Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 10, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 000-28831 | |
Entity Registrant Name | CAPSTONE COMPANIES, INC. | |
Entity Central Index Key | 0000814926 | |
Entity Tax Identification Number | 84-1047159 | |
Entity Incorporation, State or Country Code | FL | |
Entity Address, Address Line One | 431 Fairway Drive | |
Entity Address, Address Line Two | Suite 200 | |
Entity Address, Address Line Three | Deerfield Beach | |
Entity Address, State or Province | FL | |
Entity Address, Country | US | |
Entity Address, Postal Zip Code | 33441 | |
City Area Code | 954 | |
Local Phone Number | 252-3440 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 46,296,364 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash | $ 1,314,508 | $ 3,131,249 |
Accounts receivable, net | 211,509 | 13,459 |
Inventories | 13,426 | 24,818 |
Prepaid expenses | 113,636 | 182,782 |
Income tax refundable | 794,838 | 220,207 |
Total Current Assets | 2,447,917 | 3,572,515 |
Property and equipment, net | 63,166 | 65,649 |
Operating lease - right of use asset | 172,796 | 214,202 |
Deposit | 11,148 | 46,021 |
Goodwill | 1,445,254 | 1,936,020 |
Total Assets | 4,140,281 | 5,834,407 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 632,750 | 635,593 |
Paycheck protection program loan - current portion | 49,971 | |
Operating lease - current portion | 61,675 | 51,174 |
Total Current Liabilities | 744,396 | 686,767 |
Long-Term Liabilities: | ||
Paycheck protection program loan - long-term portion | 39,988 | |
Operating lease - long term portion | 124,207 | 170,998 |
Total Long-Term Liabilities | 164,195 | 170,998 |
Total Liabilities | 908,591 | 857,765 |
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares; Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares; Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | ||
Common Stock, par value $.0001 per share, authorized 56,666,667 shares, issued 46,296,364 shares at September 30, 2020 and 46,579,747 shares at December 31, 2019 | 4,630 | 4,658 |
Additional paid-in capital | 7,049,128 | 7,061,565 |
Accumulated deficit | (3,822,068) | (2,089,581) |
Total Stockholders' Equity | 3,231,690 | 4,976,642 |
Total Liabilities and Stockholders' Equity | 4,140,281 | 5,834,407 |
Preferred Stock, Series A [Member] | ||
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares; Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares; Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | ||
Total Stockholders' Equity | ||
Total Liabilities and Stockholders' Equity | ||
Preferred Stock, Series B-1 [Member] | ||
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares; Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares; Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | ||
Total Stockholders' Equity | ||
Total Liabilities and Stockholders' Equity | ||
Preferred Stock, Series C [Member] | ||
Stockholders' Equity: | ||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares; Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares; Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares | ||
Total Stockholders' Equity | ||
Total Liabilities and Stockholders' Equity |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Common stock, par value per share | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 56,666,667 | 56,666,667 |
Common stock, shares outstanding | 46,296,364 | 46,579,747 |
Preferred Stock, Series A [Member] | ||
Preferred stock, par value per share | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 6,666,667 | 6,666,667 |
Preferred stock, shares issued | 0 | 0 |
Preferred Stock, Series B-1 [Member] | ||
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 3,333,333 | 3,333,333 |
Preferred stock, shares issued | 0 | 0 |
Preferred Stock, Series C [Member] | ||
Preferred stock, par value per share | $ 1 | $ 1 |
Preferred stock, shares authorized | 67 | 67 |
Preferred stock, shares issued | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements Of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Revenues, net | $ 709,654 | $ 5,354,190 | $ 1,765,189 | $ 11,740,814 |
Cost of sales | 535,270 | 4,139,214 | 1,521,628 | 9,165,140 |
Gross Profit | 174,384 | 1,214,976 | 243,561 | 2,575,674 |
Operating Expenses: | ||||
Sales and marketing | 22,337 | 102,193 | 277,264 | 329,463 |
Compensation | 362,706 | 381,795 | 1,139,107 | 1,138,960 |
Professional fees | 99,579 | 112,687 | 339,816 | 353,293 |
Product development | 75,948 | 81,060 | 169,133 | 260,823 |
Other general and administrative | 113,026 | 169,572 | 364,941 | 490,835 |
Goodwill impairment charge | 490,766 | |||
Total Operating Expenses | 673,596 | 847,307 | 2,781,027 | 2,573,374 |
Operating Income (Loss) | (499,212) | 367,669 | (2,537,466) | 2,300 |
Other Income (Expenses): | ||||
Interest Expense | 47 | 3,206 | 181 | 3,206 |
Other Income | 2,610 | 135 | ||
Total Other Income (Expenses) | (47) | (596) | (181) | (3,071) |
Income (Loss) Before Tax Benefit | (499,259) | 367,073 | (2,537,647) | (771) |
Benefit for Income Tax | (21,222) | (805,160) | (12,000) | |
Net Income (Loss) | $ (478,037) | $ 367,073 | $ (1,732,487) | $ 11,229 |
Net Income (Loss) per Common Share Basic and Diluted | $ (0.01) | $ 0.01 | $ (0.04) | $ 0 |
Weighted Average Shares Outstanding Basic and Diluted | 46,296,364 | 46,882,538 | 46,350,909 | 46,874,256 |
Consolidated Statements Of Stoc
Consolidated Statements Of Stockholders' Equity (Unaudited) - USD ($) | Preferred Stock, Series A [Member] | Preferred Stock, Series B-1 [Member] | Preferred Stock, Series C [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance, shares at Dec. 31, 2018 | 47,046,364 | ||||||
Balance, value at Dec. 31, 2018 | $ 4,704 | $ 7,092,219 | $ (1,197,912) | $ 5,899,011 | |||
Stock options for compensation | $ 0 | 11,025 | 11,025 | ||||
Repurchase of shares, shares | (45,470) | ||||||
Repurchase of shares, value | $ (3) | (8,612) | 8,615 | ||||
Net Loss | (345,340) | (345,340) | |||||
Balance, shares at Mar. 31, 2019 | 47,000,894 | ||||||
Balance, value at Mar. 31, 2019 | $ 4,701 | 7,094,632 | (1,543,252) | 5,556,081 | |||
Balance, shares at Dec. 31, 2018 | 47,046,364 | ||||||
Balance, value at Dec. 31, 2018 | $ 4,704 | 7,092,219 | (1,197,912) | 5,899,011 | |||
Net Loss | 11,229 | ||||||
Balance, shares at Sep. 30, 2019 | 46,752,419 | ||||||
Balance, value at Sep. 30, 2019 | $ 4,677 | 7,076,513 | (1,186,683) | 5,894,507 | |||
Balance, shares at Mar. 31, 2019 | 47,000,894 | ||||||
Balance, value at Mar. 31, 2019 | $ 4,701 | 7,094,632 | (1,543,252) | 5,556,081 | |||
Stock options for compensation | 11,025 | 11,025 | |||||
Repurchase of shares, shares | (168,530) | ||||||
Repurchase of shares, value | $ (17) | (27,246) | 27,263 | ||||
Net Loss | (10,504) | (10,504) | |||||
Balance, shares at Jun. 30, 2019 | 46,832,364 | ||||||
Balance, value at Jun. 30, 2019 | $ 4,684 | 7,078,411 | (1,553,756) | 5,529,339 | |||
Stock options for compensation | 9,732 | 9,732 | |||||
Repurchase of shares, shares | (79,945) | ||||||
Repurchase of shares, value | $ (7) | (11,630) | 11,637 | ||||
Net Loss | 367,073 | 367,073 | |||||
Balance, shares at Sep. 30, 2019 | 46,752,419 | ||||||
Balance, value at Sep. 30, 2019 | $ 4,677 | 7,076,513 | (1,186,683) | 5,894,507 | |||
Balance, shares at Dec. 31, 2019 | 0 | 46,579,747 | |||||
Balance, value at Dec. 31, 2019 | $ 4,658 | 7,061,565 | (2,089,581) | 4,976,642 | |||
Stock options for compensation | 8,925 | 8,925 | |||||
Repurchase of shares, shares | (283,383) | ||||||
Repurchase of shares, value | $ (28) | (36,305) | 36,333 | ||||
Net Loss | (597,376) | (597,376) | |||||
Balance, shares at Mar. 31, 2020 | 0 | 46,296,364 | |||||
Balance, value at Mar. 31, 2020 | $ 4,630 | 7,034,185 | (2,686,957) | 4,351,858 | |||
Balance, shares at Dec. 31, 2019 | 0 | 46,579,747 | |||||
Balance, value at Dec. 31, 2019 | $ 4,658 | 7,061,565 | (2,089,581) | 4,976,642 | |||
Net Loss | (1,732,487) | ||||||
Balance, shares at Sep. 30, 2020 | 46,296,364 | ||||||
Balance, value at Sep. 30, 2020 | $ 4,630 | 7,049,128 | (3,822,068) | 3,231,690 | |||
Balance, shares at Mar. 31, 2020 | 0 | 46,296,364 | |||||
Balance, value at Mar. 31, 2020 | $ 4,630 | 7,034,185 | (2,686,957) | 4,351,858 | |||
Stock options for compensation | 8,925 | 8,925 | |||||
Net Loss | (657,074) | (657,074) | |||||
Balance, shares at Jun. 30, 2020 | 0 | 0 | 0 | 46,296,364 | |||
Balance, value at Jun. 30, 2020 | $ 4,630 | 7,043,110 | (3,344,031) | 3,703,709 | |||
Stock options for compensation | 6,018 | 6,018 | |||||
Net Loss | (478,037) | (478,037) | |||||
Balance, shares at Sep. 30, 2020 | 46,296,364 | ||||||
Balance, value at Sep. 30, 2020 | $ 4,630 | $ 7,049,128 | $ (3,822,068) | $ 3,231,690 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements Of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income (Loss) | $ (1,732,487) | $ 11,229 |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization | 18,222 | 33,072 |
Stock based compensation expense | 23,868 | 31,782 |
Noncash lease expense | 41,406 | |
Unpaid accrued interest on paycheck protection program loan | 359 | |
Goodwill impairment charge | 490,766 | |
Benefit for deferred income tax | (12,000) | |
Increase in accounts receivable, net | 198,050 | 2,087,830 |
Decrease in inventories | (11,392) | (27,497) |
Decrease in prepaid expense | (69,146) | (107,359) |
Decrease in deposits | 34,873 | 75,912 |
Increase (decrease) in accounts payable and accrued liabilities | (2,843) | 454,004 |
Decrease in deferred rent incentive | (75,315) | |
Increase in income tax refundable | 574,631 | |
Decrease in operating lease liabilities | (36,290) | |
Net cash used in operating activities | (1,854,269) | (1,434,290) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | 15,739 | 34,123 |
Net cash used in investing activities | (15,739) | (34,123) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from loan under paycheck protection program | 89,600 | |
Repurchase of Shares | 36,333 | 47,515 |
Net cash provided by (used in) financing activities | 53,267 | (47,515) |
Net Decrease in Cash, cash equivalents, and restricted cash | (1,816,741) | (1,515,928) |
Cash, cash equivalents, and restricted cash at Beginning of Period | 3,131,249 | 3,822,359 |
Cash, cash equivalents, and restricted cash at End of Period | 1,314,508 | 2,306,431 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid during the period for: Interest | $ 3,206 |
Organization And Summary Of Sig
Organization And Summary Of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Summary of Significant Accounting Policies | NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of accounting policies for Capstone Companies, Inc. ("CAPC" or the "Company"), a Florida 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. Organization and 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 September 30, 2020 and results of operations, stockholders’ equity and cash flows for the three months and nine months ended September 30, 2020 and 2019. All material 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, 2019 (the “2019 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. Effects of COVID-19 During the quarter ended September 30, 2020, the Company continued to be negatively impacted by the effects of the worldwide COVID-19 pandemic. During the end of March 2020, the Company’s Chinese suppliers that had been previously closed down by local and regional authorities in their efforts to combat the spread of COVID-19, started to gradually reopen their factories. Orders that had been previously delayed because of the close down started to ship. The newly certified Thailand factory has produced and shipped orders in the second and third quarters, 2020. These factories are now fully functioning, and orders are being produced both in Thailand and in China. Capstone International H.K. Ltd., (“CIHK”) staff have continued to work remotely from home. On March 9, 2020, the State of Florida declared a state of emergency and issued a “stay at home” order to combat the spread of the COVID-19 pandemic. This order has since been lifted and during the second quarter 2020, many states enacted a phased reopening of their economies. The Company in 2019 had expanded its IT systems to allow for remote operations and as of March 20, 2020 the Company’s U.S. staff had been working remotely from their homes. With the State of Florida reopening, the Corporate office also reopened with staff working on a rotating schedule between the office and remotely from home. With the initial phased reopening of many states, retailers experienced improving sales trends with consumer confidence significantly improving in September, 2020, but with the recent resurgence of the number of COVID-19 cases and the impact of a second pandemic wave, many phased reopenings have now been paused and other protective health measures are being considered. Our business operations and financial performance for the three and nine months ended September 30, 2020 continued to be adversely impacted by the developments discussed above, including a further decrease in net revenue which resulted in an increase in the net loss for the three and nine months ended September 30, 2020 as compared to the prior year. The decrease in net sales for this period was driven by the uncertainty felt by retail buyers as to the continuing pandemic impact on the retail market of COVID-19 and its overall long-term negative impact on the U.S. economy. However, the Warehouse Club channel, which includes our customers Costco Wholesale and Sam’s Club, has seen a substantial increase in foot traffic because of the changed buying trend of consumers during the pandemic, which has recently resulted in the resumption of some promotional opportunities. Management believes that the impact of the pandemic on the general brick and mortar retail market will carry through to the end of 2020 or until a vaccine is readily available. The development of an effective, widely available vaccine is critical to restoring the economy and consumer confidence, but that vaccine has not been produced and distributed as of the date of the filing of this Form 10-Q Report. The absence of an effective, widely available vaccine would potentially prolong the adverse impact of COVID-19 pandemic on the economy, consumer confidence and our business and financial results in 2021. However, in the Warehouse Club channel, we believe that promotional opportunities will continue to grow and gradually normalize in early 2021. The e-commerce channel that we are transitioning into also continues to expand. According to the U.S. Census Bureau, U.S. retail e-commerce for the end of the second quarter 2020, was up 31.8% from the first quarter 2020 and 44.5% year over year. E-commerce also accounted for 16.1% of total retail sales in the second quarter, up from 11.8% in the first quarter 2020. The Company reported a net loss of approximately $478.0 thousand and $1.7 million for the three and nine months ended September 30, 2020, respectively, compared to a net income of approximately $367.1 thousand and $11.2 thousand for the three and nine months ended September 30, 2019, respectively. With these recurring losses, the cash generated from operations was negatively impacted and the Company utilized $1.8 million of cash during the nine months ended September 30, 2020. As a result of the continuing economic uncertainties caused by the COVID-19 pandemic, management determined sufficient indicators remained to trigger the performance of a further interim goodwill impairment analysis as of September 30, 2020. The analysis concluded that a further goodwill impairment charge was not required for the three months ended September 30, 2020. The total impairment charge for the nine months ended September 30, 2020 was approximately $490.8 thousand. With the economic uncertainties caused by the COVID-19 pandemic the capital markets may continue to have a downturn and adversely affect the Company’s stock price which will require the Company to further test its goodwill for impairment in future reporting periods. On March 27, 2020, the current administration signed into law the Coronavirus Aid, Relief and Economic Security Act, which we refer to as the “CARES Act.” The CARES Act, among other things, includes provisions related to net operating loss carryback periods. The Company was able to carryback available net operating losses to the 2017 tax year and generate an estimated net refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of $573.7 thousand which has been recorded in the first quarter 2020. The Company recorded a further net benefit of $210.3 thousand in the second quarter 2020. During the third quarter, the Company recorded approximately $21.2 thousand net benefit of deferred tax liability adjustment related to goodwill impairment. For the nine months ended September 30, 2020, the Company has recorded approximately $806.2 thousand in tax benefits. The CARES Act also provided for the Paycheck Protection Program (“PPP”). On May 11, 2020, the Company received a $89.6 thousand loan under the PPP which was processed through Sterling National Bank. The Company filed SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application which the Company submitted to Sterling National Bank on September 16, 2020, which was accepted by the bank and processed to the SBA for final review and approval. As of September 30, 2020, the Company’s had a loan balance of $89.6 thousand under the PPP and had a cash balance of $1.3 million. Liquidity and Going Concern The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As discussed above, the overall impact of the COVID-19 pandemic to our business, financial condition, cash flow and results of operations remains uncertain. For example, if any of our major wholesale customers fail to maintain normal operations, our revenue could decline, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Management believes the economic impact of the COVID-19 pandemic in the U.S. will continue through to the end of 2020 or until a vaccine is readily available, but ultimately should not impact our long-term strategy and initiatives. The Company has a recent history of losses and negative cash from operations and its cash balance has dropped by approximately $1.8 million from $3.1 million as of December 31, 2019 to $1.3 million as of September 30, 2020. The uncertainty and the continuing negative impact that this disruption could have on the future retail business and consumers’ willingness to visit retail stores, causing reduced consumer foot traffic and consumer spending, could negatively impact the demand for our products or delay future planned promotional opportunities. As the Company relies on cash generated from operations to support its ongoing business, based on the Company’s expected rate of consumption, if the new programs are delayed or postponed the Company will need additional working capital by the end of 2020. On July 31, 2020, the Company terminated its factoring agreement with Sterling National Bank. The Company is in discussions with alternate funding sources that offer extensive programs that are more in line with the Company’s future business model particularly a facility that provides funding options that are suitable for the e-commerce business that the Company is transitioning into. The borrowing costs associated with such financing are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future. The Company has an income tax refundable as of September 30, 2020 of approximately $795 thousand of which approximately $576 thousand has already been applied for refund and is expected to be received within the next few months. In addition, we could seek alternative sources of liquidity, including but not limited to accessing the capital markets, or other alternative financing measures. However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital markets on terms acceptable to us. An economic recession or a slow recovery could adversely affect our business and liquidity. The ongoing impact of the COVID-19 pandemic on the Company’s business and financial performance may also affect the Company’s ability to obtain funding. The Company may be able to raise the required additional capital through debt or equity financing. However, the Company can make no assurances that it will be able to raise the required capital, on acceptable terms or at all. Unless the Company succeeds in raising additional capital or successfully increases cash generated from operations, management believes there is substantial doubt about the Company’s ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this report. However, there are compensating factors and actions that are being taken to address these uncertainties, including the following: • The Company has an $89.6 thousand PPP loan but no other debt or other outstanding obligations, outside of normal trade obligations. An application to forgive this loan has already been submitted to the SBA. • The Company has no obligations or agreements containing financial covenants. • The Company has working capital of approximately $1.7 million consisting mostly of cash of $1.3 million. • The Company has an estimated income tax refundable of approximately $795 thousand of which approximately $576 thousand has already been applied for refund. • The Company is in discussions with three alternate funding sources that offers varying programs that could service the Company’s future business model. • The Company’s plan has been to sell direct to consumers. The funding and cashflow requirements for this business model will require e-commerce funding. The Company is in discussions with a funding source that provides this option. • The Company has in place a mitigation plan that reduces discretionary expenses, executive managements compensation, and significantly reduces the cost of the Hong Kong operation and also reduces future travel, lodging and show expenses. Management is closely monitoring its operations, liquidity, and capital resources and is actively working to minimize the current and future impact of this unprecedented situation. To conserve liquidity, the Company made some immediate steps to reduce operating costs. Disregarding the goodwill impairment charge that did not occur in 2019, the total operating expenses for the 3 months ended September 30, 2020 and 2019 were $674 thousand and $847 thousand, respectively, a reduction of $173 thousand or 20.4%. Disregarding the impairment charge in the first quarter 2020, the total operating expense level was $915 thousand. When compared against the same operating expenses in the third quarter 2020 of $674 thousand, expenses have been reduced by $241 thousand or 26.3% since the first quarter 2020 level. Nature of Business Since the beginning of fiscal year 2007, the Company has been primarily engaged in the business of developing, marketing, and selling home LED products (“Lighting Products”) through national and regional retailers in North America and in certain overseas markets. The Company’s products are targeted for applications such as home indoor and outdoor lighting and have different functionalities to meet consumer’s needs. The Company has developed a smart interactive mirror for residential use as a variant line for its lighting products, which was launched at the Consumer Electronics Show in early 2020 but its release to the retail market has been delayed due to product development delays at our suppliers, resulting from the impact of COVID-19. The development of the smart interactive mirror or “Smart Mirrors” is part of the Company’s strategic effort to find new product lines to replace or supplement existing products that are nearing or at the end of their product life cycle. These products are offered either under the Capstone brand or licensed brands. Due to the impact of COVID-19 pandemic on brick and mortar retail sales and consumer shopping habits, the Company is increasing its efforts to develop an independent e-commerce direct sales operation, including enhanced Social Media marketing. Whether the Company will be able to establish a successful independent e-commerce sales effort is uncertain as of the date of the filing of this Form 10-Q Report – in part, due to the uncertainty about the duration and future impact of COVID-19 pandemic on the economy, consumer habits and our business and financial condition. The impact of COVID-19 pandemic and concerns about the Company as an ongoing concern have also prompted the Company to consider possible changes in its strategic plan, but the Company’s Board of Directors has not made a decision on changes in strategic plan as of the date of the filing of this Form 10-Q Report. The Company’s products are typically manufactured in Thailand and China by contract manufacturing companies. As of the date of this Form 10-Q Report, the Company’s future product development effort is focused on the Smart Mirrors category because the Company believes, based on Company’s management understanding of the industry, the Smart Mirrors have the potential for greater profit margin than the Company’s historical LED consumer products. Technological developments and changes in consumer tastes could alter the perceived potential and future viability of Smart Mirrors as a primary product. The Company may change its product development strategies and plans as economic conditions and consumer tastes change, which condition and changes may be unforeseeable by the Company or may be beyond the ability of the Company to timely or at all adjust its strategic and product development plans. The Company’s operations consist of one reportable segment for financial reporting purposes: Lighting Products. Accounts Receivable For product revenue, the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivable are recognized at the amount expected to be collected and are not subject to any interest or finance charges. The Company does not have any off-balance sheet credit exposure related to any of its customers. Previously in the factoring agreement with Sterling National Bank, accounts receivable served as collateral when the Company borrowed against its credit facilities. With the termination of the factoring agreement, the accounts receivables are unencumbered. Allowance for Doubtful Accounts The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company becomes aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will recognize an allowance against amounts due, and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes an allowance for doubtful accounts based on the length of time the receivables are past due and consideration of other factors such as industry conditions, the current business environment and the Company’s historical payment experience. An allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available. As of September 30, 2020 and December 31, 2019, management has determined that accounts receivable are fully collectible. As such, management has not recorded an allowance for doubtful accounts. The following table summarizes the components of Accounts Receivable, net: September 30, December 31, 2020 2019 Trade Accounts Receivables at period end $ 288,611 $ 276,551 Reserve for estimated marketing allowances (77,102 ) (263,092 ) Total Accounts Receivable, net $ 211,509 $ 13,459 Inventories The Company's inventory, recorded at lower of cost (first-in, first-out) or net realizable value, consists of finished goods for resale by Capstone. Prepaid Expenses The Company’s prepaid expenses consist primarily of deposits on inventory purchases for future orders as well as prepaid insurance, trade show and subscription expense. As of September 30, 2020 and December 31, 2019, prepaid expenses were $113,636 and $182,782, respectively. Goodwill On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation (“Capstone”). Capstone was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of Capstone’s Common Stock, and recorded goodwill of $1,936,020. Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired. Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds its fair value, an impairment loss is recognized. Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company's market capitalization. As a result of the continuing economic uncertainties caused by the COVID-19 pandemic, management determined sufficient indicators remained to trigger the performance of a further interim goodwill impairment analysis as of September 30, 2020. The analysis concluded that a further goodwill impairment charge was not required for the three months ended September 30, 2020. The total impairment charge for the nine months ended September 30, 2020 was approximately $490.8 thousand. The following table summarizes the changes in the Company’s goodwill asset which is included in the total assets in the accompanying condensed consolidated balance sheets: September 30, December 31, 2020 2019 Balance at the beginning of the period $ 1,936,020 $ 1,936,020 Impairment charges - net (490,766 ) - Balance at September 30, 2020 $ 1,445,254 $ 1,936,020 With the continuing economic uncertainties caused by the COVID-19 pandemic, the capital markets may continue to have a downturn and adversely affect the Company’s stock price which will require the Company to test its goodwill for impairment in future reporting periods. The Company’s stock is deemed a “penny stock” under Commission rules. Fair Value Measurement The accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), “Fair Value Measurements and Disclosures” (ASC 820-10) requires the Company to make disclosures about the fair value of certain of its assets and liabilities. ASC 820-10 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. ASC 820-10 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are as follows: Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3: Significant unobservable inputs. The input used in the goodwill fair value calculation falls within the level 1 hierarchy. Earnings Per Common Share Basic earnings per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the reporting periods. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2020 and 2019, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 990,000 and 1,023,334, respectively. During the nine months ended September 30, 2020 a total of 220,000 stock options expired. Basic weighted average shares outstanding is reconciled to diluted weighted shares outstanding as follows: Three Months Ended Three Months Ended September 30, 2020 September 30, 2019 Basic and Diluted weighted average shares outstanding 46,296,364 46,882,538 Nine Months Ended Nine Months Ended September 30, 2020 September 30, 2019 Basic and Diluted weighted average shares outstanding 46,350,909 46,874,256 Revenue Recognition The Company generates revenue from developing, marketing and selling consumer lighting products through national and regional retailers. The Company’s products are targeted for applications such as home indoor and outdoor lighting and have different functionalities. Capstone currently operates in the consumer lighting products category in the United States and in certain overseas markets. These products may be offered either under the Capstone brand or licensed brands. A sales contract occurs when the customer-retailer submits a purchase order to buy a specific product, a specific quantity, at an agreed-fixed price, within a ship window, from a specific location and on agreed payment terms. The selling price in all of our customers’ orders has been previously negotiated and agreed to including any applicable discount prior to receiving the customer’s purchase order. The stated unit price in the customer’s order has already been determined and is fixed at the time of invoicing. The Company recognizes product revenue when the Company’s performance obligations as per the terms in the customers purchase order have been fully satisfied, specifically, when the specified product and quantity ordered has been manufactured and shipped pursuant to the customers requested ship window, when the sales price as detailed in the purchase order is fixed, when the product title and risk of loss for that order has passed to the customer, and collection of the invoice is reasonably assured. This means that the product ordered and to be shipped has gone through quality assurance inspection, customs and commercial documentation preparation, the goods have been delivered, title transferred to the customer and confirmed by a signed cargo receipt or bill of lading. Only at the time of shipment when all performance obligations have been satisfied will the judgement be made to invoice the customer and complete the sales contract. The Company may enter into a licensing agreement with globally recognized companies, that allows the Company to market products under a licensed brand to retailers for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage of licensed product revenue to the licensor in order to market the licensed product. The Company expenses license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale is recorded. These costs are recorded within sales and marketing expense. The following tables disaggregates net revenue by geographical area: For the Three Months Ended September 30, 2020 For the Three Months Ended September 30, 2019 Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 433,167 61 % $ 4,980,249 93 % Lighting Products-International 276,487 39 % 373,941 7 % Total Net Revenue $ 709,654 100 % $ 5,354,190 100 % For the Nine Months Ended September 30, 2020 For the Nine Months Ended September 30, 2019 Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 1,261,641 71 % $ 10,965,258 93 % Lighting Products-International 503,548 29 % 775,556 7 % Total Net Revenue $ 1,765,189 100 % $ 11,740,814 100 % We provide our customers with limited rights of return for non-conforming product warranty claims. As a policy, the Company does not accept product returns from customers, however occasionally as part of a customer's in store test for new product, we may receive back residual inventory. Customer orders received are not long-term orders and are typically shipped within six months of the order receipt, but certainly within a one-year period. Our payment terms may vary by the type of customer, the customer's credit standing, the location where the product will be picked up from and for international customers, which country their corporate office is located. The term between invoicing date and when payment is due may vary between 30 days and 90 days depending on the customer type. In order to ensure there are no payment issues, overseas customers or new customers may be required to provide a deposit or full payment before the order is delivered to the customer. The Company selectively supports retailer's initiatives to maximize sales of the Company's products on the retail floor or to assist in developing consumer awareness of new products launches, by providing marketing fund allowances to the customer. The Company recognizes these incentives at the time they are offered to the customers and records a credit to their account with an offsetting charge as either a reduction to revenue, increase to cost of sales, or marketing expenses depending on the type of sales incentives. Sales reductions for anticipated discounts, allowances and other deductions are recognized during the period the related revenue is recorded. Warranties The Company provides the end user with limited rights of return as a consumer assurance warranty on all products sold, stipulating that the product will function properly for the warranty period. The warranty period for all products is one year from the date of consumer purchase. Certain retail customers may receive an off-invoice based discount such as a defective/warranty allowance, that will automatically reduce the unit selling price at the time the order is invoiced. This allowance will be used by the retail customer to defray the cost of any returned units from consumers and therefore negate the need to ship defective units back to the Company. Such allowances are charged to cost of sales at the time the order is invoiced. For those customers that do not receive a discount off-invoice, the Company recognizes a charge to cost of sales for anticipated non-conforming returns based upon an analysis of historical product warranty claims and other relevant data. We evaluate our warranty reserves based on various factors including historical warranty claims assumptions about frequency of warranty claims, and assumptions about the frequency of product failures derived from our reliability estimates. Actual product failure rates that materially differ from our estimates could have a significant impact on our operating results. Product warranty reserves are reviewed each quarter and recognized at the time we recognize revenue. The following table summarizes the changes in the Company's product warranty liabilities which are included in accounts payable and accrued liabilities in the accompanying September 30, 2020 and December 31, 2019 balance sheets: September 30, December 31, 2020 2019 Balance at the beginning of the period $ 247,850 $ 212,495 Amount accrued 28,196 180,797 Payments and credits (221,898 ) (145,442 ) Balance at period-end $ 54,148 $ 247,850 Advertising and Promotion Advertising and promotion costs, including advertising, public relations, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expense was $8,554 and $42,358 for the three months and $205,508 and $228,364 for the nine months ended September 30, 2020 and 2019, respectively. Product Development Our research and development team located in Hong Kong working with our designated contractor factories, are responsible for the design, development, testing, and certification of new product releases. Our engineering efforts support product development across all products, as well as product testing for specific overseas markets. All research and development costs are charged to results of operations as incurred. Product development expenses were $75,948 and $81,060, respectively for the three months and $169,133 and $260,823, respectively for the nine months ended September 30, 2020 and 2019. Shipping and Handling The Company's shipping and handling costs are included in sales and marketing expenses and are recognized as an expense during the period in which they are incurred and amounted to $1,013 and $4,871, respectively for the three months and $15,751 and $20,533, respectively for the nine |
Concentrations Of Credit Risk A
Concentrations Of Credit Risk And Economic Dependence | 9 Months Ended |
Sep. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk and Economic Dependence | NOTE 2 - CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE Financial instruments that potentially subject the Company to credit risk consist principally of cash and accounts receivable. The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. Cash The Company at times has cash with its financial institution in excess of Federal Deposit Insurance Corporation ("FIDC") insurance limits. The Company places its cash with high credit quality financial institutions which minimize risk of loss. Accounts Receivable The Company grants credit to its customers, substantially all of whom are retail establishments located throughout the United States and their international locations. The Company typically does not require collateral from customers. Credit risk is limited due to the financial strength of the customers comprising the Company's customer base and their dispersion across different geographical regions. The Company monitors exposure of credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. Major Customers The Company had two customers who comprised 30% and 54%, respectively, of net revenue during the nine months ended September 30, 2020 and two customers who comprised 84% and 13%, respectively, of net revenue during the nine months ended September 30, 2019. The loss of these customers would adversely impact the business of the Company. For the nine months ended September 30, 2020 and 2019, approximately 29% and 7%, respectively, of the Company's net revenue resulted from international sales. As of September 30, 2020 and December 31, 2019, approximately $195.2 thousand or 92% and approximately $13.5 thousand or 100% of accounts receivable, respectively, was from one customer. Major Vendors The Company had three vendors from which it purchased 61%, 25% and 14%, respectively, of merchandise during the nine months ended September 30, 2020, and one vendor from which it purchased 98% of merchandise during the nine months ended September 30, 2019. The loss of these suppliers could adversely impact the business of the Company. As of September 30, 2020 and December 31, 2019, approximately $154.9 thousand or 60% and approximately $100.7 thousand or 37% of accounts payable were due to one vendor. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 3 – NOTES PAYABLE Sterling National Bank The credit facility at Sterling National Bank was up for renewal. On July 16, 2020, the Company received a Termination of Factoring Agreement letter advising that the Factoring Agreement would be terminated effective September 30, 2020. The bank advised that as the existing facility had not been used in recent years and with the uncertainties associated with the resurgence of the COVID-19 pandemic and its potential impact on the retail sector, the bank decided not to renew the Factoring Agreement. The Company requested to terminate the Agreement on July 31, 2020 which was agreed to by the bank. The Company has retained its cash operating accounts at Sterling National Bank. For the three months ended September 30, 2020 and 2019, the processing fees associated with the agreement were $6,810 and $16,464, respectively. For the nine months ended September 30, 2020 and 2019, the processing fees associated with the agreement were $10,117 and $36,692, respectively. The Company is in discussions with alternate sources of funding, that will provide funding options that are more suitable to the e-commerce business model that the Company is transitioning into. The borrowing costs associated with such financing, are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future or that we will secure affordable funding. The Company, through Sterling National Bank, applied for a loan under the Paycheck Protection Program (“PPP”). The PPP was enacted on March 27, 2020 as part of the CARES Act and provides for loans for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. On May 11, 2020, the Company received loan proceeds in the amount of $89,600. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. As of September 30, 2020, the Company has accrued $359 of interest expense for this PPP loan. The Company used the proceeds for purposes consistent with the PPP. The Company believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, however we cannot be certain that we will not take actions that could cause the Company to be ineligible for forgiveness of the loan. Under Small Business Administration (“SBA”) and U.S. Treasury Department guidelines issued in May 2020, a borrower must apply for the forgiveness of the loans by filing SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application which the Company submitted to Sterling National Bank on September 16, 2020, which was accepted by the bank and processed to the SBA for final review and approval. |
Commitments And Contingencies
Commitments And Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 4 – COMMITMENTS AND CONTINGENCIES Operating Leases The Company has operating lease agreements for offices and showroom facilities in Fort Lauderdale, Florida and in Hong Kong, expiring at varying dates. The Company’s principal executive office is located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. Effective February 1, 2017, the Company renewed the lease for 3 years ending January 31, 2020, with a base annual rent of $92,256 and with a total rent expense of $281,711 through the term of the agreement. Under the lease agreement, Capstone was responsible for a portion of common area maintenance charges and any other utility consumed in the leased premises. On May 15, 2018, the Company entered into a lease agreement with the previous landlord to provide for a premise’s relocation, lease termination and new sublease agreement. Under the agreement the Company relocated its principal executive offices located at 350 Jim Moran Blvd, Suite 120, Deerfield Beach, Florida 33442 to 4,694 square feet of office space on the second floor of 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. The original lease terminated on the relocation date, being July 1, 2018, and the parties proceeded under the terms of the sublease which expired on January 31, 2020. The base annual rent in the sublease remained at the same rate as the previous agreement until January 31, 2020. At the expiration of the sublease, the Company had the option to accept the prime lease with another 3 years renewal and with an option to renew for an additional 5-year period. If the Company decided to further extend the sublease after January 31, 2020, the Company would be subject to the terms and conditions of the prime lease. The base monthly rent was $7,312 to January 31, 2019 and then base rent would be $7,514 until January 31, 2020 which includes an estimate for portion of the common area maintenance. As consideration for the lease amendment, the Company received a rate abatement from the landlord, effective May 1, 2018 and for four months to September 1, 2018. The landlord delivered the relocation premises in a “turnkey” condition with requested renovations made at no expense to the Company. As further consideration, the existing landlord agreed to pay the Company a $150,000 incentive to vacate the existing premises on completion of the relocation, which was fully paid as of December 31, 2018 and was being amortized over the life of the lease amendment and resulted in the recognition of lease incentive income of $870 per month. On May 9, 2019, per the terms of the lease agreement, the current landlord was notified of the Company’s intent to take over the prime lease. Effective November 1, 2019, the Company entered into a new prime operating lease with the landlord “431 Fairway Associates, LLC” ending June 30, 2023, for the Company’s executive offices located on the second floor of 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441 with an annualized base rent of $70,104 and with a base rental adjustment of 3% commencing July 1, 2020 and on July 1 st The Company's rent expense is recorded on a straight-line basis over the term of the lease. The rent expense for the nine months ended September 30, 2020 and 2019 amounted to $128,705 and $64,002, respectively. The rent increase in the nine months ended September 30, 2020 resulted from the expiry of a $8,383 monthly rent incentive that ended January 31, 2020. At the commencement date of the new office lease, the Company recorded a right-of-use asset and lease liability under ASU 2016-02, Topic 842. Supplemental balance sheet information related to leases as of September 30, 2020 is as follows: Assets Operating lease - right-of-use asset $ 172,796 Liabilities Current Current portion of operating lease $ 61,675 Noncurrent Operating lease liability, net of current portion $ 124,207 Supplemental statement of operations information related to leases for the nine months ended September 30, 2020 is as follows: Operating lease expense as a component of other general and administrative $ 52,377 Supplemental cash flow information related to leases for the nine months ended September 30, 2020 is as follows: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow paid for operating lease $ 47,261 Lease term and Discount Rate Weighted average remaining lease term (months) Operating lease 33 Weighted average Discount Rate Operating lease 7 % Scheduled maturities of operating lease liabilities outstanding as of September 30, 2020 are as follows: Year Operating Lease 2020, remaining three months $ 18,051 2021 73,290 2022 75,492 2023 38,304 Total Minimum Future Payments 205,137 Less: Imputed Interest 19,255 Present Value of Lease Liabilities $ 185,882 The Company has one short term lease with a duration of less than twelve months. Capstone International Hong Kong Ltd, (CIHK), entered into a lease agreement for office space at 303 Hennessy Road, Wanchai, Hong Kong. The original agreement which was effective from February 17, 2014 has been extended various times. On August 17, 2019, the lease was further extended with a base monthly rate of $5,100 for six months until February 16, 2020. As the premises was no longer required as the employees were working remotely, the Company decided not to renew and allowed this lease to expire. CIHK entered into a six-month rental agreement effective from December 1, 2016 for a showroom space at 3F, Wing Kin Industrial Building, 4-6 Wing Kin Road, Kwai Chung, NT, Hong Kong. This agreement has been extended various times. The lease with a base monthly rent of $1,290 expired August 16, 2019 and was further renewed for six-months expiring on February 16, 2020. Effective February 17, 2020, the Company entered into a six-month lease expiring on September 30, 2020, with a base rate of $1,285 per month. To further reduce costs, effective September 30, 2020 the Company reduced its space requirements and entered into a three-month lease expiring on December 31, 2020, with a base rate of $516 per month and the space is available to renew as required. Consulting Agreements On July 1, 2015, the Company entered into a consulting agreement with George Wolf, whereby Mr. Wolf was paid $10,500 per month through December 31, 2015 increasing to $12,500 per month from January 1, 2016 through December 31, 2017. On January 1, 2017, the agreement was amended, whereby Mr. Wolf was paid $13,750 per month from January 1, 2017 through December 31, 2017. On January 1, 2018, the agreement was further amended, whereby Mr. Wolf was paid $13,750 per month from January 1, 2018 through December 31, 2018. On January 1, 2019, the agreement was further amended, whereby Mr. Wolf was paid $13,750 per month from January 1, 2019 through December 31, 2020. Effective September 1, 2020 through December 31, 2020, fifty percent or $6,875 of the monthly consulting fee or approximately $27,500 for the effective period, will be deferred until 2021. The agreement can be terminated upon 30 days' notice by either party. The Company may, in its sole discretion at any time convert Mr. Wolf to a full-time Executive status. The annual salary and term of employment would be equal to that outlined in the consulting agreement. Employment Agreements On February 5, 2020, the Company entered into a new Employment Agreement with Stewart Wallach, whereby Mr. Wallach will be paid $301,521 per annum. The initial term of this new agreement began February 5, 2020 and ends February 5, 2023. The parties may extend the employment period of this agreement by mutual consent with approval of the Company's Board of Directors, but the extension may not exceed two years in length. On February 5, 2020, the Company entered into a new Employment Agreement with James McClinton, whereby Mr. McClinton will be paid $191,442 per annum. The term of this new agreement began February 5, 2020 and ends February 5, 2022. Effective September 1, 2020 through December 31, 2020, fifty percent of both Mr. Wallach and Mr. McClinton’s salary or approximately $46,388 and $29,453, respectively, will be deferred until 2021. There is a common provision in both Mr. Wallach and Mr. McClinton's employment agreements: If the officer's employment is terminated by death or disability or without cause, the Company is obligated to pay to the officer's estate or the officer, 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 6 months starting at the Executives date of termination. If the Executive had family health coverage at the time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive's severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment. Directors Compensation On May 31, 2019 the Company approved that effective on June 1, 2019, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. On May 31, 2019, the Company also approved that the independent directors would be offered effective from June 1, 2019, the opportunity to participate as a non-employee in the Company’s Health Benefit Plan, subject to compliance with all plan participation requirements and on acceptance into the plan the director will be responsible to pay 100% of their plans participation cost. On June 10, 2020 the Company approved that effective on August 1, 2020 until August 1, 2021, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. Licensing Agreements Under a February 4, 2015 Licensing Agreement with a floorcare company, Company markets home lighting products under the licensed brand of the floorcare company, to discount retailers, warehouse clubs, home centers, on-line retailers and other retail distribution channels in the U.S., Canada and Mexico. The initial term of the agreement was for 3 years. The Licensing Agreement did not have a guaranteed royalty stipulation. On December 29, 2016, the Company finalized the first amendment to the February 4, 2015 Licensing Agreement with the floorcare company in which the initial term was extended through February 3, 2020 and additional renewal terms and periods were also finalized. During this initial extended period through February 3, 2020, if the Company achieved net sales of $5,000,000, then the Licensing Agreement would automatically be extended 2 years until February 3, 2022 and if during this second extended period the Company achieved net sales of $5,000,000, then the Licensing Agreement would automatically be further extended 2 years until February 3, 2024. This license amendment also added an additional product category. On April 12, 2018, the Company finalized the second amendment to the February 4, 2015 Licensing Agreement in which the license was further expanded to add an additional product category. As the Company did not achieve the stated net sales volume for the renewal period, the License expired on February 3, 2020. Public Relations Agreement On September 27, 2018, the Company executed a public relations services agreement with Max Borges Agency, (“MBA”), a full – service public relations and communications agency with offices in Miami and San Francisco. The Company entered into the Agreement to obtain assistance from a nationally recognized firm, specializing in the development of product branding, marketing and launching of technology products. The agreement was effective on October 1, 2018 with an initial 180-day term, which either party can cancel with 60 days advanced notice in writing on or after the 120 th During 2019 both Companies agreed to temporarily pause the MBA agreement for specific months and restarted the engagement with the same statement of work and terms as originally agreed. On January 21, 2020, the Company provided MBA with 60 days cancellation notice and the agreement ended March 31, 2020. During the three months ended March 31, 2020, the Company incurred $33,750 of services fees and $952 of subscription fees. As the agreement has been cancelled there will be no further charges for this project. |
Stock Transactions
Stock Transactions | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Stock Transactions | NOTE 5 - STOCK TRANSACTIONS Options In 2005, the Company authorized the 2005 Equity Plan that made available shares of common stock for issuance through awards of options, restricted stock, stock bonuses, stock appreciation rights and restricted stock units. On May 2, 2017, the Company’s Board of Directors amended the Company’s 2005 Equity Incentive Plan to extend the Plan’s expiration date from December 31, 2016 to December 31, 2021. On August 29, 2018, the Company granted 100,000 stock options each to two directors of the Company for their participation as members of the Audit Committee and Nominating and Compensation Committee, and 10,000 stock options to the Company Secretary. The Director options have an exercise price of $.435 with an effective date of August 6, 2018 and vested on August 5, 2019 and have a term of 5 years. The Company Secretary options have an exercise price of $.435 with an effective date of August 6, 2018 and vested on August 5, 2019 and have a term of 10 years. On May 31, 2019, the Company granted 100,000 stock options each to two directors of the Company for their participation as members of the Audit Committee and Nominating and Compensation Committee, and 10,000 stock options to the Company Secretary. The Director options have a strike price of $.435 with an effective date of August 6, 2019 and will vest on August 5, 2020 and have a term of 5 years. The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2019 and will vest on August 5, 2020 and have a term of 10 years. On June 10, 2020, the Company granted 100,000 stock options each to two directors of the Company for their participation as members of the Audit Committee and Nominating and Compensation Committee, and 10,000 stock options to the Company Secretary. The Director options have a strike price of $.435 with an effective date of August 6, 2020 and will vest on August 5, 2021 and have a term of 5 years. The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2020 and will vest on August 5, 2021 and have a term of 10 years. As of September 30, 2020, there were 990,000 stock options outstanding and 780,000 stock options vested. The stock options have a weighted average expense price of $0.435. Stock options were issued under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933. For the three months ended September 30, 2020 and 2019, the Company recognized stock-based compensation expense of $6,018 and $9,732, respectively. For the nine months ended September 30, 2020 and 2019, the Company recognized stock-based compensation expense of $23,868 and $31,782, respectively. Such amounts are included in compensation expense in the accompanying consolidated statements 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 and these shares were retired on June 1, 2017. On December 15, 2017, the Company's Board of Directors approved an extension of the Company's stock repurchase plan for up to $750,000 through June 30, 2018. On August 29, 2018, the Company’s Board of Directors approved a further extension of the Company’s stock repurchase plan through August 31, 2019. The Board of Directors also approved an increase of the maximum amount of aggregate funding available for possible stock repurchases under the stock repurchase program from $750,000 to $1,000,000 during the renewal period. On August 29, 2018, the Company’s Board of Directors authorized and directed the Company’s management to establish a trading account at a brokerage firm for the Company to conduct open market purchases of the Company’s Common Stock in accordance with the terms and conditions of the Company’s current stock repurchase program and to fund said account from available cash of the Company but not to exceed such amount that would cause the Company to be unable to pay its bona fide debts. On December 19, 2018, Company entered into a Purchase Plan pursuant to Rule 10b5-1 under the Exchange Act, with Wilson Davis & Co., Inc., a registered broker-dealer. Under the Purchase Plan, Wilson Davis & Co., Inc will make periodic purchases of up to an aggregate of 750,000 shares at prevailing market prices, subject to the terms of the Purchase Plan. On May 31, 2019, the Company’s Board of Directors approved a further extension of the Company’s stock repurchase plan through August 31, 2020. The Board of Directors also approved that the maximum amount of aggregate funding available for possible stock repurchases under the stock repurchase program remained at $1,000,000 during the renewal period. On September 23, 2019 the Company signed a revised stock Purchase Plan to reflect an extension of the plan to repurchase up to an aggregate of 750,000 shares at prevailing market prices, subject to the terms of the Purchase Plan. On March 30, 2020, Wilson Davis & CO., Inc., advised the Company that 750,000 of the Company’s Common Stock had been repurchased to complete the authorized Purchase Plan. On June 10, 2020, the Company’s Board of Directors approved a further extension of the Company’s stock repurchase plan through August 31, 2021. During the quarter ended March 31, 2020 a total of 283,383 of the Company’s Common Stock has been repurchased at a total cost of $36,333. As of September 30, 2020, since the start of the program, a total of 750,000 of the Company’s Common Stock has been repurchased at a total cost of $107,740. As of September 30, 2020, there have been no further repurchase of the Company’s Common Stock in the quarter and further Stock repurchases have been placed on hold in order to conserve cash during the COVID-19 pandemic. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 6 - INCOME TAXES As of December 31, 2019, the Company had net operating loss carry forwards of approximately $1,654,000, available to the Company indefinitely and up to 80% of the operating loss can be used against future taxable income. As of September 30, 2020, the Company had $741,600 net operating loss carry forward available to the Company. On March 27, 2020, the CARES Act was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOLs”) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. The Company was able to carryback the NOL to 2017 tax years and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of $573,685 which has been recorded in the first quarter 2020. The Company recorded a further net benefit of $210,253 in the second quarter 2020. In the third quarter 2020, the Company recorded a $21,222 net tax benefit for deferred tax liability adjustment related to goodwill impairment. For the nine months ended September 30, 2020, the Company has recorded $805,160 in net tax benefits. The condensed consolidated statement of operations shows an effective tax rate for the three months ended September 30, 2020 and 2019, of 4.3% and 0%, respectively. The condensed consolidated statement of operations shows an effective tax rate for the nine months ended September 30, 2020 and 2019, of 31.7% and 0%, respectively. The statutory tax rate was 21.0% in 2020 and 21.0% in 2019. The income tax (benefit) for the three months ended September 30, 2020 and 2019 consists of: 2020 2019 Current: Federal $ - $ - State 800 - Deferred: Federal (22,022 ) - State - - Income Tax Provision $ (21,222 ) $ - The income tax (benefit) for the nine months ended September 30, 2020 and 2019 consists of: 2020 2019 Current: Federal $ (806,800 ) $ - State 1,640 - Deferred: Federal (4,862 ) (11,340 ) State 4,862 (660 ) Income Tax (Benefit) $ (805,160 ) $ (12,000 ) |
Organization And Summary Of S_2
Organization And Summary Of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Organization and Basis of Presentation | Organization and 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 September 30, 2020 and results of operations, stockholders’ equity and cash flows for the three months and nine months ended September 30, 2020 and 2019. All material 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, 2019 (the “2019 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. |
Effects of COVID-19 | Effects of COVID-19 During the quarter ended September 30, 2020, the Company continued to be negatively impacted by the effects of the worldwide COVID-19 pandemic. During the end of March 2020, the Company’s Chinese suppliers that had been previously closed down by local and regional authorities in their efforts to combat the spread of COVID-19, started to gradually reopen their factories. Orders that had been previously delayed because of the close down started to ship. The newly certified Thailand factory has produced and shipped orders in the second and third quarters, 2020. These factories are now fully functioning, and orders are being produced both in Thailand and in China. Capstone International H.K. Ltd., (“CIHK”) staff have continued to work remotely from home. On March 9, 2020, the State of Florida declared a state of emergency and issued a “stay at home” order to combat the spread of the COVID-19 pandemic. This order has since been lifted and during the second quarter 2020, many states enacted a phased reopening of their economies. The Company in 2019 had expanded its IT systems to allow for remote operations and as of March 20, 2020 the Company’s U.S. staff had been working remotely from their homes. With the State of Florida reopening, the Corporate office also reopened with staff working on a rotating schedule between the office and remotely from home. With the initial phased reopening of many states, retailers experienced improving sales trends with consumer confidence significantly improving in September, 2020, but with the recent resurgence of the number of COVID-19 cases and the impact of a second pandemic wave, many phased reopenings have now been paused and other protective health measures are being considered. Our business operations and financial performance for the three and nine months ended September 30, 2020 continued to be adversely impacted by the developments discussed above, including a further decrease in net revenue which resulted in an increase in the net loss for the three and nine months ended September 30, 2020 as compared to the prior year. The decrease in net sales for this period was driven by the uncertainty felt by retail buyers as to the continuing pandemic impact on the retail market of COVID-19 and its overall long-term negative impact on the U.S. economy. However, the Warehouse Club channel, which includes our customers Costco Wholesale and Sam’s Club, has seen a substantial increase in foot traffic because of the changed buying trend of consumers during the pandemic, which has recently resulted in the resumption of some promotional opportunities. Management believes that the impact of the pandemic on the general brick and mortar retail market will carry through to the end of 2020 or until a vaccine is readily available. The development of an effective, widely available vaccine is critical to restoring the economy and consumer confidence, but that vaccine has not been produced and distributed as of the date of the filing of this Form 10-Q Report. The absence of an effective, widely available vaccine would potentially prolong the adverse impact of COVID-19 pandemic on the economy, consumer confidence and our business and financial results in 2021. However, in the Warehouse Club channel, we believe that promotional opportunities will continue to grow and gradually normalize in early 2021. The e-commerce channel that we are transitioning into also continues to expand. According to the U.S. Census Bureau, U.S. retail e-commerce for the end of the second quarter 2020, was up 31.8% from the first quarter 2020 and 44.5% year over year. E-commerce also accounted for 16.1% of total retail sales in the second quarter, up from 11.8% in the first quarter 2020. The Company reported a net loss of approximately $478.0 thousand and $1.7 million for the three and nine months ended September 30, 2020, respectively, compared to a net income of approximately $367.1 thousand and $11.2 thousand for the three and nine months ended September 30, 2019, respectively. With these recurring losses, the cash generated from operations was negatively impacted and the Company utilized $1.8 million of cash during the nine months ended September 30, 2020. As a result of the continuing economic uncertainties caused by the COVID-19 pandemic, management determined sufficient indicators remained to trigger the performance of a further interim goodwill impairment analysis as of September 30, 2020. The analysis concluded that a further goodwill impairment charge was not required for the three months ended September 30, 2020. The total impairment charge for the nine months ended September 30, 2020 was approximately $490.8 thousand. With the economic uncertainties caused by the COVID-19 pandemic the capital markets may continue to have a downturn and adversely affect the Company’s stock price which will require the Company to further test its goodwill for impairment in future reporting periods. On March 27, 2020, the current administration signed into law the Coronavirus Aid, Relief and Economic Security Act, which we refer to as the “CARES Act.” The CARES Act, among other things, includes provisions related to net operating loss carryback periods. The Company was able to carryback available net operating losses to the 2017 tax year and generate an estimated net refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of $573.7 thousand which has been recorded in the first quarter 2020. The Company recorded a further net benefit of $210.3 thousand in the second quarter 2020. During the third quarter, the Company recorded approximately $21.2 thousand net benefit of deferred tax liability adjustment related to goodwill impairment. For the nine months ended September 30, 2020, the Company has recorded approximately $806.2 thousand in tax benefits. The CARES Act also provided for the Paycheck Protection Program (“PPP”). On May 11, 2020, the Company received a $89.6 thousand loan under the PPP which was processed through Sterling National Bank. The Company filed SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application which the Company submitted to Sterling National Bank on September 16, 2020, which was accepted by the bank and processed to the SBA for final review and approval. As of September 30, 2020, the Company’s had a loan balance of $89.6 thousand under the PPP and had a cash balance of $1.3 million. |
Liquidity and Going Concern | Liquidity and Going Concern The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As discussed above, the overall impact of the COVID-19 pandemic to our business, financial condition, cash flow and results of operations remains uncertain. For example, if any of our major wholesale customers fail to maintain normal operations, our revenue could decline, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Management believes the economic impact of the COVID-19 pandemic in the U.S. will continue through to the end of 2020 or until a vaccine is readily available, but ultimately should not impact our long-term strategy and initiatives. The Company has a recent history of losses and negative cash from operations and its cash balance has dropped by approximately $1.8 million from $3.1 million as of December 31, 2019 to $1.3 million as of September 30, 2020. The uncertainty and the continuing negative impact that this disruption could have on the future retail business and consumers’ willingness to visit retail stores, causing reduced consumer foot traffic and consumer spending, could negatively impact the demand for our products or delay future planned promotional opportunities. As the Company relies on cash generated from operations to support its ongoing business, based on the Company’s expected rate of consumption, if the new programs are delayed or postponed the Company will need additional working capital by the end of 2020. On July 31, 2020, the Company terminated its factoring agreement with Sterling National Bank. The Company is in discussions with alternate funding sources that offer extensive programs that are more in line with the Company’s future business model particularly a facility that provides funding options that are suitable for the e-commerce business that the Company is transitioning into. The borrowing costs associated with such financing are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future. The Company has an income tax refundable as of September 30, 2020 of approximately $795 thousand of which approximately $576 thousand has already been applied for refund and is expected to be received within the next few months. In addition, we could seek alternative sources of liquidity, including but not limited to accessing the capital markets, or other alternative financing measures. However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital markets on terms acceptable to us. An economic recession or a slow recovery could adversely affect our business and liquidity. The ongoing impact of the COVID-19 pandemic on the Company’s business and financial performance may also affect the Company’s ability to obtain funding. The Company may be able to raise the required additional capital through debt or equity financing. However, the Company can make no assurances that it will be able to raise the required capital, on acceptable terms or at all. Unless the Company succeeds in raising additional capital or successfully increases cash generated from operations, management believes there is substantial doubt about the Company’s ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this report. However, there are compensating factors and actions that are being taken to address these uncertainties, including the following: • The Company has an $89.6 thousand PPP loan but no other debt or other outstanding obligations, outside of normal trade obligations. An application to forgive this loan has already been submitted to the SBA. • The Company has no obligations or agreements containing financial covenants. • The Company has working capital of approximately $1.7 million consisting mostly of cash of $1.3 million. • The Company has an estimated income tax refundable of approximately $795 thousand of which approximately $576 thousand has already been applied for refund. • The Company is in discussions with three alternate funding sources that offers varying programs that could service the Company’s future business model. • The Company’s plan has been to sell direct to consumers. The funding and cashflow requirements for this business model will require e-commerce funding. The Company is in discussions with a funding source that provides this option. • The Company has in place a mitigation plan that reduces discretionary expenses, executive managements compensation, and significantly reduces the cost of the Hong Kong operation and also reduces future travel, lodging and show expenses. Management is closely monitoring its operations, liquidity, and capital resources and is actively working to minimize the current and future impact of this unprecedented situation. To conserve liquidity, the Company made some immediate steps to reduce operating costs. Disregarding the goodwill impairment charge that did not occur in 2019, the total operating expenses for the 3 months ended September 30, 2020 and 2019 were $674 thousand and $847 thousand, respectively, a reduction of $173 thousand or 20.4%. Disregarding the impairment charge in the first quarter 2020, the total operating expense level was $915 thousand. When compared against the same operating expenses in the third quarter 2020 of $674 thousand, expenses have been reduced by $241 thousand or 26.3% since the first quarter 2020 level. |
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 home LED products (“Lighting Products”) through national and regional retailers in North America and in certain overseas markets. The Company’s products are targeted for applications such as home indoor and outdoor lighting and have different functionalities to meet consumer’s needs. The Company has developed a smart interactive mirror for residential use as a variant line for its lighting products, which was launched at the Consumer Electronics Show in early 2020 but its release to the retail market has been delayed due to product development delays at our suppliers, resulting from the impact of COVID-19. The development of the smart interactive mirror or “Smart Mirrors” is part of the Company’s strategic effort to find new product lines to replace or supplement existing products that are nearing or at the end of their product life cycle. These products are offered either under the Capstone brand or licensed brands. Due to the impact of COVID-19 pandemic on brick and mortar retail sales and consumer shopping habits, the Company is increasing its efforts to develop an independent e-commerce direct sales operation, including enhanced Social Media marketing. Whether the Company will be able to establish a successful independent e-commerce sales effort is uncertain as of the date of the filing of this Form 10-Q Report – in part, due to the uncertainty about the duration and future impact of COVID-19 pandemic on the economy, consumer habits and our business and financial condition. The impact of COVID-19 pandemic and concerns about the Company as an ongoing concern have also prompted the Company to consider possible changes in its strategic plan, but the Company’s Board of Directors has not made a decision on changes in strategic plan as of the date of the filing of this Form 10-Q Report. The Company’s products are typically manufactured in Thailand and China by contract manufacturing companies. As of the date of this Form 10-Q Report, the Company’s future product development effort is focused on the Smart Mirrors category because the Company believes, based on Company’s management understanding of the industry, the Smart Mirrors have the potential for greater profit margin than the Company’s historical LED consumer products. Technological developments and changes in consumer tastes could alter the perceived potential and future viability of Smart Mirrors as a primary product. The Company may change its product development strategies and plans as economic conditions and consumer tastes change, which condition and changes may be unforeseeable by the Company or may be beyond the ability of the Company to timely or at all adjust its strategic and product development plans. The Company’s operations consist of one reportable segment for financial reporting purposes: Lighting Products. |
Accounts Receivable | Accounts Receivable For product revenue, the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivable are recognized at the amount expected to be collected and are not subject to any interest or finance charges. The Company does not have any off-balance sheet credit exposure related to any of its customers. Previously in the factoring agreement with Sterling National Bank, accounts receivable served as collateral when the Company borrowed against its credit facilities. With the termination of the factoring agreement, the accounts receivables are unencumbered. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company becomes aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will recognize an allowance against amounts due, and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes an allowance for doubtful accounts based on the length of time the receivables are past due and consideration of other factors such as industry conditions, the current business environment and the Company’s historical payment experience. An allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available. As of September 30, 2020 and December 31, 2019, management has determined that accounts receivable are fully collectible. As such, management has not recorded an allowance for doubtful accounts. The following table summarizes the components of Accounts Receivable, net: September 30, December 31, 2020 2019 Trade Accounts Receivables at period end $ 288,611 $ 276,551 Reserve for estimated marketing allowances (77,102 ) (263,092 ) Total Accounts Receivable, net $ 211,509 $ 13,459 |
Inventories | Inventories The Company's inventory, recorded at lower of cost (first-in, first-out) or net realizable value, consists of finished goods for resale by Capstone. |
Prepaid Expenses | Prepaid Expenses The Company’s prepaid expenses consist primarily of deposits on inventory purchases for future orders as well as prepaid insurance, trade show and subscription expense. As of September 30, 2020 and December 31, 2019, prepaid expenses were $113,636 and $182,782, respectively. |
Goodwill | Goodwill On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation (“Capstone”). Capstone was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of Capstone’s Common Stock, and recorded goodwill of $1,936,020. Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired. Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds its fair value, an impairment loss is recognized. Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company's market capitalization. As a result of the continuing economic uncertainties caused by the COVID-19 pandemic, management determined sufficient indicators remained to trigger the performance of a further interim goodwill impairment analysis as of September 30, 2020. The analysis concluded that a further goodwill impairment charge was not required for the three months ended September 30, 2020. The total impairment charge for the nine months ended September 30, 2020 was approximately $490.8 thousand. The following table summarizes the changes in the Company’s goodwill asset which is included in the total assets in the accompanying condensed consolidated balance sheets: September 30, December 31, 2020 2019 Balance at the beginning of the period $ 1,936,020 $ 1,936,020 Impairment charges - net (490,766 ) - Balance at September 30, 2020 $ 1,445,254 $ 1,936,020 With the continuing economic uncertainties caused by the COVID-19 pandemic, the capital markets may continue to have a downturn and adversely affect the Company’s stock price which will require the Company to test its goodwill for impairment in future reporting periods. The Company’s stock is deemed a “penny stock” under Commission rules. |
Fair Value Measurement | Fair Value Measurement The accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), “Fair Value Measurements and Disclosures” (ASC 820-10) requires the Company to make disclosures about the fair value of certain of its assets and liabilities. ASC 820-10 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. ASC 820-10 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are as follows: Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3: Significant unobservable inputs. The input used in the goodwill fair value calculation falls within the level 1 hierarchy. |
Earnings Per Common Share | Earnings Per Common Share Basic earnings per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the reporting periods. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of September 30, 2020 and 2019, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 990,000 and 1,023,334, respectively. During the nine months ended September 30, 2020 a total of 220,000 stock options expired. Basic weighted average shares outstanding is reconciled to diluted weighted shares outstanding as follows: Three Months Ended Three Months Ended September 30, 2020 September 30, 2019 Basic and Diluted weighted average shares outstanding 46,296,364 46,882,538 Nine Months Ended Nine Months Ended September 30, 2020 September 30, 2019 Basic and Diluted weighted average shares outstanding 46,350,909 46,874,256 |
Revenue Recognition | Revenue Recognition The Company generates revenue from developing, marketing and selling consumer lighting products through national and regional retailers. The Company’s products are targeted for applications such as home indoor and outdoor lighting and have different functionalities. Capstone currently operates in the consumer lighting products category in the United States and in certain overseas markets. These products may be offered either under the Capstone brand or licensed brands. A sales contract occurs when the customer-retailer submits a purchase order to buy a specific product, a specific quantity, at an agreed-fixed price, within a ship window, from a specific location and on agreed payment terms. The selling price in all of our customers’ orders has been previously negotiated and agreed to including any applicable discount prior to receiving the customer’s purchase order. The stated unit price in the customer’s order has already been determined and is fixed at the time of invoicing. The Company recognizes product revenue when the Company’s performance obligations as per the terms in the customers purchase order have been fully satisfied, specifically, when the specified product and quantity ordered has been manufactured and shipped pursuant to the customers requested ship window, when the sales price as detailed in the purchase order is fixed, when the product title and risk of loss for that order has passed to the customer, and collection of the invoice is reasonably assured. This means that the product ordered and to be shipped has gone through quality assurance inspection, customs and commercial documentation preparation, the goods have been delivered, title transferred to the customer and confirmed by a signed cargo receipt or bill of lading. Only at the time of shipment when all performance obligations have been satisfied will the judgement be made to invoice the customer and complete the sales contract. The Company may enter into a licensing agreement with globally recognized companies, that allows the Company to market products under a licensed brand to retailers for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage of licensed product revenue to the licensor in order to market the licensed product. The Company expenses license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale is recorded. These costs are recorded within sales and marketing expense. The following tables disaggregates net revenue by geographical area: For the Three Months Ended September 30, 2020 For the Three Months Ended September 30, 2019 Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 433,167 61 % $ 4,980,249 93 % Lighting Products-International 276,487 39 % 373,941 7 % Total Net Revenue $ 709,654 100 % $ 5,354,190 100 % For the Nine Months Ended September 30, 2020 For the Nine Months Ended September 30, 2019 Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 1,261,641 71 % $ 10,965,258 93 % Lighting Products-International 503,548 29 % 775,556 7 % Total Net Revenue $ 1,765,189 100 % $ 11,740,814 100 % We provide our customers with limited rights of return for non-conforming product warranty claims. As a policy, the Company does not accept product returns from customers, however occasionally as part of a customer's in store test for new product, we may receive back residual inventory. Customer orders received are not long-term orders and are typically shipped within six months of the order receipt, but certainly within a one-year period. Our payment terms may vary by the type of customer, the customer's credit standing, the location where the product will be picked up from and for international customers, which country their corporate office is located. The term between invoicing date and when payment is due may vary between 30 days and 90 days depending on the customer type. In order to ensure there are no payment issues, overseas customers or new customers may be required to provide a deposit or full payment before the order is delivered to the customer. The Company selectively supports retailer's initiatives to maximize sales of the Company's products on the retail floor or to assist in developing consumer awareness of new products launches, by providing marketing fund allowances to the customer. The Company recognizes these incentives at the time they are offered to the customers and records a credit to their account with an offsetting charge as either a reduction to revenue, increase to cost of sales, or marketing expenses depending on the type of sales incentives. Sales reductions for anticipated discounts, allowances and other deductions are recognized during the period the related revenue is recorded. |
Warranties | Warranties The Company provides the end user with limited rights of return as a consumer assurance warranty on all products sold, stipulating that the product will function properly for the warranty period. The warranty period for all products is one year from the date of consumer purchase. Certain retail customers may receive an off-invoice based discount such as a defective/warranty allowance, that will automatically reduce the unit selling price at the time the order is invoiced. This allowance will be used by the retail customer to defray the cost of any returned units from consumers and therefore negate the need to ship defective units back to the Company. Such allowances are charged to cost of sales at the time the order is invoiced. For those customers that do not receive a discount off-invoice, the Company recognizes a charge to cost of sales for anticipated non-conforming returns based upon an analysis of historical product warranty claims and other relevant data. We evaluate our warranty reserves based on various factors including historical warranty claims assumptions about frequency of warranty claims, and assumptions about the frequency of product failures derived from our reliability estimates. Actual product failure rates that materially differ from our estimates could have a significant impact on our operating results. Product warranty reserves are reviewed each quarter and recognized at the time we recognize revenue. The following table summarizes the changes in the Company's product warranty liabilities which are included in accounts payable and accrued liabilities in the accompanying September 30, 2020 and December 31, 2019 balance sheets: September 30, December 31, 2020 2019 Balance at the beginning of the period $ 247,850 $ 212,495 Amount accrued 28,196 180,797 Expenditures (221,898 ) (145,442 ) Balance at period-end $ 54,148 $ 247,850 |
Advertising and Promotion | Advertising and Promotion Advertising and promotion costs, including advertising, public relations, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expense was $8,554 and $42,358 for the three months and $205,508 and $228,364 for the nine months ended September 30, 2020 and 2019, respectively. |
Product Development | Product Development Our research and development team located in Hong Kong working with our designated contractor factories, are responsible for the design, development, testing, and certification of new product releases. Our engineering efforts support product development across all products, as well as product testing for specific overseas markets. All research and development costs are charged to results of operations as incurred. Product development expenses were $75,948 and $81,060, respectively for the three months and $169,133 and $260,823, respectively for the nine months ended September 30, 2020 and 2019. |
Shipping and Handling | Shipping and Handling The Company's shipping and handling costs are included in sales and marketing expenses and are recognized as an expense during the period in which they are incurred and amounted to $1,013 and $4,871, respectively for the three months and $15,751 and $20,533, respectively for the nine months ended September 30, 2020 and 2019. |
Accounts Payable and Accrued Liabilities | Accounts Payable and Accrued Liabilities The following table summarizes the components of accounts payable and accrued liabilities as of September 30, 2020 and December 31, 2019, respectively: September 30, December 31, 2020 2019 Accounts payable $ 256,181 $ 273,606 Accrued warranty reserve 54,148 247,850 Accrued compensation, benefits, marketing allowances and other liabilities 322,421 114,137 Total accrued liabilities 376,569 361,987 Total $ 632,750 $ 635,593 |
Income Taxes | Income Taxes The Company is subject to income taxes in the U.S. federal jurisdiction, various state jurisdictions and certain other jurisdictions. The Company accounts for income taxes under the provisions of ASC 740 Income Taxes The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Tax regulations within each jurisdiction are subject to the interpretation of the relaxed tax laws and regulations and require significant judgement to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities generally for a period of 3 years from the later of each return due date or date filed. On March 27, 2020, the CARES Act was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOLs”) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be recorded as a component of income tax expense. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation- Stock Compensation Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. In conjunction with the adoption of ASC 718, the Company adopted the straight-line single option method of attributing the value of stock-based compensation expense. The Company accounts for forfeitures as they occur. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. The Company evaluates its estimates on an ongoing basis, including those related to revenue recognition, periodic impairment tests, product warranty obligations, valuation of inventories, tax related contingencies, valuation of stock-based compensation, other contingencies and litigation, among others. The Company generally bases its estimates on historical experience, agreed obligations, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Historically, past changes to these estimates have not had a material impact on the Company’s financial statements. However, circumstances could change, and actual results could differ materially from those estimates. |
Recent Accounting Standards | Recent Accounting Standards To be Adopted in a Future Period In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “ Financial Instruments – Credit Losses In December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740)” |
Adoption of New Accounting Standards | Adoption of New Accounting Standards In January 2017, the FASB issued ASU 2017-04, “ Simplifying the Test for Goodwill Impairment”, In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – “ Changes to the Disclosure Requirements for Fair Value Measurement.” 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 consolidated 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 consolidated financial statements properly reflect the change. |
Reclassifications | Reclassifications Certain reclassifications have been made to the 2019 consolidated financial statements to conform to the presentation of the current period condensed consolidated financial statements. These reclassifications had no effect on the reported results of operations. Total stockholders’ equity and net loss are unchanged due to these reclassifications. |
Organization And Summary Of S_3
Organization And Summary Of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Organization And Summary Of Significant Accounting Policies | |
Schedule of Components of Accounts Receivable, net | The following table summarizes the components of Accounts Receivable, net: September 30, December 31, 2020 2019 Trade Accounts Receivables at period end $ 288,611 $ 276,551 Reserve for estimated marketing allowances (77,102 ) (263,092 ) Total Accounts Receivable, net $ 211,509 $ 13,459 |
Schedule of Goodwill Impairment Charges | The following table summarizes the changes in the Company’s goodwill asset which is included in the total assets in the accompanying condensed consolidated balance sheets: September 30, December 31, 2020 2019 Balance at the beginning of the period $ 1,936,020 $ 1,936,020 Impairment charges - net (490,766 ) - Balance at September 30, 2020 $ 1,445,254 $ 1,936,020 |
Schedule of Basic Weighted Average Shares Outstanding is Reconciled to Diluted | Basic weighted average shares outstanding is reconciled to diluted weighted shares outstanding as follows: Three Months Ended Three Months Ended September 30, 2020 September 30, 2019 Basic and Diluted weighted average shares outstanding 46,296,364 46,882,538 Nine Months Ended Nine Months Ended September 30, 2020 September 30, 2019 Basic and Diluted weighted average shares outstanding 46,350,909 46,874,256 |
Schedule of Net Revenue by Major Source | The following tables disaggregates net revenue by geographical area: For the Three Months Ended September 30, 2020 For the Three Months Ended September 30, 2019 Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 433,167 61 % $ 4,980,249 93 % Lighting Products-International 276,487 39 % 373,941 7 % Total Net Revenue $ 709,654 100 % $ 5,354,190 100 % For the Nine Months Ended September 30, 2020 For the Nine Months Ended September 30, 2019 Capstone Brand % of Revenue Capstone Brand % of Revenue Lighting Products- U.S. $ 1,261,641 71 % $ 10,965,258 93 % Lighting Products-International 503,548 29 % 775,556 7 % Total Net Revenue $ 1,765,189 100 % $ 11,740,814 100 % |
Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities | The following table summarizes the changes in the Company's product warranty liabilities which are included in accounts payable and accrued liabilities in the accompanying September 30, 2020 and December 31, 2019 balance sheets: September 30, December 31, 2020 2019 Balance at the beginning of the period $ 247,850 $ 212,495 Amount accrued 28,196 180,797 Expenditures (221,898 ) (145,442 ) Balance at period-end $ 54,148 $ 247,850 |
Schedule of Components of Accounts Payable and Accrued Liabilities | The following table summarizes the components of accounts payable and accrued liabilities as of September 30, 2020 and December 31, 2019, respectively: September 30, December 31, 2020 2019 Accounts payable $ 256,181 $ 273,606 Accrued warranty reserve 54,148 247,850 Accrued compensation, benefits, marketing allowances and other liabilities 322,421 114,137 Total accrued liabilities 376,569 361,987 Total $ 632,750 $ 635,593 |
Commitments And Contingencies A
Commitments And Contingencies And Subsequent Events (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Commitments And Contingencies And Subsequent Events | |
Schedule of Right Of Use Asset and Lease Liability | Supplemental balance sheet information related to leases as of September 30, 2020 is as follows: Assets Operating lease - right-of-use asset $ 172,796 Liabilities Current Current portion of operating lease $ 61,675 Noncurrent Operating lease liability, net of current portion $ 124,207 Supplemental statement of operations information related to leases for the nine months ended September 30, 2020 is as follows: Operating lease expense as a component of other general and administrative $ 52,377 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow paid for operating lease $ 47,261 Lease term and Discount Rate Weighted average remaining lease term (months) Operating lease 33 Weighted average Discount Rate Operating lease |
Scheduled Maturities of Operating Lease Liabilities Outstanding | Scheduled maturities of operating lease liabilities outstanding as of September 30, 2020 are as follows: Year Operating Lease 2020, remaining three months $ 18,051 2021 73,290 2022 75,492 2023 38,304 Total Minimum Future Payments 205,137 Less: Imputed Interest 19,255 Present Value of Lease Liabilities $ 185,882 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax (Benefit) | The income tax (benefit) for the three months ended September 30, 2020 and 2019 consists of: 2020 2019 Current: Federal $ - $ - State 800 - Deferred: Federal (22,022 ) - State - - Income Tax Provision $ (21,222 ) $ - The income tax (benefit) for the nine months ended September 30, 2020 and 2019 consists of: 2020 2019 Current: Federal $ (806,800 ) $ - State 1,640 - Deferred: Federal (4,862 ) (11,340 ) State 4,862 (660 ) Income Tax (Benefit) $ (805,160 ) $ (12,000 ) |
Organization And Summary Of S_4
Organization And Summary Of Significant Accounting Policies (Components Of Accounts Receivable, Net) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Organization And Summary Of Significant Accounting Policies Components Of Accounts Receivable Net | ||
Trade Accounts Receivables at period end | $ 288,611 | $ 276,551 |
Reserve for estimated marketing allowances | 77,102 | 263,092 |
Total Accounts Receivable, net | $ 211,509 | $ 13,459 |
Organization And Summary Of S_5
Organization And Summary Of Significant Accounting Policies (Schedule Of Goodwill Impairment Charges) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies Schedule Of Goodwill Impairment Charges | |||||
Balance at December 31, 2019 | $ 1,936,020 | $ 1,936,020 | $ 1,936,020 | ||
Impairment charges-net | 490,766 | ||||
Balance at September 30, 2020 | $ 1,445,254 | $ 1,445,254 | $ 1,936,020 |
Organization And Summary Of S_6
Organization And Summary Of Significant Accounting Policies (Schedule Of Basic Weighted Average Shares) (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Organization And Summary Of Significant Accounting Policies Schedule Of Basic Weighted Average Shares | ||||
Basic and Diluted weighted average shares outstanding | 46,296,364 | 46,882,538 | 46,350,909 | 46,874,256 |
Organization And Summary Of S_7
Organization And Summary Of Significant Accounting Policies (Schedule Of Net Revenue By Major Source) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Total Revenue | $ 709,654 | $ 5,354,190 | $ 1,765,189 | $ 11,740,814 |
Capstone Brand [Member] | ||||
Total Revenue | $ 709,654 | $ 5,354,190 | $ 1,765,189 | $ 11,740,814 |
Percentage of revenue | 100.00% | 100.00% | 100.00% | 100.00% |
Lighting Products - U.S. [Member] | Capstone Brand [Member] | ||||
Total Revenue | $ 433,167 | $ 4,980,249 | $ 1,261,641 | $ 10,965,258 |
Percentage of revenue | 61.00% | 93.00% | 71.00% | 93.00% |
Lighting Products-International [Member] | Capstone Brand [Member] | ||||
Total Revenue | $ 276,487 | $ 373,941 | $ 503,548 | $ 775,556 |
Percentage of revenue | 39.00% | 7.00% | 29.00% | 7.00% |
Organization And Summary Of S_8
Organization And Summary Of Significant Accounting Policies (Schedule Of Product Warranty Liabilities) (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Organization And Summary Of Significant Accounting Policies Schedule Of Product Warranty Liabilities | ||
Balance at the beginning of the period | $ 247,850 | $ 212,495 |
Amount accrued | 28,196 | 180,797 |
Expenditures | 221,898 | 145,442 |
Balance at period-end | $ 54,148 | $ 247,850 |
Organization And Summary Of S_9
Organization And Summary Of Significant Accounting Policies (Components Of Accounts Payable) (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Organization And Summary Of Significant Accounting Policies Components Of Accounts Payable | |||
Accounts payable | $ 256,181 | $ 273,606 | |
Accrued warranty reserve | 54,148 | 247,850 | $ 212,495 |
Accrued compensation, benefits, marketing allowances and other liabilities | 322,421 | 114,137 | |
Total accrued liabilities | 376,569 | 361,987 | |
Total | $ 632,750 | $ 635,593 |
Commitments And Contingencies (
Commitments And Contingencies (Schedule Of Right Of Use Asset And Lease Liability) (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Assets | ||
Operating lease - right-of-use asset | $ 172,796 | $ 214,202 |
Liabilities Current | ||
Current portion of operating lease | 61,675 | 51,174 |
Noncurrent | ||
Operating lease liability, net of current portion | 124,207 | $ 170,998 |
Commitments [Member] | ||
Assets | ||
Operating lease - right-of-use asset | 172,796 | |
Liabilities Current | ||
Current portion of operating lease | 61,675 | |
Noncurrent | ||
Operating lease liability, net of current portion | 124,207 | |
Supplemental statement of operations information related to leases for the nine months ended September 30, 2020 is as follows: | ||
Operating lease expense as a component of other general and administrative | 52,377 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flow paid for operating lease | $ 47,261 | |
Lease term and Discount Rate | ||
Weighted average remaining lease term (months) operating lease | 33 months | |
Weighted average Discount Rate | ||
Operating lease | 7.00% |
Commitments And Contingencies_2
Commitments And Contingencies (Scheduled Maturities Of Operating Lease Liabilities Outstanding) (Details) | Sep. 30, 2020USD ($) |
Year | |
2020, remaining three months | $ 18,051 |
2021 | 73,290 |
2022 | 75,492 |
2023 | 38,304 |
Total Minimum Future Payments | 205,137 |
Less: Imputed Interest | 19,255 |
Present Value of Lease Liabilities | $ 185,882 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Current: | ||||
Federal | $ (806,800) | |||
State | 800 | 1,640 | ||
Deferred: | ||||
Federal | (22,022) | (4,862) | (11,340) | |
State | 4,862 | (660) | ||
Income Tax Provision(Benefit) | $ (21,222) | $ (805,160) | $ (12,000) |
Organization And Summary Of _10
Organization And Summary Of Significant Accounting Policies (Narrative) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Retail sale percentage description | The Warehouse Club channel, we believe that promotional opportunities will continue to grow and gradually normalize in early 2021. The e-commerce channel that we are transitioning into also continues to expand. According to the U.S. Census Bureau, U.S. retail e-commerce for the end of the second quarter 2020, was up 31.8% from the first quarter 2020 and 44.5% year over year. E-commerce also accounted for 16.1% of total retail sales in the second quarter, up from 11.8% in the first quarter 2020. | ||||
Business operations and financial performance by the effects of the worldwide COVID-19 | As discussed above, the overall impact of the COVID-19 pandemic to our business, financial condition, cash flow and results of operations remains uncertain. For example, if any of our major wholesale customers fail to maintain normal operations, our revenue could decline, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Management believes the economic impact of the COVID-19 pandemic in the U.S. will continue through to the end of 2020 or until a vaccine is readily available, but ultimately should not impact our long-term strategy and initiatives. The Company has a recent history of losses and negative cash from operations and its cash balance has dropped by approximately $1.8 million from $3.1 million as of December 31, 2019 to $1.3 million as of September 30, 2020. The Company has an income tax refundable as of September 30, 2020 of approximately $795 thousand of which approximately $576 thousand has already been applied for refund and is expected to be received within the next few months. | As discussed above, the overall impact of the COVID-19 pandemic to our business, financial condition, cash flow and results of operations remains uncertain. For example, if any of our major wholesale customers fail to maintain normal operations, our revenue could decline, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Management believes the economic impact of the COVID-19 pandemic in the U.S. will continue through to the end of 2020 or until a vaccine is readily available, but ultimately should not impact our long-term strategy and initiatives. The Company has a recent history of losses and negative cash from operations and its cash balance has dropped by approximately $1.8 million from $3.1 million as of December 31, 2019 to $1.3 million as of September 30, 2020. The Company has an income tax refundable as of September 30, 2020 of approximately $795 thousand of which approximately $576 thousand has already been applied for refund and is expected to be received within the next few months. | |||
Reduced operating expenses description | To conserve liquidity, the Company made some immediate steps to reduce operating costs. Disregarding the goodwill impairment charge that did not occur in 2019, the total operating expenses for the 3 months ended September 30, 2020 and 2019 were $674 thousand and $847 thousand, respectively, a reduction of $173 thousand or 20.4%. Disregarding the impairment charge in the first quarter 2020, total operating expenses were $915 thousand. When compared against the same operating expenses in the third quarter 2020 of $674 thousand, expenses have been reduced by $241 thousand or 26.3% since the first quarter 2020 expense level . | ||||
Potentially dilutive common stock equivalents excluded from diluted earnings per share | 990,000 | 1,023,334 | |||
Sales and Marketing Expenses [Member] | |||||
Advertising and promotion expense | $ 8,554 | $ 42,358 | $ 205,508 | $ 228,364 | |
Shipping and handling costs | $ 1,013 | $ 4,871 | $ 15,751 | $ 20,533 | |
Equity Option [Member] | |||||
Stock option expired | 220,000 |
Concentrations Of Credit Risk_2
Concentrations Of Credit Risk And Economic Dependence (Narrative) (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | |||
Accounts receivable approximately | $ 211,509 | $ 13,459 | |
Accounts payable approximately | $ 256,181 | $ 273,606 | |
Net Revenue [Member] | Two Customer [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 30.00% | 84.00% | |
Net Revenue [Member] | Two Customer [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 54.00% | 13.00% | |
Net Revenue [Member] | International Sales [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 29.00% | 7.00% | |
Accounts Receivable [Member] | One Vendor [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 92.00% | ||
Accounts receivable approximately | $ 19,520,000 | ||
Accounts Receivable [Member] | One Customer [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 100.00% | ||
Accounts receivable approximately | $ 1,350,000 | ||
Net Purchase [Member] | One Vendor [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 61.00% | 98.00% | |
Net Purchase [Member] | Second Vendor [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 25.00% | ||
Net Purchase [Member] | Third Vendor [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 14.00% | ||
Accounts Payable [Member] | One Vendor [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 60.00% | 37.00% | |
Accounts payable approximately | $ 15,490,000 | $ 10,070,000 |
Notes Payable (Narrative) (Deta
Notes Payable (Narrative) (Details) - USD ($) | May 11, 2020 | Sep. 30, 2020 | Dec. 31, 2019 |
Line of Credit Facility [Line Items] | |||
Accrued interest | $ 376,569 | $ 361,987 | |
Financing Agreement With Sterling National Bank [Member] | Line Of Credit [Member] | |||
Line of Credit Facility [Line Items] | |||
Line of credit interest rate description | The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. | ||
Proceeds from loan | $ 89,600 | ||
Accrued interest | $ 359 |
Commitments And Contingencies_3
Commitments And Contingencies And Subsequent Events (Operating Leases) (Narrative) (Details) - USD ($) | Sep. 30, 2020 | Feb. 17, 2020 | Nov. 01, 2019 | Aug. 17, 2019 | May 15, 2018 | Feb. 01, 2017 | Dec. 01, 2016 | Feb. 17, 2014 | Dec. 31, 2018 | Sep. 30, 2020 | Sep. 30, 2019 |
Operating Leased Assets [Line Items] | |||||||||||
Base annual / monthly rent payable | $ 205,137 | $ 205,137 | |||||||||
Increase in base rent payable per month | 8,383 | ||||||||||
Rent expenses | 128,705 | $ 64,002 | |||||||||
Operating Lease Agreement - Office Space [Member] | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Base annual / monthly rent payable | $ 92,256 | ||||||||||
Operating lease description | Effective November 1, 2019, the Company entered into a new prime operating lease with the landlord “431 Fairway Associates, LLC” ending June 30, 2023, for the Company's executive offices located on the second floor of 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441 with an annualized base rent of $70,104 and with a base rental adjustment of 3% commencing July 1, 2020 and on July 1st of each subsequent year during the term. Under the lease agreement, Capstone is also responsible for a portion of common area maintenance charges in the leased premises which has been estimated at $12.00 per square foot on an annualized basis of which the premises is approximately 4,694 square feet. | On May 15, 2018, the Company entered into a lease agreement with the previous landlord to provide for a premise's relocation, lease termination and new sublease agreement. Under the agreement the Company relocated its principal executive offices located at 350 Jim Moran Blvd, Suite 120, Deerfield Beach, Florida 33442 to 4,694 square feet of office space on the second floor of 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. The original lease terminated on the relocation date, being July 1, 2018, and the parties proceeded under the terms of the sublease which expired on January 31, 2020. The base annual rent in the sublease remained at the same rate as the previous agreement until January 31, 2020. At the expiration of the sublease, the Company had the option to accept the prime lease with another 3 years renewal and with an option to renew for an additional 5-year period. If the Company decided to further extend the sublease after January 31, 2020, the Company would be subject to the terms and conditions of the prime lease. The base monthly rent was $7,312 to January 31, 2019 and then base rent would be $7,514 until January 31, 2020 which includes an estimate for portion of the common area maintenance. | Effective February 1, 2017, the Company renewed the lease for 3 years ending January 31, 2020. | ||||||||
Operating lease renewal term | 3 years | ||||||||||
Total rental expenses | $ 281,711 | ||||||||||
Amount agreed to pay by Landlord on completion of relocation | $ 150,000 | ||||||||||
Lease incentive income per month | $ 870 | ||||||||||
Operating Lease Agreement - Office Space [Member] | Capstone International Hong Kong Ltd (CIHK) [Member] | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Base annual / monthly rent payable | $ 5,100 | $ 1,290 | |||||||||
Operating lease description | The lease was further extended with a base monthly rate of $5,100 for six months until February 16, 2020. As the premises was no longer required as the employees were working remotely, the Company decided not to renew and allowed this lease to expire. | CIHK entered into a six month rental agreement effective from December 1, 2016 for a showroom space at 3F, Wing Kin Industrial Building, 4-6 Wing Kin Road, Kwai Chung, NT, Hong Kong. This agreement has been extended various times. The current lease expires August 16, 2019 and was further renewed for six-months expiring on February 16, 2020 | The original agreement which was effective from February 17, 2014 has been extended various times. | ||||||||
Operating Lease Agreement - Showroom Space [Member] | Capstone International Hong Kong Ltd (CIHK) [Member] | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Base annual / monthly rent payable | $ 516 | $ 1,285 | $ 516 | ||||||||
Operating lease description | To further reduce costs, effective September 30, 2020 the Company reduced its space requirements and entered into a three-month lease expiring on December 31, 2020, with a base rate of $516 per month and the space is available to renew as required. | Effective February 17, 2020, the Company entered into a new six-month lease expiring on September 30, 2020, with a base rate of $1,285 per month and the space is available to renew as required. |
Commitments And Contingencies_4
Commitments And Contingencies (Consulting Agreements) (Narrative) (Details) - Consulting Agreement With George Wolf [Member] - USD ($) | Jan. 02, 2019 | Jan. 02, 2018 | Jan. 02, 2017 | Jan. 02, 2016 | Jul. 01, 2015 | Dec. 31, 2020 | Sep. 30, 2020 | Sep. 02, 2020 |
Other Commitments [Line Items] | ||||||||
Amount payable per month under the agreement | $ 13,750 | $ 13,750 | $ 13,750 | $ 12,500 | $ 10,500 | $ 6,875 | ||
Agreement description | On January 1, 2019, the agreement was further amended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2019 through December 31, 2020. | On January 1, 2018, the agreement was further amended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2018 through December 31, 2018. | 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. | Increasing to $12,500 per month from January 1, 2016 through December 31, 2017. | Mr. Wolf will be paid $10,500 per month through December 31, 2015. | Effective September 1, 2020 through December 31, 2020, fifty percent or $6,875 of the monthly consulting fee or approximately $27,500 for the effective period, will be deferred until 2021 | The agreement can be terminated upon 30 days' notice by either party. The Company may, in its sole discretion at any time convert Mr. Wolf to a full-time Executive status. The annual salary and term of employment would be equal to that outlined in the consulting agreement. Mr. Wolf is an independent contractor of the Company. |
Commitments And Contingencies_5
Commitments And Contingencies (Employment Agreements) (Narrative) (Details) - USD ($) | Feb. 05, 2020 | Dec. 31, 2020 | Jun. 30, 2020 |
Employment Agreement With Stewart Wallach [Member] | |||
Other Commitments [Line Items] | |||
Amount payable per annum under the agreement | $ 301,521 | ||
Agreement description | The initial term of this new agreement began February 5, 2020 and ends February 5, 2023. | ||
Employment Agreement With James McClinton [Member] | |||
Other Commitments [Line Items] | |||
Amount payable per annum under the agreement | $ 191,442 | ||
Agreement description | The term of this new agreement began February 5, 2020 and ends February 5, 2022. | ||
Employment Agreement With Mr. Wallach And Mr. McClinton’s Member] | |||
Other Commitments [Line Items] | |||
Agreement description | Effective September 1, 2020 through December 31, 2020, fifty percent of both Mr. Wallach and Mr. McClinton’s salary or approximately $46,388 and $29,453, respectively, will be deferred until 2021 | ||
Employment Agreements [Member] | |||
Other Commitments [Line Items] | |||
Agreement description | There is a common provision in both Mr. Wallach and Mr. McClinton's employment agreements: If the officer's employment is terminated by death or disability or without cause, the Company is obligated to pay to the officer's estate or the officer, as the case may be an amount equal to accrued and unpaid base salary as well as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal to (a) the sum of twelve (12) months base salary at the rate the Executive was earning as of the date of termination and (b) the sum of "merit" based bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by the Company shall be paid from a normal payroll account on a bi-weekly basis in accordance with the normal payroll policies of the Company. The amount owed by the Company to the Executive, from the effective Termination date, will be payout bi-weekly over the course of the year but at no time will be no more than twenty (26) installments. The Company will also continue to pay the Executive's health and dental insurance benefits for 6 months starting at the Executives date of termination. If the Executive had family health coverage at the time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive's severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment. |
Commitments And Contingencies_6
Commitments And Contingencies (Directors Compensation) (Narrative) (Details) - Directors Compensation [Member] - USD ($) | Jun. 10, 2020 | May 31, 2019 |
Jeffrey Guzy - Director [Member] | ||
Other Commitments [Line Items] | ||
Director compensation payable per calendar month | $ 750 | $ 750 |
Agreement description | On June 10, 2020 the Company approved that effective on August 1, 2020 until August 1, 2021, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. | On May 31, 2019 the Company approved that effective on June 1, 2019, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. |
Jeffrey Postal - Director [Member] | ||
Other Commitments [Line Items] | ||
Director compensation payable per calendar month | $ 750 | |
Agreement description | On May 31, 2019, the Company also approved that the independent directors would be offered effective from June 1, 2019, the opportunity to participate as a non-employee in the Company's Health Benefit Plan, subject to compliance with all plan participation requirements and on acceptance into the plan the director will be responsible to pay 100% of their plans participation cost. |
Commitments And Contingencies(L
Commitments And Contingencies(Licensing Agreements) (Narrative) (Details) | Feb. 03, 2020 | Apr. 12, 2018 | Dec. 29, 2016 | Feb. 04, 2015 |
Licensing Agreement With Floorcare Company | ||||
Other Commitments [Line Items] | ||||
Agreement description | The Company did not achieve the stated net sales volume for the renewal period, the License expired on February 3, 2020. | On April 12, 2018, the Company finalized the second amendment to the February 4, 2015 Licensing Agreement in which the license was further expanded to add an additional product category. | On December 29, 2016, the Company finalized the first amendment to the February 4, 2015 Licensing Agreement with the floorcare company in which the initial term was extended through February 3, 2020 and additional renewal terms and periods were also finalized. During this initial extended period through February 3, 2020, if the Company achieved net sales of $5,000,000, then the Licensing Agreement would automatically be extended 2 years until February 3, 2022 and if during this second extended period the Company achieved net sales of $5,000,000, then the Licensing Agreement would automatically be further extended 2 years until February 3, 2024. This license amendment also added an additional product category. | Under a February 4, 2015 Licensing Agreement with a floorcare company, Company markets home lighting products under the licensed brand of the floorcare company, to discount retailers, warehouse clubs, home centers, on-line retailers and other retail distribution channels in the U.S., Canada and Mexico. The initial term of the agreement is for 3 years. The Licensing Agreement did not have a guaranteed royalty stipulation. |
Commitments And Contingencies_7
Commitments And Contingencies (Public Relations Agreement) (Narrative) (Details) - USD ($) | Sep. 27, 2018 | Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Other Commitments [Line Items] | ||||||
Service charges | $ 99,579 | $ 112,687 | $ 339,816 | $ 353,293 | ||
Public Relations Services Agreement With Max Borges Agency (MBA) [Member] | ||||||
Other Commitments [Line Items] | ||||||
Agreement description | On September 27, 2018, the Company executed a public relations services agreement with Max Borges Agency, (“MBA”), a full – service public relations and communications agency with offices in Miami and San Francisco. The Company entered into the Agreement to obtain assistance from a nationally recognized firm, specializing in the development of product branding, marketing and launching of technology products. The agreement was effective on October 1, 2018 with an initial 180 day term, which either party can cancel with 60 days advanced notice in writing on or after the 120th day of the effective date. | |||||
Amount payable per month under the agreement | $ 11,250 | |||||
Subscription fee due on the first of each month | $ 476 | |||||
Service charges | $ 33,750 | |||||
Subscription fees | $ 952 |
Stock Transactions (Options) (N
Stock Transactions (Options) (Narrative) (Details) - USD ($) | Jun. 10, 2020 | May 31, 2019 | Aug. 29, 2018 | May 02, 2017 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Stock based compensation expense | $ 23,868 | $ 31,782 | ||||||
2005 Equity Plan [Member] | Stock Options [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Stock options amendment terms | 2005 Equity Incentive Plan to extend the Plan's expiration date from December 31, 2016 to December 31, 2021. | |||||||
Stock options outstanding | 990,000 | 990,000 | ||||||
Stock options vested | 780,000 | |||||||
Unrecognized stock based compensation expense to be recognized in 2020 | $ 14,215 | $ 14,215 | ||||||
Stock based compensation expense | $ 6,018 | $ 9,732 | ||||||
2005 Equity Plan [Member] | Stock Options [Member] | Director One [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
No of options granted | 100,000 | 100,000 | ||||||
Options description | The Director options have a strike price of $.435 with an effective date of August 6, 2019 | The Director options have an exercise price of $.435 with an effective date of August 6, 2018 | ||||||
Strike price of options | $ 0.435 | $ 0.435 | ||||||
Vesting date of options | Will vest on August 5, 2020 | Vested on August 5, 2019 | ||||||
Term of options | 5 years | 5 years | ||||||
2005 Equity Plan [Member] | Stock Options [Member] | Director Two [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
No of options granted | 100,000 | 100,000 | ||||||
Options description | The Director options have a strike price of $.435 with an effective date of August 6, 2019 | The Director options have an exercise price of $.435 with an effective date of August 6, 2018 | ||||||
Strike price of options | $ 0.435 | $ 0.435 | ||||||
Vesting date of options | Will vest on August 5, 2020 | Vested on August 5, 2019 | ||||||
Term of options | 5 years | 5 years | ||||||
2005 Equity Plan [Member] | Stock Options [Member] | Company Secretary [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
No of options granted | 100,000 | 10,000 | 10,000 | |||||
Options description | The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2020. | The Company Secretary options have an exercise price of $.435 with an effective date of August 6, 2019 | The Company Secretary options have an exercise price of $.435 with an effective date of August 6, 2018 | |||||
Strike price of options | $ 0.435 | $ 0.435 | $ 0.435 | |||||
Vesting date of options | Will vest on August 5, 2021 and have a term of 5 years. | Will vest on August 5, 2020 | Vested on August 5, 2019 | |||||
Term of options | 10 years | 10 years | 10 years |
Stock Transactions (Adoption Of
Stock Transactions (Adoption Of Stock Repurchase Plan) (Narrative) (Details) - USD ($) | Mar. 30, 2020 | Sep. 23, 2019 | May 31, 2019 | Dec. 19, 2018 | Aug. 29, 2018 | Dec. 15, 2017 | May 01, 2017 | Feb. 13, 2017 | Aug. 23, 2016 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 |
Repurchase of shares, value | $ 36,333 | $ 11,637 | $ 27,263 | $ 8,615 | ||||||||||
Common Stock [Member] | ||||||||||||||
Repurchase of shares, shares | (283,383) | (79,945) | (168,530) | (45,470) | ||||||||||
Repurchase of shares, value | $ (28) | $ (7) | $ (17) | $ (3) | ||||||||||
Stock Repurchase Plan [Member] | Common Stock [Member] | ||||||||||||||
Value of shares authorized to be repurchased | $ 750,000 | $ 750,000 | $ 1,000,000 | $ 750,000 | $ 1,000,000 | $ 750,000 | $ 750,000 | |||||||
Repurchase of shares, shares | 666,667 | 1,000,000 | 283,383 | |||||||||||
Exercise price of shares repurchased | $ 0.15 | $ 0.15 | ||||||||||||
Repurchase of shares, value | $ 36,333 | |||||||||||||
Stock Repurchase Plan [Member] | Common Stock-Total [Member] | ||||||||||||||
Repurchase of shares, shares | 750,000 | |||||||||||||
Repurchase of shares, value | $ 107,740 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) | Mar. 27, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 |
Income Taxes Narrative | ||||||||
Operating loss carryforward | $ 741,600 | $ 741,600 | $ 1,654,000 | |||||
Operating loss carryforward limitations on use | Offset against future taxable income through 2034. | |||||||
Changes in income tax rate description | On March 27, 2020, the CARES Act was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOLs”) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. The Company was able to carryback the NOL to 2017 tax years and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. | |||||||
Income tax expenses benefit | $ 21,222 | $ 210,253 | $ 573,685 | $ 805,160 | ||||
Effective income tax rate | 4.30% | 0.00% | 31.70% | 0.00% | ||||
Statutory income tax rate | 21.00% | 21.00% |