Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 04, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | CAPSTONE COMPANIES, INC. | |
Entity Trading Symbol | capc | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Entity Central Index Key | 814,926 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 47,132,664 | |
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 | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash | $ 1,176,440 | $ 1,646,128 |
Accounts receivable, net | 5,732,730 | 4,449,179 |
Inventory | 514,198 | 366,330 |
Prepaid expenses | 544,381 | 330,020 |
Total Current Assets | 7,967,749 | 6,791,657 |
Property and Equipment: | ||
Computer equipment and software | 19,767 | 19,767 |
Machinery and equipment | 339,184 | 325,750 |
Furniture and fixtures | 5,665 | 5,665 |
Less: Accumulated depreciation | (267,961) | (250,465) |
Total Property & Equipment | 96,655 | 100,717 |
Other Non-current Assets: | ||
Deposit | 12,193 | 12,193 |
Note receivable | 539,832 | 526,887 |
Goodwill | 1,936,020 | 1,936,020 |
Total Other Non-current Assets | 2,488,045 | 2,475,100 |
Total Assets | 10,552,449 | 9,367,474 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 3,732,285 | 2,678,210 |
Income tax payable | 1,588 | 1,588 |
Notes and loans payable to related parties | 1,203,468 | 1,321,721 |
Total Current Liabilities | 4,937,341 | 4,001,519 |
Long Term Liabilities: | ||
Deferred tax liabilities | 344,000 | 216,000 |
Total Long Term Liabilities | 344,000 | 216,000 |
Total Liabilities | 5,281,341 | 4,217,519 |
Commitments and Contingencies (Note 6) | ||
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares | 0 | 0 |
Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares | 0 | 0 |
Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | 0 | 0 |
Common Stock, par value $.0001 per share, authorized 56,666,667 shares, issued 47,132,664 shares and 48,132,664 shares | 4,713 | 4,813 |
Additional paid-in capital | 7,281,747 | 7,411,172 |
Accumulated deficit | (2,015,352) | (2,266,030) |
Total Stockholders' Equity | 5,271,108 | 5,149,955 |
Total Liabilities and Stockholders' Equity | $ 10,552,449 | $ 9,367,474 |
CONSOLIDATED BALANCE SHEETS PAR
CONSOLIDATED BALANCE SHEETS PARENTHETICALS - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Parentheticals | ||
Preferred Stock, Series A, par value | $ 0.001 | $ 0.001 |
Preferred Stock, Series A, shares authorized | 6,666,667 | 6,666,667 |
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 | 3,333,333 | 3,333,333 |
Preferred Stock, Series B-1, shares issued | 0 | 0 |
Preferred Stock, Series C, par value | $ 1 | $ 1 |
Preferred Stock, Series C, shares authorized | 67 | 67 |
Preferred Stock, Series C, shares issued | 0 | 1,000 |
Common Stock, par value | $ 0.0001 | $ 0.0001 |
Common Stock, shares authorized | 56,666,667 | 56,666,667 |
Common Stock, shares issued | 47,132,664 | 48,132,664 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue: | ||
Revenues, net | $ 6,752,196 | $ 2,078,214 |
Cost of sales | (5,172,729) | (1,464,658) |
Gross Profit | 1,579,467 | 613,556 |
Operating Expenses: | ||
Sales and marketing | 376,756 | 62,977 |
Compensation | 359,802 | 308,458 |
Professional fees | 204,802 | 104,285 |
Product development | 72,025 | 36,274 |
Other general and administrative | 178,619 | 142,755 |
Total Operating Expenses | 1,192,004 | 654,749 |
Operating Income (Loss) | 387,463 | (41,193) |
Other Income (Expense): | ||
Interest income | 12,945 | 0 |
Interest expense | (21,730) | (57,736) |
Total Other Income (Expense) | (8,785) | (57,736) |
Income (Loss) Before Tax Provision | 378,678 | (98,929) |
Provision for Income Tax | 128,000 | 0 |
Net Income (Loss) | $ 250,678 | $ (98,929) |
Net Income (Loss) per Common Share | ||
Basic | $ 0.005 | $ (0.002) |
Diluted | $ 0.005 | $ (0.002) |
Weighted Average Common Shares Outstanding | ||
Basic | 47,621,553 | 48,132,664 |
Diluted | 47,883,977 | 48,132,664 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ 250,678 | $ (98,929) |
Adjustments necessary to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 17,495 | 14,061 |
Accrued interest on note receivable | (12,945) | 0 |
Stock based compensation expense | 20,475 | 14,250 |
Provision for deferred income tax | 128,000 | 0 |
Accrued sales allowance | 206,995 | (94,203) |
(Increase) decrease in accounts receivable | (1,539,687) | 3,835,576 |
(Increase) in inventory | (147,868) | (26,674) |
(Increase) in prepaid expenses | (214,361) | (38,057) |
Increase (decrease) in accounts payable and accrued liabilities | 1,103,216 | (1,864,020) |
Increase in accrued interest on notes payable | (18,253) | 31,282 |
Net cash provided by (used in) operating activities | (206,255) | 1,773,286 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (13,433) | (4,700) |
Net cash (used in) investing activities | (13,433) | (4,700) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from notes payable | 5,280,373 | 3,643,356 |
Repayments of notes payable | (5,280,373) | (5,564,194) |
Repurchase of shares from Involve, LLC | (150,000) | 0 |
Proceeds from notes and loans payable to related parties | 0 | 360,000 |
Repayments of notes and loans payable to related parties | (100,000) | (108,847) |
Net cash (used in) financing activities | (250,000) | (1,669,685) |
Net (Decrease) Increase in Cash and Cash Equivalents | (469,688) | 98,901 |
Cash and Cash Equivalents at Beginning of Period | 1,646,128 | 364,714 |
Cash and Cash Equivalents at End of Period | 1,176,440 | 463,615 |
Cash paid during the year for: | ||
Interest | 39,983 | 60,301 |
Income taxes | $ 0 | $ 7,500 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2017 | |
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" or "Capstone"), a Florida corporation (formerly, "CHDT Corporation") and its wholly-owned subsidiaries is presented to assist in understanding the Company's consolidated financial statements. The accounting policies conform to accounting principles generally accepted in the United States of America ("U.S. GAAP") and have been consistently applied in the preparation of the consolidated financial statements. Basis of Presentation The condensed consolidated financial statements contained in this report are unaudited. In the opinion of management, the condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the Company's financial position as of March 31, 2017 and results of operations and cash flows for the three months ended March 31, 2017 and 2016. All significant intercompany accounts and transactions are eliminated in consolidation. These condensed consolidated financial statements and notes are presented in accordance with the rules and regulations of the United States Securities and Exchange Commission ("SEC") relating to interim financial statements and in conformity with U.S. GAAP. Certain information and note disclosures have been condensed or omitted in the condensed financial statements pursuant to SEC rules and regulations, although the Company believes that the disclosures made herein are adequate to make the information not misleading. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 (the "2016 Annual Report"). The operating results for any interim period are not necessarily indicative of the operating results to be expected for any other interim period or the full fiscal year. Reverse Stock Split On May 24, 2016, the Company's Board and stockholders holding a majority of stockholder's votes approved a reverse split of common stock at a ratio of 15 old for 1 new. The Company effectuated the reverse split on Monday July 25, 2016 and the Company's shares of common stock began trading on a post reverse split basis on July 25, 2016. The par value of the Company's common stock and preferred stock was not adjusted as a result of the reverse split. All issued and outstanding common stock, options for common stock, warrants and per share amounts have been retroactively adjusted to reflect this reverse stock split for all periods presented. 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 Company's products are typically manufactured in China by third-party manufacturing companies. Inventory The Company's inventory, recorded at lower of cost (first-in, first-out) or market, consists of finished goods for resale by Capstone, totaling $514,198 and $366,330 at March 31, 2017 and December 31, 2016, respectively. Net Income (Loss) Per Common Share Basic earnings per common share were computed by dividing net income or loss by the weighted average number of shares of common stock outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted net income per share, the basic weighted average number of shares is increased by the dilutive effect of stock options using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. At March 31, 2017 and 2016, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 5,182,226 and 5,908,693, respectively. Basic weighted average shares outstanding is reconciled to diluted weighted shares outstanding as follows: 3 months ended March 31, 2017 3 months ended March 31, 2016 Basic weighted average shares outstanding 47,621,553 48,132,664 Dilutive warrants 259,030 - Diluted weighted average shares outstanding 47,883,977 48,132,664 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 consolidated 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 which are based on historical authorized returns. During the three months ended March 31, 2017 and 2016, Capstone determined that $47,741 and $94,203, respectively of previously accrued allowances were no longer required. The reduction of accrued allowances is included in net revenues for the periods ended March 31, 2017 and 2016. 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 $20,663 and $3,053 for the three months ended March 31, 2017 and 2016, respectively. Shipping and Handling The Company's shipping and handling costs are included in sales and marketing expenses and amounted to $16,919 and $26,255 for the three months ended March 31, 2017 and 2016, respectively. Accrued Liabilities Accrued liabilities contained in the accompanying consolidated balance sheets include accruals for estimated amounts of credits to be issued in future years based on potential 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 Company's consolidated statements of income. 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. Stock-based compensation for the period ended March 31, 2017 and 2016 totaled $20,475 and $14,250, respectively. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated 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. Recent Accounting Standards In May 2014, ASU 2014-09 was issued, Revenue from Contracts with Customers In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities , Fair Value Measurements In March 2016, the FASB issued ASU 2016-02, Leases In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments Statement of Cash Flows, In November 2016, the FASB issued ASU 2016-18, Cash Flows: Statement of Cash Flows (Topic 230) - Restricted Cash. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, Adoption of New Accounting Standards In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory The Company adopted ASU 2015-17, Income Taxes (Topic 740): Balance sheet Classification of Deferred Taxes, The Company adopted ASU 2016-09, Compensation - Stock Compensation (Topic 718) The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company's financials properly reflect the change. |
CONCENTRATIONS OF CREDIT RISK A
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE | 3 Months Ended |
Mar. 31, 2017 | |
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 considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents, to the extent the funds are not being held for investment purposes. Accounts Receivable The Company grants credit to its customers, substantially all of whom are retail establishments located throughout the United States and their international locations'. The Company typically does not require collateral from customers. Credit risk is limited due to the financial strength of the customers comprising the Company's customer base and their dispersion across different geographical 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 51.2% and 48.0% of net revenue during the period ended March 31, 2017, and 65.6% and 29.7% of net revenue during the period ended March 31, 2016. The loss of these customers would adversely impact the business of the Company. Approximately 8.5% and 48.9% of the Company's net revenue for both periods ended March 31, 2017 and 2016, was from international sales. Gross Revenue % Gross Accounts Receivable Periods Ended March 31, Periods Ended March 31, 2017 2016 2017 2016 Customer A 51.2 % 65.6 % $ 2,603,277 $ 1,337,076 Customer B 48.0 % 29.7 % 3,512,252 - 99.2 % 95.3 % $ 6,115,529 $ 1,337,076 Major Vendors The Company had two vendors from which it purchased 93.2% and 3.8% of merchandise sold during the period ended March 31, 2017, and 85.1% and 10.4 % of merchandise sold during the period ended March 31, 2016. The loss of these suppliers could adversely impact the business of the Company. As of March 31, 2017, approximately 86.7% and 74.1%, respectively, of accounts payable were due to two vendors. Purchases % Accounts Payable Periods Ended March 31, Periods Ended March 31, 2017 2016 2017 2016 Vendor A 93.2 % 85.1 % $ 2,890,006 $ 148,004 Vendor B 3.8 % 10.4 % 138,183 11,311 97.0 % 95. 5 % $ 3,028,189 $ 159,315 |
INVESTMENT AND NOTE RECEIVABLE
INVESTMENT AND NOTE RECEIVABLE | 3 Months Ended |
Mar. 31, 2017 | |
INVESTMENT AND NOTE RECEIVABLE: | |
INVESTMENT AND NOTE RECEIVABLE | NOTE 3 - INVESTMENT AND NOTE RECEIVABLE On January 15, 2013, the Company entered into an agreement with AC Kinetics, Inc. ("AC Kinetics") to purchase 100 shares of AC Kinetics Series A Preferred Stock for $500,000. These shares carried a liquidation preference in the amount of $500,000, were convertible at the Company's demand into 3% of the outstanding shares of AC Kinetics common stock and had anti-dilution protection. On June 8, 2016, the Board of Directors approved a Resolution to accept an offer from AC Kinetics to sell back the 100 shares of AC Kinetics Series A Preferred Stock. For consideration, the Company received a note in the face amount of $1,500,000 that will be immediately paid to the Company on completion and funding of a Securities Purchase Agreement with a national company to purchase AC Kinetics. The note is subject to a Subordination Agreement for loans made to AC Kinetics by the national company involved in the Securities Purchase Agreement. As further consideration, the Company also received an option to repurchase 1,666,667 shares of Company common stock held by Involve L.L.C. at an exercise price of $.15. The Agreements were signed June 27, 2016. As the note is subject to a subordination agreement, and the Securities Purchase Agreement between the national company and AC Kinetics and has not been concluded, the Company has determined that the note falls under the Level three category of the fair value hierarchy and that the fair value of the note was determined to be $500,000 at the date of the transaction. The fair value of the note was determined based on an analysis of AC Kinetics ability to repay the note and the value of the collateral issued in connection with the sale of AC Kinetics Series A Preferred Stock. The significant unobservable inputs used in the fair value measurement of the Company's note receivable were the probability of default and the loss severity in the event of the default. The table below sets forth a summary of changes in the fair value of the Level three note for the period ended March 31, 2017: Balance, December 31, 2016 $ 526,887 Accrued interest income $ 12,945 Balance, March 31, 2017 $ 539,832 |
NOTES PAYABLE AND SUBSEQUENT EV
NOTES PAYABLE AND SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2017 | |
NOTES PAYABLE AND SUBSEQUENT EVENTS | |
NOTES PAYABLE AND SUBSEQUENT EVENTS | NOTE 4 – NOTES PAYABLE AND SUBSEQUENT EVENTS Sterling National Bank On September 8, % As of May 1, 2017, the base management fee was reduced to .30% of the gross invoice amount. As of March 31, 2017 and December 31, 2016, there was no balance due to Sterling National Bank under the note payable. As of March 31, 2017, 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 | 3 Months Ended |
Mar. 31, 2017 | |
NOTES AND LOANS PAYABLE TO RELATED PARTIES | |
NOTES AND LOANS PAYABLE TO RELATED PARTIES | NOTE 5 – NOTES AND LOANS PAYABLE TO RELATED PARTIES As of March 31, 2017 and December 31, 2016, the Company had three notes and loans payable due to one officer, director and related party. Total notes and loan payable due to related parties at March 31, 2017 and December 31, 2016 was $1,203,468 and $1,321,721, respectively. These various notes and loans payable carry an 8 % interest rate, with maturities dates of January 2, 2018. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 6 – 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 entered into a lease agreement for the same office space as currently located. The 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 had the one-time option to renew the lease for three (3) years subject to a 3% increase per each year of the renewal term. Effective February 1, 2017, the Company renewed the lease for 3 years ending January 31, 2020, with a base annual rent of $92,256 and with a total rent expense of $281,711 through the term of the agreement. Under the lease agreement, Capstone is responsible for a portion of common area maintenance charges and any other utility consumed in the leased premises. CIHK entered into a lease agreement for office space at 303 Hennessy Road, Wanchai, Hong Kong. The original agreement was for the period from February 17, 2014, to February 16, 2016, with a base annual rent of $48,000 (HK$ 372,000) paid in equal monthly installments. The lease was extended for three (3) months until May 16, 2016. The lease was renewed for (12) months ending May 16, 2017 with a base annual rate of $48,775 and was further extended for (12) months ending May 16, 2018 with a base annual rate of $54,193 paid in equal monthly installments. The Company entered into a six (6) month rental agreement from December 1, 2016 until May 31, 2017 for showroom space at 3F, Wing Kin Industrial Building, 4-6 Wing Kin Road, Kwai Chung, NT, Hong Kong. This agreement has been further extended until December 31, 2017. The Company's rent expense amounted to $39,753 and $35,413 for the periods ended March 31, 2017 and 2016, respectively. Consulting Agreements On July 1, 2015, the Company entered into a consulting agreement with George Wolf, whereby Mr. Wolf will be paid $10,500 per month through December 31, 2015 and $12,500 per month from January 1, 2016 through December 31, 2017. On January 1, 2017, the agreement was amended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2017 through December 31, 2017. A bonus compensation of $10,000 was paid in the month of January 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 Mr. Wolf to a full-time Executive status. The annual salary and term of employment would be equal to that outlined in the consulting agreement. Employment Agreements On February 5, 2016, the Company entered into an Employment Agreement with Stewart Wallach, whereby Mr. Wallach will be paid $287,163 per annum. As part of the agreement, the base salary will be reviewed annually by the Compensation Committee for a potential increase, to at least reflect increases in the cost of living, but only if the Company shows a net profit for the year. The initial term of this new agreement began February 5, 2016 and ends February 5, 2018. The parties may extend the employment period of this agreement by mutual consent with approval of the Company's Board of Directors, but the extension may not exceed two years in length. On February 5, 2016, the Company entered into an Employment Agreement with James McClinton, whereby Mr. McClinton will be paid $191,442 per annum. As part of the agreement, the base salary will be reviewed annually by the Compensation Committee for a potential increase, to at least reflect increases in the cost of living, but only if the Company shows a net profit for the year. The initial term of this new agreement began February 5, 2016 and ends February 5, 2018. The parties may extend the employment period of this agreement by mutual consent with approval of the Company's Board of Directors, but the extension may not exceed one year in length. There is a common provision in both Mr. Wallach and Mr. McClinton's employment agreements: If the officer's employment is terminated by death or disability or without cause, the Company is obligated to pay to the officer's estate or the officer, as the case may be an amount equal to accrued and unpaid base salary as well as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal to (a) the sum of twelve (12) months base salary at the rate the Executive was earning as of the date of termination and (b) the sum of "merit" based bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by the Company shall be paid from a normal payroll account on a bi- weekly basis in accordance with the normal payroll policies of the Company. The amount owed by the Company to the Executive, from the effective Termination date, will be payout bi-weekly over the course of the year but at no time will be no more than twenty (26) installments. The Company will also continue to pay the Executive's health and dental insurance benefits for 12 months starting at the Executives date of termination. If the Executive had family health coverage at the time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive's severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment. Licensing Agreements On February 4, 2015, the Company finalized a Licensing Agreement with a globally recognized floorcare company that allows the Company to market home lighting products under the licensed brand, to discount retailers, warehouse clubs, home centers, on-line retailers and other retail distribution channels in the U.S., Canada and Mexico. The initial term of the agreement is for 3 years. The agreement does not have a Guaranteed Royalty stipulation. On December 29, 2016, the Company finalized the first amendment to the February 4 th Royalty expense for this agreement was $172,964 and $30,871 for the periods ended March 31, 2017 and 2016, respectively. On January 9, 2017, the Company finalized a Licensing Agreement with a globally recognized battery company that will allow the Company to market under the licensed brand, a specific product to a specific retailer in the warehouse club distribution channel. This agreement will be effective until December 31, 2018. The agreement does not have a Guaranteed Royalty stipulation, but the Company must meet minimum net sales requirements of $5,000,000 for contract year 1 and $7,000,000 for contract year 2. Royalty expense for this agreement was $60,049 and $0 for the periods ended March 31, 2017 and 2016, respectively. Investment Banking Agreement On March 1, 2017, the Company executed an Investment Banking Agreement with Wilmington Capital Securities, LLC, ("Wilmington"), a registered broker-dealer under the Securities Exchange Act of 1934. The Company entered into the Agreement in order to obtain outside assistance in finding and considering possible opportunities to enhance Company shareholder value through significant corporate transactions or through funding expansion and/or diversification of the Company's primary business lines. The scope of such possible strategic transactions include mergers and acquisitions, asset acquisition or sales and funding through the issuance of Company securities. The agreement has an initial six-month term and renews for an additional, consecutive six-month term if not terminated prior to the term renewal. Wilmington will receive a cash retainer fee of $80,000, payable in monthly installments, in the first six-month term, and a reduced retainer fee of $45,000, payable in monthly installments, in the first renewal of the initial six-month term. Wilmington will also receive a transaction fee for any consummated strategic transaction introduced by Wilmington under the Agreement. The transaction fees are based on the Lehman Scale starting at 8% fee reducing to 4% on transactions from $5,000,000 to in excess of $20,000,000. The retainer fee for this agreement was $40,000 and $0 for the periods ended March 31, 2017 and 2016, respectively. |
STOCK TRANSACTIONS AND SUBSEQUE
STOCK TRANSACTIONS AND SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2017 | |
STOCK TRANSACTIONS AND SUBSEQUENT EVENTS | |
STOCK TRANSACTIONS AND SUBSEQUENT EVENTS | NOTE 7 - STOCK TRANSACTIONS AND SUBSEQUENT EVENTS Warrants During September and October 2007, the Company issued 2,121,569 shares of common stock for cash at $0.255 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 636,474 warrants were issued and remain outstanding at March 31, 2017. The warrants are ten year warrants and have an exercise price of $0.255 per share. Options In 2005, the Company authorized the 2005 Equity Plan that made available shares of common stock for issuance through awards of options, restricted stock, stock bonuses, stock appreciation rights and restricted stock units. There were no stock options issued during the period ended March 31, 2017. As of March 31, 2017, there were 5,182,226 stock options outstanding and 4,972,226 stock options vested. The stock options have a weighted average expense price of $0.435. For the periods ended March 31, 2017 and 2016, the Company recognized stock based compensation expense of $20,475 and $14,250, respectively, related to these stock options. Such amounts are included in compensation expense in the accompanying consolidated statements of income. A further compensation expense expected to be $28,350 will be recognized for these options in 2017. On May 2, 2017, the Company's Board of Directors amended the Company's 2005 Equity Incentive Plan to extend the Plan's expiration date from December 31, 2016 to December 31, 2021. Adoption of Stock Repurchase Plan On August 23, 2016, the Company's Board of Directors authorized the Company to implement a stock repurchase plan for up to $750,000 worth of shares of the Company's outstanding common stock. The stock purchases can be made in the open market, structured repurchase programs, or in privately negotiated transactions. The Company has no obligation to repurchase shares under the authorization, and the timing, actual number and value of the shares which are repurchased will be at the discretion of management and will depend on a number of factors including the price of the Company's common stock, market conditions, corporate developments and the Company's financial condition. The repurchase plan may be discontinued at any time at the Company's discretion. On December 21, 2016, the Company's Board of Directors approved an extension of the Company's stock repurchase plan through December 31, 2017, subject to an earlier termination at the discretion of the Company's Board of Directors. On February 13, 2017, as authorized under the Company's stock repurchase plan, the Company repurchased 1,000,000 shares of Company common stock from Involve, LLC., under the Option Agreement dated June 27, 2016, at an exercise price of $.15 per share. On May 1, 2017, as authorized under the Company's stock repurchase plan, the Company repurchased 666,667 shares of Company common stock from Involve, LLC., under the Option Agreement dated June 27, 2016, at an exercise price of $.15 per share. On May 2, 2017, the Company's Board of Directors authorized at the Company's discretion to either retain repurchased shares in the treasury or to retire the repurchased shares. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | NOTE 8 - INCOME TAXES As of March 31, 2017, the Company had net operating loss carry forwards for income tax reporting purposes of approximately $9,000 that may be offset against future taxable income through 2034. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. The net deferred tax liability as of March 31, 2017 was $344,000 and is reflected in within long-term liabilities in the accompanying balance sheet. 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 judgement to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities for the years 2013 and prior. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be recorded as a component of income tax expense. The provision for income taxes for the three months ended March 31, 2017 and 2016 was calculated based on the estimated annual effective rate of 34% and 34 % for the full 2017 and 2016 calendar years respectively, adjusted for an income tax benefit from the expected utilization of net operating loss carryforwards. The income tax provision for the periods ended March 31, 2017 and 2016 consists of: 2017 2016 Current: Federal $ - $ - Deferred: Federal 128,000 - Income Tax Provision $ 128,000 $ - |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
SIGNIFICANT ACCOUNTING POLICIES (Policies) | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements contained in this report are unaudited. In the opinion of management, the condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the Company's financial position as of March 31, 2017 and results of operations and cash flows for the three months ended March 31, 2017 and 2016. All significant intercompany accounts and transactions are eliminated in consolidation. These condensed consolidated financial statements and notes are presented in accordance with the rules and regulations of the United States Securities and Exchange Commission ("SEC") relating to interim financial statements and in conformity with U.S. GAAP. Certain information and note disclosures have been condensed or omitted in the condensed financial statements pursuant to SEC rules and regulations, although the Company believes that the disclosures made herein are adequate to make the information not misleading. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 (the "2016 Annual Report"). The operating results for any interim period are not necessarily indicative of the operating results to be expected for any other interim period or the full fiscal year. |
Reverse Stock Split | Reverse Stock Split On May 24, 2016, the Company's Board and stockholders holding a majority of stockholder's votes approved a reverse split of common stock at a ratio of 15 old for 1 new. The Company effectuated the reverse split on Monday July 25, 2016 and the Company's shares of common stock began trading on a post reverse split basis on July 25, 2016. The par value of the Company's common stock and preferred stock was not adjusted as a result of the reverse split. All issued and outstanding common stock, options for common stock, warrants and per share amounts have been retroactively adjusted to reflect this reverse stock split for all periods presented. |
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 Company's products are typically manufactured in China by third-party manufacturing companies. |
Inventory | Inventory The Company's inventory, recorded at lower of cost (first-in, first-out) or market, consists of finished goods for resale by Capstone, totaling $514,198 and $366,330 at March 31, 2017 and December 31, 2016, respectively. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share Basic earnings per common share were computed by dividing net income or loss by the weighted average number of shares of common stock outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted net income per share, the basic weighted average number of shares is increased by the dilutive effect of stock options using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. At March 31, 2017 and 2016, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 5,182,226 and 5,908,693, respectively. Basic weighted average shares outstanding is reconciled to diluted weighted shares outstanding as follows: 3 months ended March 31, 2017 3 months ended March 31, 2016 Basic weighted average shares outstanding 47,621,553 48,132,664 Dilutive warrants 259,030 - Diluted weighted average shares outstanding 47,883,977 48,132,664 |
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 consolidated 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 which are based on historical authorized returns. During the three months ended March 31, 2017 and 2016, Capstone determined that $47,741 and $94,203, respectively of previously accrued allowances were no longer required. The reduction of accrued allowances is included in net revenues for the periods ended March 31, 2017 and 2016. |
Advertising and Promotion | Advertising and Promotion Advertising and promotion costs, including advertising, public relations, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expense was $20,663 and $3,053 for the three months ended March 31, 2017 and 2016, respectively. |
Shipping and Handling | Shipping and Handling The Company's shipping and handling costs are included in sales and marketing expenses and amounted to $16,919 and $26,255 for the three months ended March 31, 2017 and 2016, respectively. |
Accrued Liabilities, Policy | Accrued Liabilities Accrued liabilities contained in the accompanying consolidated balance sheets include accruals for estimated amounts of credits to be issued in future years based on potential product returns and various allowances. These estimates could change significantly in the near term. |
Income Taxes, Policy | 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 Company's consolidated statements of income. 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. Stock-based compensation for the period ended March 31, 2017 and 2016 totaled $20,475 and $14,250, respectively. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated 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. |
Recent Accounting Standards | Recent Accounting Standards In May 2014, ASU 2014-09 was issued, Revenue from Contracts with Customers In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities , Fair Value Measurements In March 2016, the FASB issued ASU 2016-02, Leases In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments Statement of Cash Flows, In November 2016, the FASB issued ASU 2016-18, Cash Flows: Statement of Cash Flows (Topic 230) - Restricted Cash. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, Adoption of New Accounting Standards In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory The Company adopted ASU 2015-17, Income Taxes (Topic 740): Balance sheet Classification of Deferred Taxes, The Company adopted ASU 2016-09, Compensation - Stock Compensation (Topic 718) The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company's financials properly reflect the change. |
NET INCOME (LOSS) PER COMMON SH
NET INCOME (LOSS) PER COMMON SHARE (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING RECONCILED TO DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING (Tables): | |
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING RECONCILED TO DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | Basic weighted average shares outstanding is reconciled to diluted weighted shares outstanding as follows: 3 months ended March 31, 2017 3 months ended March 31, 2016 Basic weighted average shares outstanding 47,621,553 48,132,664 Dilutive warrants 259,030 - Diluted weighted average shares outstanding 47,883,977 48,132,664 |
CONCENTRATIONS OF CREDIT RISK16
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE {2} | |
SCHEDULE OF REVENUE BY MAJOR CUSTOMERS | Approximately 8.5% and 48.9% of the Company's net revenue for both periods ended March 31, 2017 and 2016, was from international sales. Gross Revenue % Gross Accounts Receivable Periods Ended March 31, Periods Ended March 31, 2017 2016 2017 2016 Customer A 51.2 % 65.6 % $ 2,603,277 $ 1,337,076 Customer B 48.0 % 29.7 % 3,512,252 - 99.2 % 95.3 % $ 6,115,529 $ 1,337,076 |
SCHEDULE OF ACCOUNTS PAYABLE DUE TO MAJOR VENDORS | As of March 31, 2017, approximately 86.7% and 74.1%, respectively, of accounts payable were due to two vendors. Purchases % Accounts Payable Periods Ended March 31, Periods Ended March 31, 2017 2016 2017 2016 Vendor A 93.2 % 85.1 % $ 2,890,006 $ 148,004 Vendor B 3.8 % 10.4 % 138,183 11,311 97.0 % 95. 5 % $ 3,028,189 $ 159,315 |
SCHEDULE OF SUMMARY OF CHANGES
SCHEDULE OF SUMMARY OF CHANGES IN FAIR VALUE OF LEVEL 3 NOTE (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
SCHEDULE OF SUMMARY OF CHANGES IN FAIR VALUE OF LEVEL 3 NOTE: | |
SCHEDULE OF SUMMARY OF CHANGES IN FAIR VALUE OF LEVEL 3 NOTE | The table below sets forth a summary of changes in the fair value of the Level three note for the period ended March 31, 2017: Balance, December 31, 2016 $ 526,887 Accrued interest income $ 12,945 Balance, March 31, 2017 $ 539,832 |
Organization and Summary of S18
Organization and Summary of Significant Accounting Policies Narrative (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 | Apr. 22, 2016 |
Organization and Summary of Significant Accounting Policies Details | |||
Inventory finished goods for resale | $ 514,198 | $ 366,330 | |
Potentially dilutive common stock Shares | 5,182,226 | 5,698,693 | |
Received a credit from major vendor to cover customer returns of products | $ 479,000 |
Basic Weighted average shares o
Basic Weighted average shares outstanding is reconciled to diluted weighted shares outstanding (Details) - shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Basic Weighted average shares outstanding is reconciled to diluted weighted shares outstanding Details | ||
Basic weighted average shares outstanding | 47,621,553 | 48,132,664 |
Dilutive Warrants | 259,030 | 0 |
Diluted weighted average shares outstanding | 47,883,977 | 48,132,664 |
Organization and Summary of S20
Organization and Summary of Significant Accounting Policies Expenses (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Organization and Summary of Significant Accounting Policies Expenses | ||
Shipping and Handling Costs | $ 16,919 | $ 26,255 |
Stock based compensation | 20,475 | 14,250 |
Advertising and promotion expenses | 20,663 | 3,053 |
Accrued promotional allowances | $ 47,741 | $ 94,203 |
Major Customers (Details)
Major Customers (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Major Customers | ||
Gross Revenue % Customer A | 51.20% | 65.60% |
Gross Revenue % Customer B | 48.00% | 29.70% |
TOTAL Gross Revenue % | 99.20% | 95.30% |
Net revenue from international sales | 8.50% | 48.90% |
Gross Accounts Receivable | ||
Gross Accounts Receivable Customer A | $ 2,603,277 | $ 1,337,076 |
Gross Accounts Receivable Customer B | 3,512,252 | 0 |
Total Gross Accounts Receivable from two customers | $ 6,115,529 | $ 1,337,076 |
Major Vendors (Details)
Major Vendors (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Major Vendors Purchases % | ||
Purchases % Vendor A | 99.20% | 85.10% |
Purchases % Vendor B | 3.80% | 10.40% |
Total Purchases % Vendor A and B | 97.00% | 95.50% |
Major Vendors Accounts payable: | ||
Accounts payable due to Vendor A | $ 2,890,006 | $ 148,004 |
Accounts payable due to Vendor B | 138,183 | 11,311 |
Total accounts payable due to two vendors A and B | $ 3,028,189 | $ 159,315 |
Investment and note receivable
Investment and note receivable (Details) - USD ($) | Jun. 08, 2016 | Jan. 15, 2013 |
INVESTMENT AND NOTE RECEIVABLE Details | ||
AC Kinetics Series A Preferred Stock | 500,000 | |
Shares carried a liquidation preference in the amount | $ 500,000 | |
Company's demand into the outstanding shares of AC Kinetics | 3.00% | |
Company would receive a royalty on any licensing revenues | 7.00% | |
Royalty agreement would terminate by the Company of royalties | $ 500,000 | |
Company received a note in the face amount | $ 1,500,000 | |
Company also received an option to repurchase shares of Company common stock | 1,666,667 | |
Company also received an option to repurchase shares of Company common stock at an exercise price | $ 0.15 | |
Fair value of the note was determined at the date of the transaction | $ 500,000 |
Summary of changes in the fair
Summary of changes in the fair value of the Level three note (Details) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Summary of changes in the fair value of the Level three note details | |
Balance, December 31, 2016 | $ 526,887 |
Accrued interest income | 12,945 |
Balance, March 31, 2017 | $ 539,832 |
Notes Payable Sterling National
Notes Payable Sterling National Bank (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 | 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% | ||
Interest rate on the loan | 5.25% | 5.25% | |
Borrowed credit line | $ 7,000,000 |
Notes And Loans Payable To Re26
Notes And Loans Payable To Related Parties (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Notes Payable And Loans Payable To Related Parties | ||
Total notes and loan payable due to related parties | $ 1,203,468 | $ 1,321,721 |
Interest rate on notes and loans payable | 8.00% | 8.00% |
Leases Principal Executive Offi
Leases Principal Executive Offices (Details) | Feb. 01, 2017USD ($) | Feb. 01, 2014USD ($) | 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% | ||
Company renewed lease agreement with a base annual rent | $ 92,256 | ||
Total rent expense | $ 281,711 |
Leases Principal Executive Of28
Leases Principal Executive Office Rental (Details) | 3 Months Ended | |
Mar. 31, 2017USD ($) | Jun. 30, 2015USD ($) | |
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 | |
Lease has been further renewed for another (12) months ending May 16, 2017 with a base annual rate paid in equal monthly installments | 48,775 | |
Lease has been further renewed for another (12) months ending May 16, 2018 with a base annual rate paid in equal monthly installments | 54,193 | |
Rental expenses | $ 39,753 | $ 35,413 |
Consulting Agreements (Details)
Consulting Agreements (Details) | Mar. 31, 2017USD ($) |
Consulting Agreements Details | |
Company entered into a consulting agreement from July 1, 2015 through December 31, 2015 with George Wolf whereby paid Mr. Wolf | $ 10,500 |
Company entered into a consulting agreement from January 1, 2016 through December 31, 2017 with George Wolf whereby paid Mr. Wolf | 12,500 |
Consulting agreement was amended whereby Mr. Wolf will be paid per month from January 1, 2017 through December 31, 2017 | 13,750 |
Bonus compensation paid in the month of January 2017 | $ 10,000 |
Commitments Employment Agreemen
Commitments Employment Agreement (Details) | Feb. 05, 2016USD ($) |
Commitments Employment Agreement | |
Amount paid to Wallach | $ 287,163 |
Amount paid to McClinton | $ 191,442 |
Licensing Agreements (Details)
Licensing Agreements (Details) - USD ($) | Mar. 31, 2017 | Jan. 09, 2017 | Dec. 29, 2016 | Mar. 31, 2016 |
Licensing Agreements details | ||||
Net sales in the initial term | $ 10,000,000 | |||
Minimum net sales requirements contract year 1 | $ 5,000,000 | |||
Minimum net sales requirements contract year 2 | $ 7,000,000 | |||
Royalty expense agreement 1 | $ 172,964 | $ 30,871 | ||
Royalty expense agreement 2 | $ 60,049 | $ 0 |
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 | 2,121,569 |
Per share value of shares of common stock as part of a private placement | $ / shares | $ 0.255 |
Value of shares as part of private placement | $ | $ 541,000 |
Warrant to purchase shares in Private Placement | 30.00% |
Total warrants were issued | shares | 636,474 |
Warrants exercise price | $ / shares | $ 0.255 |
Stock Transactions Options (Det
Stock Transactions Options (Details) | Mar. 31, 2017shares |
Stock Transactions Options Details | |
Stock options outstanding | 5,182,226 |
Stock options vested | 4,972,226 |
Stock Transactions Compensation
Stock Transactions Compensation Expense (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Stock Transactions Compensation Expense | ||
Compensation expense recognized to these stock options | $ 20,475 | $ 14,250 |
Further compensation expense in 2017 | $ 28,350 |
Adoption of Stock Repurchase Pl
Adoption of Stock Repurchase Plan (Details) - USD ($) | May 01, 2017 | Feb. 13, 2017 | Aug. 23, 2016 |
Adoption of Stock Repurchase Plan details | |||
Company to implement a stock repurchase plan for upto shares worth | $ 750,000 | ||
Shares repurchased from Involve, LLC | 666,667 | 1,000,000 | |
Shares repurchased from Involve, LLC at exercise price per share | $ 0.15 | $ 0.15 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Taxes Narrative Details | ||
Net operating loss carryforwards | $ 9,000 | |
Net Deferred tax liability | $ 344,000 | |
Annual effective rate | 34.00% | 34.00% |
Income Tax Provision (Details)
Income Tax Provision (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Current: | ||
Federal | $ 0 | $ 0 |
Deferred: | ||
Federal | 128,000 | 0 |
Income Tax Provision | $ 128,000 | $ 0 |