029 - - Outstanding, September 30, 2015 79,083,333 $ 0.029 1.98 $ - Vested/exercisable at December, 31, 2014 77,533,333 $ 0.029 2.36 $ - Vested/exercisable at September 30, 2015 75,933,333 $ 0.029 1.85 $ - |
Schedule of summary the information with respect to options granted, outstanding and exercisable under the 2005 plan | The following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 plan: Exercise Price Options Outstanding Remaining Contractual Life in Years Average Exercise Price Number of Options Currently Exercisable $.029 54,983,333 1.58 $.029 54,983,333 $.029 2,500,000 2.58 $.029 2,500,000 $.029 700,000 3.58 $.029 700,000 $.029 1,000,000 2.08 $.029 1,000,000 $.029 150,000 2.33 $.029 150,000 $.029 850,000 3.67 $.029 850,000 $.029 300,000 4.75 $.029 300,000 $.029 4,500,000 .75 $.029 4,500,000 $.029 150,000 5.75 $.029 150,000 $.029 4,500,000 1.83 $.029 4,500,000 $.029 3,000,000 3.25 $.029 3,000,000 $.029 150,000 8.25 $.029 150,000 $.029 3,000,000 4.25 $.029 3,000,000 $.029 150,000 9.25 $.029 150,000 $.029 3,000,000 4.83 $.029 - $.029 150,000 9.83 $.029 - |
Organization and Summary of S18
Organization and Summary of Significant Accounting Policies Fixed Assets (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Sep. 13, 2006 |
Organization and Summary of Significant Accounting Policies Fixed Assets | |||
Issued and outstanding shares of Common Stock | 100.00% | ||
Goodwill | $ 1,936,020 | ||
Inventory finished goods for resale | $ 90,649 | $ 128,984 | |
Potentially dilutive common stock Shares | 88,630,388 | 155,058,813 | |
Accounts receivable serve as collateral | 100.00% | 100.00% | |
Computer equipment estimated useful life minimum (in years) | 3 | ||
Computer equipment estimated useful life maximum (in years) | 7 | ||
Computer software estimated useful life minimum (in years) | 3 | ||
Computer software estimated useful life maximum (in years) | 7 | ||
Machinery and equipment estimated useful life minimum (in years) | 3 | ||
Machinery and equipment estimated useful life maximum (in years) | 7 | ||
Furniture and fixture estimated useful life minimum (in years) | 3 | ||
Furniture and fixture estimated useful life maximum (in years) | 7 | ||
Capitalized advertising costs included in prepaid expenses | $ 275,019 | $ 275,019 | |
Working capital deficit | 851,509 | 1,075,314 | |
Accumulated deficit | $ 5,635,050 | $ 5,786,519 |
Organization and Summary of S19
Organization and Summary of Significant Accounting Policies Expenses (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Organization and Summary of Significant Accounting Policies Expenses | ||||
Depreciation Expense | $ 20,072 | $ 15,740 | $ 49,311 | $ 45,818 |
Shipping and Handling Costs | 11,765 | 15,101 | 45,588 | 52,818 |
Stock based compensation | 22,353 | 8,156 | 81,219 | 43,500 |
Advertising and promotion expenses | 3,301 | $ 14,806 | 98,461 | 138,518 |
Accrued promotional allowances | $ 0 | 196,977 | ||
Company had net income | $ 151,469 | $ 133,978 |
Concentrations of credit risk (
Concentrations of credit risk (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Major Customers | ||
Two customers of gross revenue | 10.00% | 10.00% |
One vendor purchased of merchandise | 10.00% | 10.00% |
Notes Payable Sterling National
Notes Payable Sterling National Bank (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Jul. 31, 2014 | Jul. 31, 2013 | Jul. 12, 2011 | Sep. 08, 2010 |
Notes Payable Sterling National Bank | ||||||
Percentage of net invoices to be submitted | 85.00% | |||||
Percentage of gross invoices | 0.45% | |||||
Interest rate of loan advance on Sterling National Bank Base Rate | 0.25% | |||||
Closing rate of Sterling National Bank Base Rate | 5.00% | |||||
Subordinated debt due to Howard Ullman | $ 121,263 | |||||
Subordinated debt due to Sterling National Bank | $ 81,000 | |||||
Balance due to Sterling | $ 4,183,663 | $ 286,945 | ||||
Borrowed credit line | $ 7,000,000 | |||||
Credit line with Sterling National Bank Opening | $ 2,000,000 | |||||
Credit line with Sterling National Bank Increased | $ 7,000,000 | $ 6,000,000 | $ 4,000,000 |
Notes And Loans Payable To Re22
Notes And Loans Payable To Related Parties (Details) - USD ($) | Sep. 30, 2015 | Jul. 12, 2011 | May. 30, 2007 |
Notes Payable And Loans Payable To Related Parties Officers And Directors | |||
Promissory note payable to director | $ 575,000 | ||
Accrued interest rate | 8.00% | ||
Series B Preferred stock issued | 12,074 | ||
Series B Preferred stock valued | $ 28,975 | ||
Notes payables balance | $ 466,886 | ||
Reduction in notes payables | 47,940 | ||
Revised balance | 418,946 | ||
Reassigned loan Stewart Wallach | 209,473 | ||
Reassigned loan JWTR Holdings LLC | $ 209,473 | ||
Total combined balance due on two notes | $ 558,612 | ||
Total combined accrued interest | $ 139,666 |
Notes Payable And Loans Payable
Notes Payable And Loans Payable To Related Parties Loan From A Director (Details) - USD ($) | Jan. 15, 2013 | May. 11, 2010 | Mar. 11, 2010 |
Notes Payable And Loans Payable To Related Parties Loan From A Director | |||
8 % Loan from a director | $ 250,000 | $ 75,000 | $ 100,000 |
Total Amount Payable | 304,137 | 107,335 | 144,449 |
Including interest | 54,137 | $ 32,335 | $ 44,449 |
Company received a loan from Stewart Wallach with interest rate 8 % | $ 250,000 |
Notes Payable And Loans Payab24
Notes Payable And Loans Payable To Related Parties Purchases Order Assignment- Funding Agreement (Details) - USD ($) | Jun. 18, 2015 | Jun. 16, 2015 | Jun. 15, 2015 | May. 20, 2015 | May. 19, 2015 | Feb. 09, 2015 |
Notes Payable And Loans Payable To Related Parties Purchases Order Assignment- Funding Agreement | ||||||
Loan received from George Wolf | $ 400,000 | |||||
Interest rate on loan George Wolf | 1.00% | |||||
Total amount due on notes George Wolf | $ 413,677 | |||||
Accrued interest George Wolf | $ 13,677 | |||||
Note received from Chief Executive Officer | $ 250,000 | |||||
Interest rate on note per month | 1.00% | |||||
Total amount due under this note | $ 261,014 | |||||
Accrued interest on note | 11,014 | |||||
Note received from Jeffrey Postal | $ 500,000 | $ 500,000 | $ 250,000 | $ 200,000 | ||
Interest rate on note | 1.00% | 1.00% | 1.00% | 1.00% | ||
Total amount due on notes Jeffrey Postal | $ 517,425 | $ 261,014 | ||||
Accrued interest Jeffrey Postal | $ 17,425 | $ 11,014 | ||||
Note received from Phyllis Postal | $ 400,000 | |||||
Interest rate on note Phyllis Postal | 1.00% |
Notes Payable And Loans Payab25
Notes Payable And Loans Payable To Related Parties Working Capital Loan Agreements (Details) - USD ($) | Sep. 30, 2015 | Apr. 01, 2012 |
Notes Payable And Loans Payable To Related Parties Working Capital Loan Agreements | ||
Maximum amount may be borrowed by company | $ 1,000,000 | |
Interest rates | 8.00% | |
Loan balance | $ 613,264 | |
Interest amount included in loan | $ 115,264 |
Notes Payable And Loans Payab26
Notes Payable And Loans Payable To Related Parties Maturities (Details) | Sep. 30, 2015USD ($) |
Notes Payable And Loans Payable To Related Parties Maturities | |
Total amount payable to officers, directors | $ 3,485,064 |
Accrued interest | $ 493,118 |
Leases Principal Executive Offi
Leases Principal Executive Offices (Details) | Feb. 01, 2014USD ($) | Jun. 29, 2007 |
Leases Principal Executive Offices | ||
Rental space area | 4,000 | |
Base annual rent paid in equal monthly installments | $ 87,678 | |
Option to renew lease for 3years to increase per each year of the renewal term | 3.00% |
Leases Principal Executive Of28
Leases Principal Executive Office Rental (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | |
Leases Principal Executive Office Rental | ||||
Lease agreement for office space in years | 2 | |||
New lease agreement for the same office space with a base annual rent paid in equal monthly installments | $ 48,000 | |||
New lease agreement for the same office space with a base annual rent paid in equal monthly installments in HK | 372,000 | |||
Rental expenses | $ 35,144 | $ 34,655 | $ 105,503 | $ 86,359 |
Lease obligations under agreeme
Lease obligations under agreements as follows (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Lease obligations under agreements as follows: | |||
Lease obligations under agreements US | $ 7,559 | $ 90,710 | $ 89,150 |
Lease obligations under agreements HK | 6,000 | 48,000 | |
Total lease obligation US and HK | $ 7,559 | $ 96,710 | 137,150 |
Total lease obligation US | 187,419 | ||
Total lease obligation HK | 54,000 | ||
Total lease obligation | $ 241,419 |
Consulting Agreements (Details)
Consulting Agreements (Details) | Jul. 02, 2015USD ($) |
Consulting Agreements | |
Consultant will be paid per month | $ 10,500 |
Consultant will be paid per month | $ 12,500 |
Commitments Employment Agreemen
Commitments Employment Agreement (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Feb. 05, 2008 |
Commitments Employment Agreement | |||
Amount paid to Wallach | $ 225,000 | ||
Percentage of increase per year to Wallach | 5.00% | ||
Amount paid to Wallach for 2014 | $ 287,164 | ||
Amount paid to Wallach for 2013 | 285,586 | ||
Accrued amount for deferred wages in 2011 Wallach | 40,233 | ||
Amount paid to McClinton | $ 150,000 | ||
Percentage of increase per year to McClinton | 5.00% | ||
Amount paid to McClinton for 2014 | $ 191,442 | ||
Amount paid to McClinton for 2013 | $ 190,398 | ||
Accrued amount for deferred wages in 2011 McClinton | $ 572 | $ 572 |
Stock Transactions Preferred St
Stock Transactions Preferred Stock and Common Stock (Details) - USD ($) | May. 05, 2015 | Dec. 31, 2014 | Jul. 09, 2009 |
Stock Transactions Preferred Stock | |||
Series C Preferred Stock shares authorized and issued | 1,000 | ||
Value of Series C Preferred stock shares issued | $ 700,000 | ||
Series C Shares 1000 are convertible into common stock shares | 67,979,425 | 67,979,425 | |
Series C Preferred stock par value | $ 1 | ||
Shares of previously issued common stock were surrendered and canceled | 3,750,000 | ||
Payment to the consultant in consideration | $ 50,000 |
Stock Transactions Warrant (Det
Stock Transactions Warrant (Details) | Oct. 31, 2007USD ($)$ / sharesshares |
Stock Transactions Warrant | |
Issuance of shares of common stock as part of a private placement | shares | 31,823,529 |
Per share value of shares of common stock as part of a private placement | $ 0.017 |
Value of shares as part of private placement | $ | $ 541,000 |
Warrant to purchase shares in Private Placement | 30.00% |
Total warrants were issued | shares | 9,547,055 |
Warrants exercise price | $ 0.025 |
Stock Transactions Options (Det
Stock Transactions Options (Details) | Aug. 06, 2015shares | Jun. 30, 2015shares | Jan. 02, 2015shares | Aug. 06, 2012shares | Jul. 01, 2011shares | Apr. 23, 2011 | Dec. 31, 2010shares | Apr. 23, 2010shares | Jul. 31, 2009shares | Dec. 31, 2008shares | May. 23, 2008shares | May. 01, 2008shares | Feb. 05, 2008shares | Jan. 10, 2008shares | Oct. 22, 2007shares | May. 01, 2007shares | Apr. 27, 2007$ / sharesshares | Apr. 23, 2007shares | May. 20, 2005$ / sharesshares |
Stock Transactions Options Details | |||||||||||||||||||
Available shares for issuance of common stock | 10,000,000 | ||||||||||||||||||
Stock options granted non-qualified under 2005 Equity plan | 250,000 | ||||||||||||||||||
Option price per share | $ / shares | $ 0.02 | ||||||||||||||||||
Stock options granted to five employees | 4,000,000 | ||||||||||||||||||
Options vesting period (in years) | 2 | ||||||||||||||||||
Stock options cancelled | 500,000 | 1,000,000 | 74,666,667 | 850,000 | |||||||||||||||
Stock options granted to CEO as incentive compensation | 102,400,000 | ||||||||||||||||||
Exercise price of stock options granted to CEO | $ / shares | $ 0.029 | ||||||||||||||||||
Options vested per year | 20.00% | ||||||||||||||||||
Fully vested options were amended and transferred to James McClinton | 5,000,000 | ||||||||||||||||||
Company granted stock option for restricted shares of common stock to James McClinton as incentive compensation | 28,100,000 | ||||||||||||||||||
Company granted stock option for restricted shares of common stock to James McClinton as incentive compensation exercise price | 0.029 | ||||||||||||||||||
Granted Stock options to a business associate. | 700,000 | ||||||||||||||||||
Options vested in years | 1 | 1 | 2 | 2 | 1 | 2 | |||||||||||||
Granted Stock options to an advisor. | 1,000,000 | ||||||||||||||||||
Granted Stock options to four Directors and one Employee. | 3,650,000 | ||||||||||||||||||
Options were cancelled | 3,500,000 | ||||||||||||||||||
Granted Stock options to an employee. | 850,000 | ||||||||||||||||||
Granted Stock options to four Directors. | 4,500,000 | 4,500,000 | 4,500,000 | ||||||||||||||||
Stock Transactions Options granted to Company Secretary. | 150,000 | 150,000 | 150,000 | 150,000 | 300,000 | ||||||||||||||
Options expired. | 4,500,000 | ||||||||||||||||||
Granted options that have been canceled | 150,000 | ||||||||||||||||||
Stock Transactions Option granted to two Directors. | 3,000,000 | 3,000,000 |
Stock Transactions assumptions
Stock Transactions assumptions in the fair value calcuations (Details) | 9 Months Ended |
Sep. 30, 2015$ / shares | |
Stock Transactions assumptions in the fair value calcuations | |
Risk free interest rates minimum | 0.65% |
Risk free interest rates maximum | 3.00% |
Expected terms Minimum | 5 |
Expected terms Maximum | 10 |
Expected volatility of stock | 500.00% |
Expected dividends | 0.00% |
Suboptimal Exercise Behavior Multiple | $ 2 |
Number of Steps | 150 |
Stock Transactions Compensation
Stock Transactions Compensation Expense (Details) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Stock Transactions Compensation Expense | |
Compensation expense recognized to these stock options | $ 81,219 |
Further compensation expense | 14,250 |
Further compensation expense in 2016 | $ 33,981 |
Summary of Stock option activit
Summary of Stock option activity and warrant activity (Details) {Stockholder Equity} | 9 Months Ended |
Sep. 30, 2015shares | |
Shares | |
Stock option Outstanding | 74,383,333 |
Stock option Granted | 3,150,000 |
Stock option Exercised | 0 |
Stock option Outstanding | 77,533,333 |
Stock option Granted | 6,300,000 |
Stock option Exercised | 0 |
Stock option Forfeited/expired | (4,750,000) |
Stock option Outstanding | 79,083,333 |
Stock option Vested/exercisable | 77,533,333 |
Stock option Vested/exercisable | 75,933,333 |
Weighted-Average Exercise Price | |
Stock option Outstanding | 0.029 |
Stock option Granted | 0.029 |
Stock option Outstanding | 0.029 |
Stock option Granted | 0.029 |
Stock option Forfeited/expired | 0.029 |
Stock option Outstanding | 0.029 |
Stock option Vested/exercisable | 0.029 |
Stock option Vested/exercisable | 0.029 |
Weighted-Average Remaining Contractual Term (Years) | |
Stock option Outstanding | 3.28 |
Stock option Outstanding | 2.36 |
Stock option Outstanding | 1.98 |
Stock option Vested/exercisable | 2.36 |
Stock option Vested/exercisable | 1.85 |
Aggregate Intrinsic Value | |
Stock option Outstanding | 0 |
Summarizes the information with
Summarizes the information with respect to options granted, outstanding and exercisable under the 2005 plan (Details) | Sep. 30, 2015$ / sharesshares |
Options Outstanding | |
Options Outstanding Exercise Price $.029 | 54,983,333 |
Options Outstanding Exercise Price $.029 | 2,500,000 |
Options Outstanding Exercise Price $.029 | 700,000 |
Options Outstanding Exercise Price $.029 | 1,000,000 |
Options Outstanding Exercise Price $.029 | 150,000 |
Options Outstanding Exercise Price $.029 | 850,000 |
Options Outstanding Exercise Price $.029 | 300,000 |
Options Outstanding Exercise Price $.029 | 4,500,000 |
Options Outstanding Exercise Price $.029 | 150,000 |
Options Outstanding Exercise Price $.029 | 4,500,000 |
Options Outstanding Exercise Price $.029 | 3,000,000 |
Options Outstanding Exercise Price $.029 | 150,000 |
Options Outstanding Exercise Price $.029 | 3,000,000 |
Options Outstanding Exercise Price $.029 | 150,000 |
Options Outstanding Exercise Price $.029 | 3,000,000 |
Options Outstanding Exercise Price $.029 | 150,000 |
Remaining Contractual Life in Years | |
Remaining Contractual Life in Years Exercise Price $.029 | 1.58 |
Remaining Contractual Life in Years Exercise Price $.029 | 2.58 |
Remaining Contractual Life in Years Exercise Price $.029 | 3.58 |
Remaining Contractual Life in Years Exercise Price $.029 | 2.08 |
Remaining Contractual Life in Years Exercise Price $.029 | 2.33 |
Remaining Contractual Life in Years Exercise Price $.029 | 3.67 |
Remaining Contractual Life in Years Exercise Price $.029 | 4.75 |
Remaining Contractual Life in Years Exercise Price $.029 | 0.75 |
Remaining Contractual Life in Years Exercise Price $.029 | 5.75 |
Remaining Contractual Life in Years Exercise Price $.029 | 1.83 |
Remaining Contractual Life in Years Exercise Price $.029 | 3.25 |
Remaining Contractual Life in Years Exercise Price $.029 | 8.25 |
Remaining Contractual Life in Years Exercise Price $.029 | 4.25 |
Remaining Contractual Life in Years Exercise Price $.029 | 9.25 |
Remaining Contractual Life in Years Exercise Price $.029 | 4.83 |
Remaining Contractual Life in Years Exercise Price $.029 | 9.83 |
Average Exercise Price | |
Average Exercise Price Exercise Price $.029 | $ / shares | $ 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | 0.029 |
Average Exercise Price Exercise Price $.029 | $ / shares | $ 0.029 |
Number of Options Currently Exercisable | |
Number of Options Currently Exercisable Exercise Price $.029 | 54,983,333 |
Number of Options Currently Exercisable Exercise Price $.029 | 2,500,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 700,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 1,000,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 150,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 850,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 300,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 4,500,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 150,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 4,500,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 3,000,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 150,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 3,000,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 150,000 |
Number of Options Currently Exercisable Exercise Price $.029 | 0 |
Number of Options Currently Exercisable Exercise Price $.029 | 0 |
Cost Method Investments (Detail
Cost Method Investments (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Jan. 15, 2013 |
Cost Method Investments Details | |||
Purchase shares of AC Kinetics Series A Preferred Stock | 100 | ||
Value of purchase shares of AC Kinetics Series A Preferred Stock | $ 500,000 | ||
Shares carry a liquidation preference | $ 500,000 | ||
Convertible outstanding shares of AC Kinetics common stock | 3.00% | ||
Royalty on any licensing revenues received by AC Kinetics for products sold | 7.00% | ||
Royalty agreement will terminate upon receipt by the company of royalties | $ 500,000 | ||
AC Kinetics Series A Convertible Preferred Stock | $ 500,000 | $ 500,000 |