Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Mar. 14, 2022 | Jun. 30, 2021 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2021 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity File Number | 000-28831 | ||
Entity Registrant Name | CAPSTONE COMPANIES, INC. | ||
Entity Central Index Key | 0000814926 | ||
Entity Tax Identification Number | 84-1047159 | ||
Entity Incorporation, State or Country Code | FL | ||
Entity Address, Address Line One | 431 Fairway Drive | ||
Entity Address, Address Line Two | Suite 200 | ||
Entity Address, City or Town | Deerfield Beach | ||
Entity Address, State or Province | FL | ||
Entity Address, Postal Zip Code | 33441 | ||
City Area Code | (954) | ||
Local Phone Number | 252-3440 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 0 | ||
Entity Common Stock, Shares Outstanding | 48,893,031 | ||
Documents Incorporated by Reference [Text Block] | None | ||
ICFR Auditor Attestation Flag | false | ||
Auditor Name | D. Brooks and Associates CPAs, P.A. | ||
Auditor Location | Palm Beach Gardens, Florida | ||
Auditor Firm ID | 4048 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash | $ 1,277,492 | $ 1,223,770 |
Accounts receivable, net | 1,481 | 120,064 |
Inventories | 508,920 | 8,775 |
Prepaid expenses | 500,748 | 75,622 |
Income tax refundable | 284,873 | 861,318 |
Total Current Assets | 2,573,514 | 2,289,549 |
Property and equipment, net | 76,928 | 54,852 |
Operating lease - right of use asset, net | 98,651 | 158,504 |
Deposit | 11,148 | 25,560 |
Goodwill | 1,312,482 | 1,312,482 |
Total Assets | 4,072,723 | 3,840,947 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 538,551 | 825,690 |
Operating lease - current portion | 70,157 | 63,307 |
Total Current Liabilities | 608,708 | 888,997 |
Long-Term Liabilities: | ||
Operating lease-long- term portion | 37,533 | 107,690 |
Note payable related parties and accrued interest | 1,030,340 | |
Deferred tax liabilities-long-term | 273,954 | 259,699 |
Total Long-Term Liabilities | 1,341,827 | 367,389 |
Total Liabilities | 1,950,535 | 1,256,386 |
Stockholders' Equity: | ||
Common Stock, par value $.0001 per share, authorized 56,666,667 shares, outstanding 48,893,031 shares at December 31, 2021 and 46,296,364 shares at December 31, 2020 | 4,892 | 4,630 |
Additional paid-in capital | 8,554,320 | 7,053,328 |
Accumulated deficit | (6,437,026) | (4,473,397) |
Total Stockholders' Equity | 2,122,188 | 2,584,561 |
Total Liabilities and Stockholders’ Equity | 4,072,723 | 3,840,947 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity: | ||
Preferred stock, value, issued | ||
Preferred Stock, Series B [Member] | ||
Stockholders' Equity: | ||
Preferred stock, value, issued | 2 | |
Series C Preferred Stock [Member] | ||
Stockholders' Equity: | ||
Preferred stock, value, issued |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2021 | Dec. 31, 2020 |
Common stock, par value per share | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 56,666,667 | 56,666,667 |
Common stock, shares outstanding | 48,893,031 | 46,296,364 |
Common stock, shares issued | 48,893,031 | 46,296,364 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value per share | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 6,666,667 | 6,666,667 |
Preferred stock, shares issued | 0 | 0 |
Preferred Stock, Series B [Member] | ||
Preferred stock, par value per share | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 3,333,333 | 3,333,333 |
Preferred stock, shares issued | 15,000 | 0 |
Preferred stock, shares outstanding | 15,000 | 0 |
Series C Preferred Stock [Member] | ||
Preferred stock, par value per share | $ 1 | $ 1 |
Preferred stock, shares authorized | 67 | 67 |
Preferred stock, shares issued | 0 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Statement [Abstract] | ||
Revenues, net | $ 685,854 | $ 2,770,358 |
Cost of sales | (638,644) | (2,266,592) |
Gross Profit | 47,210 | 503,766 |
Operating Expenses: | ||
Sales and marketing | 28,568 | 300,420 |
Compensation | 1,276,503 | 1,515,522 |
Professional fees | 368,229 | 422,820 |
Product development | 308,823 | 249,879 |
Other general and administrative | 420,962 | 477,121 |
Goodwill impairment charge | 623,538 | |
Total Operating Expenses | 2,403,085 | 3,589,300 |
Operating Loss | (2,355,875) | (3,085,534) |
Other Income (Expenses): | ||
Other Income, net | 456,275 | 89,600 |
Interest Income (Expense), net | (48,974) | 179 |
Total Other Income, net | 407,301 | 89,779 |
Loss Before Tax Benefit | (1,948,574) | (2,995,755) |
Income Tax Expense (Benefit) | 15,055 | (611,939) |
Net Loss | $ (1,963,629) | $ (2,383,816) |
Net Loss per Common Share: | ||
Basic and Diluted | $ (0.04) | $ (0.05) |
Weighted Average Shares Outstanding: | ||
Basic and Diluted | 48,196,903 | 46,337,198 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'?? EQUITY - USD ($) | Preferred Stock Series A [Member] | Preferred Stock Series B 1 [Member] | Preferred Stock Series C [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2019 | $ 4,658 | $ 7,061,565 | $ (2,089,581) | $ 4,976,642 | |||
Beginning balance, shares at Dec. 31, 2019 | 46,579,747 | ||||||
Stock options for compensation | 28,068 | $ 28,068 | |||||
Stock option exercised, shares | |||||||
Repurchase of shares | $ 28 | 36,305 | $ 36,333 | ||||
Repurchase of shares, shares | (283,383) | ||||||
Net Loss | (2,383,816) | (2,383,816) | |||||
Ending balance, value at Dec. 31, 2020 | $ 4,630 | 7,053,328 | (4,473,397) | 2,584,561 | |||
Ending balance, shares at Dec. 31, 2020 | 46,296,364 | ||||||
Stock options for compensation | 15,619 | 15,619 | |||||
Stock issued to Directors for loan | $ 2 | 48,994 | 48,966 | ||||
Stock issued to Director's for loan, shares | 15,000 | ||||||
Stock option exercised | $ 10 | 43,490 | $ 43,500 | ||||
Stock option exercised, shares | 100,000 | 100,000 | |||||
Common stock for cash, net of fees | $ 252 | 1,392,889 | $ 1,393,141 | ||||
Common stock for cash, net of fees, shares | 2,496,667 | ||||||
Net Loss | (1,963,629) | (1,963,629) | |||||
Ending balance, value at Dec. 31, 2021 | $ 2 | $ 4,892 | $ 8,554,320 | $ (6,437,026) | $ 2,122,188 | ||
Ending balance, shares at Dec. 31, 2021 | 15,000 | 48,893,031 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Los | $ (1,963,629) | $ (2,383,816) |
Depreciation and amortization | 9,852 | 24,297 |
Stock based compensation expense | 15,619 | 28,068 |
Noncash lease expense | 59,853 | 55,698 |
Goodwill impairment charge | 623,538 | |
Stock issued to directors for loan | 48,996 | |
Accrued interest added to note payable related parties | 10,340 | |
Increase in deferred income tax liabilities-long-term | 14,255 | 259,699 |
Noncash accounts receivable allowance | 173,426 | |
(Increase) decrease in accounts receivable, net | 118,583 | (106,605) |
(increase) decrease in inventories | (500,145) | 16,043 |
(Increase) decrease in prepaid expenses | (425,126) | 107,160 |
Decrease in deposits | 14,412 | 20,461 |
(Decrease) increase in accounts payable and accrued liabilities | (287,139) | 16,671 |
(Increase) decrease in income tax refundable | 576,445 | (641,111) |
Decrease in operating lease liabilities | (63,307) | (51,175) |
Net cash used in operating activities | (2,370,991) | (1,857,646) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (31,928) | (13,500) |
Net cash used in investing activities | (31,928) | (13,500) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from sale of common stock and stock option exercise, net of costs | 1,436,641 | |
Proceeds from note payable related parties | 1,020,000 | |
Repurchase of shares | (36,333) | |
Net cash provided (used) in financing activities | 2,456,641 | (36,333) |
Net Increase (Decrease) in Cash | 53,722 | (1,907,479) |
Cash at Beginning of Year | 1,223,770 | 3,131,249 |
Cash at End of Year | 1,277,492 | 1,223,770 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Stocks issued to directors for loan fee | 48,996 | |
Interest accrued note payable related party | $ 10,340 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements for the years ended December 31, 2021 and 2020 include the accounts of the parent entity and its wholly-owned subsidiaries. All intra-entity transactions and balances have been eliminated in consolidation. This summary of accounting policies for Capstone Companies, Inc. (CAPC), a Florida corporation (formerly, CHDT Corporation) and its wholly-owned subsidiaries (collectively referred to as the Company, we, our or us), is presented to assist in understanding the Companys consolidated financial statements. The accounting policies conform to accounting principles generally accepted in the United States of America (U.S. GAAP) and have been consistently applied in the preparation of the consolidated financial statements. Organization and Nature of Business Capstone Companies, Inc. is headquartered in Deerfield Beach, Florida and is incorporated under the laws of the State of Florida. On April 13, 2012, the Company established a wholly owned subsidiary in Hong Kong, named Capstone International Hong Kong Ltd (CIHK) which provides support services such as engineering, new product development, product sourcing, factory certification and compliance, product price negotiating, product testing and quality control and ocean freight logistics for the Companys other subsidiaries. CIHK is also engaged in selling the Companys products internationally. Since the beginning of fiscal year 2007, the Company through Capstone Industries has been primarily engaged in the business of developing, marketing, and selling home LED products (Lighting Products) through national and regional retailers in North America and in certain overseas markets. The Companys products are targeted for applications such as home indoor and outdoor lighting and have different functionalities to meet consumers 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 was delayed due to product development delays at the Companys suppliers, resulting from the impact of COVID-19. The development of the smart interactive mirror or Smart Mirrors is part of the Companys strategic effort to find new product lines to replace or supplement existing products that are nearing or at the end of their product life cycle. These products are offered either under the Capstone brand or licensed brands. The Companys products are typically manufactured in Thailand and China by contract manufacturing companies. As of the date of these consolidated financial statements, the Companys future product development effort is focused on the Smart Mirrors category because the Company believes, based on Companys management understanding of the industry, the Smart Mirrors have the potential for greater profit margin than the Companys 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 Companys operations in 2021 consist of one reportable segment for financial reporting purposes: Lighting Products. Effects of COVID-19 During the year ended December 31, 2021, the outbreak and global spread of COVID-19 pandemic caused significant economic volatility, uncertainty and disruption in our operating environment. We began 2020 in an environment exhibiting strong economic conditions combined with the successful launch of our new product category, the Smart Mirror at the 2020 CES Show. However, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, and the various containment and mitigation measures adopted by governments and institutions globally and in the U.S. began to have a severe economic impact, including causing the U.S. to enter an economic recession. In response to the COVID-19 and various state and local orders, the Company instituted the following actions in March 2020: ● Placed restrictions on business travel for our employees. ● Closed our Corporate offices both in the U.S. and in Hong Kong. ● Modified our corporate and division office functions to allow all employees to work remotely. During the months of February and March 2020, the Companys Chinese suppliers were impacted by the closedown of facilities by local and regional authorities in their efforts to combat the spread of COVID-19. The factory closures delayed shipment of certain orders from the first quarter of 2020 until the second and third quarter 2020. During the end of March 2020, the Companys Chinese suppliers that had been previously closed started to gradually reopen their factories. Company orders that had been previously delayed because of the close started to ship. These factories are fully functioning, and orders are being produced both in Thailand and in China. CIHK staff have continued to work remotely from home. On March 20, 2020, the Companys U.S. staff started to work remotely from their homes. With the State of Florida lifting its Stay at Home requirement on May 20, 2020, the Corporate office reopened with staff working on a rotating schedule between the office and remotely from home. While all the above-referenced steps were, and some remain, necessary and appropriate in light of COVID-19, they impacted the Companys ability to operate the business in its ordinary and traditional course. As the result of COVID-19 and the economic uncertainties, our core LED lighting orders declined significantly starting in March 2020 and the Company was unable to expand on the marketing success of the launch of the Smart Mirror at the CES Show in January 2020. As the pandemic spread and federal, state and local government mandated movement restrictions, management maintained its focus on shifting production into Thailand, expansion of the Smart Mirror portfolio, protecting our liquidity and closely managing our cash flows. In the fiscal second and third quarters, 2020, the Company implemented cost controls to mitigate the loss of revenue. The Company took action to reduce expenses, including promotional activities, travel, meetings, and compensation expenses with the elimination of certain positions overseas and the deferment of senior executive compensation and consulting expenses. Our business operations and financial performance for the year ended December 31, 2021 was adversely impacted by the developments discussed above, The Company reported a decrease in net revenue from $ 2.7 686 2.0 2.4 2.4 The decrease in net sales for the year was driven by the uncertainty felt by retail buyers as to the continuing impact on the retail market of COVID-19 and its overall long-term negative impact on the U.S. economy. However, the Warehouse Club channel, which includes our customers Costco Wholesale and Sams Club, has seen a substantial increase in foot traffic because of the changed buying trend of consumers during the pandemic, which has recently resulted in the resumption of some promotional opportunities. Management believes that with the national distribution of vaccines now occurring, the impact of the pandemic on the general brick and mortar retail market will carry through to mid-2021. As a result of the economic uncertainties caused by the COVID-19 pandemic, during the year ended December 31, 2020, management determined sufficient indicators existed to trigger quarterly goodwill impairment analyses. The total impairment charge for the year ended December 31, 2020 was approximately $ 623.5 On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, which we refer to as the CARES Act. was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (NOLs) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. The Company was able to carryback the 2018 and the 2019 NOLs to 2017 tax year and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of $575,645 which was recorded in the first quarter 2020. The Company expects to carryback a portion of its 2020 NOL, for which it recorded a further net benefit of $286,433. In the third quarter 2020, the Company recorded a $21,222 net tax benefit for deferred tax liability adjustment related to goodwill impairment. For the year ended December 31, 2020, the Company has recorded $ 861,318 284,873 The CARES Act also provided for the Paycheck Protection Program (PPP). On May 11, 2020, the Company received a $89.6 thousand loan under PPP which was processed through Sterling National Bank. The Company filed SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application. On October 30, 2020, the SBA notified the Company that the PPP loan principal of $89,600 and $428 of accumulated interest had been fully forgiven. This forgiveness has been reflected in Other Income on the consolidated statements of operations Liquidity and Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The uncertainty and the continuing negative impact that the COVID-19 disruption could have on the future retail business and consumers willingness to visit retail stores, causing reduced consumer foot traffic and consumer spending, could negatively impact the demand for our products or delay future planned promotional opportunities. However, with a successful relaunch of the Smart Mirror portfolio using the online retail platform, the Company may need a purchase order credit line to support increased U.S. domestic inventory to facilitate revenue growth in that category. During the year ended December 31, 2021, the Company used cash in operations of approximately $ 2.4 2.0 2.0 (6,437,026) 1,223 1,277 As discussed above, the overall impact of the COVID-19 pandemic to our business, financial condition, cash flow and results of operations remains uncertain. For example, if any of our major wholesale customers fail to maintain normal operations, our revenue could further decline, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Management believes that with the ongoing national distribution of vaccines, the economic impact of the COVID-19 pandemic in the U.S. will continue through to mid-2021, but ultimately should not impact the Companys long-term strategy and initiatives. On July 31, 2020, the Company terminated its factoring agreement with Sterling National Bank. The Company has been in discussions with alternate funding sources that offer extensive programs that are more in line with the Companys future business model, particularly a facility that provides funding options that are suitable for the e-commerce business that the Company is transitioning into. The borrowing costs associated with such financing are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future. In addition, we could seek alternative sources of liquidity, including but not limited to accessing the capital markets, or other alternative financing measures. However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital markets on terms acceptable to us. An economic recession or a slow recovery could adversely affect our business and liquidity. The ongoing impact of the COVID-19 pandemic on the Companys business and financial performance may also affect the Companys 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 Companys ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this report. However, there are compensating factors and actions that are being and have been taken to address these uncertainties, including the following: ● The Company has outstanding note payable due to related parties of approximately $1.0 million. The Company has working capital of approximately $2.0 million consisting mostly of cash of $1.3 million. ● The Company had an estimated income tax refundable as of December 31, 2020 of approximately $861 thousand of which approximately $576 thousand and $10.3 thousand of interest was received on February 3, 2021, (see Note 8). ● On July 31, 2020 with the termination of the Sterling National Bank factoring agreement, the Company has been in discussions with alternate funding sources that offers varying programs that are more in line with the Companys future business model, particularly a facility that provides funding options that are more suitable for the e-commerce business that the Company is transitioning into. ● The Company has entered a $750,000 working capital loan agreement effective January 4, 2021 that was ended June 30, 2021. fo(see Note 4). ● The Companys plan is to sell direct to consumers. The funding and cashflow requirements for this business model will require e-commerce funding. The Company has been in discussions with a funding source that provides this option. ● The Company has in place a mitigation plan that reduces discretionary expenses, executive managements compensation, and significantly reduces the cost of the Hong Kong operation and also reduces future travel, lodging and show expenses. ● Since September 1, 2020, through December 31, 2020 in order to conserve operating cashflow, the Companys executive management deferred 50% of their compensation until later in 2021. The compensation deferral was further extended until 2022. Accounts Receivable For product revenue, the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivables are recognized at the amount expected to be collected and are not subject to any interest or finance charges. The Company does not have any off-balance sheet credit exposure related to any of its customers. Previously in the factoring agreement with Sterling National Bank, accounts receivable served as collateral when the Company borrowed against its credit facilities. With the termination of the Sterling National Bank factoring agreement, the accounts receivables are unencumbered. As of December 31, 2021, accounts receivable has not been collateralized against debt. 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 customers 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 Companys historical payment experience. An allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available. As of both Decembers 31, 2021 and 2020, management determined that accounts receivable are fully collectible. As such, management has not recorded an allowance for doubtful accounts. The following table summarizes the components of Accounts Receivable, net: Schedule of Components of Accounts Receivable, net December 31, December 31, 2021 2020 Trade Accounts Receivables at year end $ 1,481 $ 197,166 Reserve for estimated marketing allowances, cash discounts and other incentives (77,102 ) Total Accounts Receivable, net $ 1,481 $ 120,064 The following table summarizes the changes in the Companys reserve for marketing allowances, cash discounts and other incentives which is included in net accounts receivable: Schedule of Changes in Reserve Included in Net Accounts Receivable December 31, December 31, 2021 2020 Balance at beginning of the year $ (77,102 )) $ (263,092 ) Accrued allowances Reclassification of allowance from accounts receivable to accounts payable and accrued liabilities 77,102 173,426 Expenditures 12,564 Balance at year-end $ $ (77,102 ) Marketing allowances include the cost of underwriting an in-store instant rebate coupon or a target markdown allowance on a specific product. The Company retains these allowances for a period of 3 to 5 years in the event the customer chargebacks for a promotional allowance against an open invoice or submits an invoice for their claim. Cash discounts represent discounts offered to the retailer off outstanding accounts receivable in order to initiate early payment. These allowances are evaluated when our relationship with a customer is terminated, or we cease selling a specific product to a customer and may be released as other income if deemed not required. During the year ended December 31, 2021, the Company reversed into other income approximately $340,000 of previously accrued marketing and promotional allowances for previous product sales that are deemed highly unlikely for the customer to chargeback the Company due to the age of the allowance and the sales of the specific item ceasing. Inventory The Companys inventory, which consists of finished Thin Cast Smart Mirror products for resale to consumers by Capstone, is recorded at the lower of landed cost (first-in, first-out) or net realizable value. The Company writes down its inventory balances for estimates of excess and obsolete amounts. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when the expected realizable value of a specific inventory item falls below its original cost. Management regularly reviews the Companys investment in inventories for such declines in value. The write-downs are recognized as a component of cost of sales. During the fiscal year 2021 and 2020, inventory write downs were $ 154 0 508,920 8,775 Prepaid Expenses The Companys prepaid expenses consist primarily of deposits on inventory purchases for future orders as well as prepaid insurance, trade show and subscription expense. As of December 31, 2021 and 2020, respectively, prepaid expenses were $ 500,748 75,622 Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives of the related assets as follows: Schedule of Useful Lives, Depreciation of Property and Equipment Useful Life December 31, 2021 December 31, 2020 Computer equipment and software 3 7 $ 53,819 $ 53,819 Machinery and equipment 3 7 151,251 119,323 Furniture and fixtures 3 7 6,828 6,828 Less: Accumulated depreciation (134,970 ) (125,118 ) Property and Equipment, Net $ 76,928 $ 54,852 Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. Long-lived assets to be disposed of, if any, are reported at the lower of carrying amount or fair value less cost to sell. Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss. Major overhauls and betterments are capitalized and depreciated over their estimated economic useful lives. Depreciation and amortization expense was $ 9,852 24,297 Leases The Company accounts for leases under ASU 2016-02 which requires leases with durations greater than twelve months to be recognized on the balance sheet and disclose key information about the leasing arrangements. Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liabilities on the consolidated balance sheets. See Note 5 Operating Leases for additional disclosures as required by the new standard. Goodwill On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation (Capstone). Capstone was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of Capstones 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 Companys market capitalization. As a result of the economic uncertainties caused by the COVID-19 pandemic during the year ended December 31, 2021 and 2020, management determined sufficient indicators existed to trigger the performance of interim goodwill impairment analyses for each reporting quarter. The total impairment charges for the year ended December 31, 2021 and 2020 was $ 0 623.5 The following table summarizes the changes in the Companys goodwill asset which is included in the total assets in the accompanying consolidated balance sheets: Schedule of Goodwill Impairment Charges December 31, December 31, 2021 2020 Balance at the beginning of the period $ 1,312,482 $ 1,936,020 Impairment charges (623,538 ) Balance at December 31, 2021 $ 1,312,482 $ 1,312,482 With the continuing economic uncertainties caused by the COVID-19 pandemic, the capital markets may continue to have a downturn and adversely affect the Companys stock price which will require the Company to test its goodwill for impairment in future reporting periods. The Companys stock is deemed a penny stock under Commission rules. The Company estimates the fair value of its single reporting unit relative to the Companys market capitalization. Fair Value Measurement The accounting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), Fair Value Measurements and Disclosures (ASC 820-10) requires the Company to make disclosures about the fair value of certain of its assets and liabilities. ASC 820-10 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. ASC 820-10 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are as follows: Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3: Significant unobservable inputs. Earnings Per Common Share Basic earnings per common share is computed by dividing net income(loss) by the weighted average number of shares of common stock outstanding as of December 31, 2021and 2020. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of December 31, 2021 and 2020, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 888,288 options and 199,733 warrants and 990,000 options, respectively. Basic weighted average shares outstanding is reconciled to diluted share outstanding as follows: Schedule of Basic Weighted Average Shares Outstanding is Reconciled to Diluted Year Ended Year Ended Basic and Diluted weighted average shares outstanding 48,196,903 46,337,198 Revenue Recognition The Company generates revenue from developing, marketing and selling consumer lighting products through national and regional retailers. The Companys products are targeted for applications such as home indoor and outdoor lighting and have different functionalities. Capstone currently operates in the consumer lighting products category and is expanding into the Smart Mirror category in the United States and in certain overseas markets. These products may be offered either under the Capstone brand or licensed brands. A sales contract occurs when the customer-retailer submits a purchase order to buy a specific product, a specific quantity, at an agreed-fixed price, within a ship window, from a specific location and on agreed payment terms. The selling price in all of our customers orders has been previously negotiated and agreed to including any applicable discount prior to receiving the customers purchase order. The stated unit price in the customers order has already been determined and is fixed at the time of invoicing. The Company recognizes lighting product revenue when the Companys 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. As the Company launches the Smart Mirror program ,these orders will be sold through e-commerce. The Company will only bill the customer and recognize revenue upon the customer obtaining control of the Smart Mirror which will generally occur upon delivery. The Company may enter into a licensing agreement with globally recognized companies, that allows the Company to market products under a licensed brand to retailers for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage of licensed product revenue to the licensor in order to market the licensed product. The Company expenses license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale is recorded. These costs are recorded within sales and marketing expenses. The following table presents net revenue by geographic location which is recognized at a point in time: Schedule of Net Revenue by Major Source For the Year Ended For the Year Ended Capstone Brand % of Capstone Brand % of Lighting Products- U.S. $ 340,896 49 % $ 2,066,519 75 % Smart Mirror Products- U.S. 3,795 1 % — — Lighting Products-International 341,163 50 % 703,839 25 % Total Revenue $ 685,854 100 % $ 2,770,358 100 % We provide our customers with limited rights of return for non-conforming product warranty claims. As a policy, the Company does not accept product returns from customers, however occasionally as part of a customers in store test for new product, we may receive back residual inventory. Customer orders received are not long-term orders and are typically shipped within six months of the order receipt, but certainly within a one-year period. Our payment terms may vary by the type of customer, the customers credit standing, the location where the product will be picked up from and for international customers and which country their corporate office is located. The time between invoicing date and when payment is due may vary between 30 days and 90 days depending on the customer type. To ensure there are no payment issues, overseas customers or new customers may be required to provide a deposit or full payment before the order is delivered to the customer. The Company selectively supports retailers initiatives to maximize sales of the Companys products on the retail floor or to assist in developing consumer awareness of new products launches, by providing marketing fund allowances to the customer. The Company recognizes these incentives at the time they are offered to the customers and records a credit to their account with an offsetting charge as either a reduction to revenue, increase to cost of sales, or marketing expenses depending on the type of sales incentives. Sales reductions for anticipated discounts, allowances and other deductions are recognized during the period the related revenue is recorded. The reduction of accrued allowances is included in net revenues and amounted to $8.0 thousand and $341.2 thousand for the years ended December 31, 2021 and 2020, respectively. Warranties The Company provides the end user with limited rights of return as a consumer assurance warranty on all products sold, stipulating that the product will function properly for the warranty period. The warranty period for all products is one year from date of consumer purchase. Certain retail customers may receive an off-invoice based discount such as a defective/warranty allowance, that will automatically reduce the unit selling price at the time the order is invoiced. This allowance will be used by the retail customer to defray the cost of any returned units from consumers and therefore negate the need to ship defective units back to the Company. Such allowances are charged to cost of sales at the time the order is invoiced. For those customers that do not receive a discount off-invoice, the Company recognizes a charge to cost of sales for anticipated non-conforming returns based upon an analysis of historical product warranty claims and other relevant data. For the new online Smart Mirror customers the product has a One Year Limited Warranty. The purchaser must register the product within 30 days from date of purchase with specific product information to activate the warranty. Capstone warrants the product to be free from defects in workmanship and materials for the warranty period. If the product fails during normal and proper use within the warranty period, Capstone at its discretion, will repair or replace the defective parts of the product, or the product itself. We evaluate our warranty reserves based on v |
CONCENTRATIONS OF CREDIT RISK A
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE | 12 Months Ended |
Dec. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE | NOTE 2 - CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE Financial instruments that potentially subject the Company to credit risk consist principally of cash and accounts receivable. The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. Cash The Company at times has cash with its financial institution in excess of Federal Deposit Insurance Corporation (FIDC) insurance limits. The Company places its cash with high credit quality financial institutions which minimize the risk of loss. To date, the Company has not experienced any such losses. As of December 31, 2021, the Company has approximately $ 471.6 Accounts Receivable The Company grants credit to its customers, substantially all of whom are retail establishments located throughout the United States and their international locations. The Company typically does not require collateral from customers. Credit risk is limited due to the financial strength of the customers comprising the Companys customer base and their dispersion across different geographical regions. The Company monitors exposure of credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. As the Companys ecommerce revenue starts to increase the makeup of the accounts receivable change significantly. Stripe is the company that processes online payments for our website, we should receive payment from them within 3 days of the product shipment. If the product is shipped through Amazon it could take between 20 and 30 days for collection. Major Customers The Company had two customers who comprised 50 37 63 26 For the years ended December 31, 2021 and 2020, approximately 50 25 As of December 31, 2021, and 2020, approximately $ 0 120.1 from one customer. As the Company increases its ecommerce business, rather than have hundreds of individual consumer customers we will have those companies that we have selected to process our orders such as Stripe, Amazon or Wayfair. Major Customers Schedule of Concentration of Credit Risk of Major Customers And Major Vendors Net Revenue % Net Accounts Receivable Year Ended December 31, Year Ended December 31, 2021 2020 2021 2020 Customer A 50 % 63 % $ — $ — Customer B 37 % 26 % — 120,064 Total 87 % 89 % $ — 120,064 Major Vendors The Company had two vendors from which it purchased 59 23 68 23 As of December 31, 2021, and 2020 , approximately 73 47 Purchases % Accounts Payable Year Ended December 31, Year Ended December 31, 2021 2020 2021 2020 Vendor A 59 % 68 % $ 92,761 $ — Vendor B 23 % 23 % — 114,870 Total 82 % 91 % $ 92,761 $ 114,870 |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2021 | |
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. The amount due to Sterling National Bank was zero at December 31, 2021 and 2020. The Company has been in discussions with alternate sources of funding, that could provide funding options that are more suitable to the e-commerce business model that the Company is transitioning into. The borrowing costs associated with such financing, are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future or that we will secure affordable funding. See Note 4 - Note Payable with Related Parties. 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 were forgivable after eight weeks as long as the borrower used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. On May 11, 2020, the Company received loan proceeds in the amount of $89,600. The Company used the proceeds for purposes consistent with the PPP forgiveness rules. Under the Small Business Administration (SBA) and U.S. Treasury Department guidelines issued in May 2020, a borrower could apply for the forgiveness of the loans by filing SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application which the Company submitted to Sterling National Bank on September 16, 2020, which was accepted by the bank and processed to the SBA for final review and approval. On October 30, 2020, the SBA notified the Company that the PPP loan principal of $89,600 and $428 of accumulated interest had been fully forgiven and has been recorded in Other Income on the Consolidated Statement of Operations for the year ended December 31, 2020. |
NOTES PAYABLE TO RELATED PARTIE
NOTES PAYABLE TO RELATED PARTIES | 12 Months Ended |
Dec. 31, 2021 | |
Related Party Transactions [Abstract] | |
NOTES PAYABLE TO RELATED PARTIES | NOTE 4 NOTES PAYABLE TO RELATED PARTIES Notes Payable to Officers, Directors and Related Parties On January 4, 2021, the Company entered a $750,000 working capital loan agreement with Directors, Stewart Wallach and Jeffrey Postal. The short-term facility ended June 30, 2021 (Initial Period). The Company had the option to extend the Initial Period for an additional six consecutive months, ending December 31, 2021, but decided not to renew. In consideration for the Lenders providing the loan under this Agreement for the Initial Period and agreeing to a below market rate of interest, and as payment of a finance fee for the loan on an unsecured basis, the Company issued to the Lenders the following securities 7,500 shares of the Companys Series B-1 Convertible Preferred Stock (Preferred Shares) issued to each Lender. The Preferred Shares shall have the appropriate restrictive legends. Each Preferred Share converts into 66.66 shares of Common Stock at option of Lender . The Preferred Shares and any shares of Common Stock issued under the loan agreement are restricted securities under Rule 144 of the Securities Act of 1933, as amended. The Preferred Shares have no further rights, preferences, or privileges. The fair value of the Preferred Shares was determined to be $48,996 based on the number of shares of Common Stock to be issued upon conversion and the market price of the Common Stock on the date the working capital loan agreement was executed. The Company amortized the $48,996 Finance Fee into interest expense over the six months of the agreement. The Finance Fee was recognized as expense and included in interest expense on the consolidated statements of operations (see Note 6). On July 2, 2021, the Board of Directors (Board) resolved that the Company required a purchase order funding facility to procure additional inventory to support the online Smart Mirror business. The Board resolved that certain Directors could negotiate the terms of a Purchase Order Funding Agreement for up to $1,020,000 with Directors S. Wallach and J. Postal and E. Fleisig, a natural person who is not affiliated with the Company. This agreement has been finalized on October 18, 2021, and the Company has received the funding of $1,020,000 on October 18, 2021 which is due 18 months from receipt of the funds. Under this agreement the interest terms are 5% based on a 365- day year. This agreement shall continue in full force for 18 months from the start date. At December 31, 2021, the note payable of $ 1,030,340 10,340 Management believes that without additional capital or increased cash generated from operations, there is substantial doubt about the Companys ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this report. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 5 COMMITMENTS AND CONTINGENCIES Operating Leases The Company had operating lease agreements for offices in Fort Lauderdale, Florida expiring at June 2023. The Companys principal executive office is located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. Effective November 1, 2019, the Company entered a new prime operating lease with the landlord 431 Fairway Associates, LLC ending June 30, 2023, for the Companys 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 Companys rent expense is recorded on a straight-line basis over the term of the lease. The rent expense for the years ended December 31, 2021 and 2020 amounted to $ 144,916 165,706 Schedule of Right Of Use Asset and Lease Liability Supplemental balance sheet information related to leases as of December 31, 2021 is as follows: Assets Operating lease - right-of-use asset $ 98,651 Liabilities Current Current portion of operating lease $ 70,157 Noncurrent Operating lease liability, net of current portion $ 37,533 Lease term and Discount Rate Weighted average remaining lease term (months) Operating lease 18 Weighted average Discount Rate Operating lease 7 % Scheduled maturities of operating lease liabilities outstanding as of December 31, 2021 are as follows: Scheduled Maturities of Operating Lease Liabilities Outstanding Year Operating 2022 75,492 2023 38,304 Total Minimum Future Payments 113,796 Less: Imputed Interest 6,106 Present Value of Lease Liabilities $ 107,690 The Company has two short-term storage rentals with durations 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 from their homes, the Company decided not to renew and allowed this lease to expire. CIHK entered into a six-month rental agreement effective from December 1, 2016 for a showroom space at 3F, Wing Kin Industrial Building, 4-6 Wing Kin Road, Kwai Chung, NT, Hong Kong. This agreement has been extended various times. The lease with a base monthly rent of $1,290 expired August 16, 2019 and was further renewed for six-months expiring on February 16, 2020. Effective February 17, 2020, the Company entered a six-month lease expiring on September 30, 2020, with a base rate of $1,285 per month. To further reduce costs, effective September 30, 2020 the Company reduced its space requirements and entered a three-month lease expiring on December 31, 2020, with a base rate of $516 per month. The Company decided not to renew and allowed this lease to expire. The rent expense recognized during the year ended December 31, 2020 on these short-term leases, was $19,239. Consulting Agreements On July 1, 2015, the Company entered into a consulting agreement with George Wolf, whereby Mr. Wolf was paid $10,500 per month through December 31, 2015 increasing to $12,500 per month from January 1, 2016 through December 31, 2017. On January 1, 2018, the agreement was further amended, whereby Mr. Wolf was paid $13,750 per month from January 1, 2018 through December 31, 2018. On January 1, 2019, the agreement was further amended, whereby Mr. Wolf was paid $13,750 per month from January 1, 2019 through December 31, 2021. On January 1, 2021, the sales operations consulting agreement with George Wolf, was further extended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2021 through December 31, 2021. Effective September 1, 2020 through March 31, 2021, payment for fifty percent or $6,875 of the monthly consulting fee or approximately $48,125 for the effective period, was deferred until 2022 The consulting 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 Companys Board of Directors, but the extension may not exceed two years in length. On February 5, 2020, the Company entered into an Employment Agreement with James McClinton, whereby Mr. McClinton will be paid $191,442 per annum. The term of agreement began February 5, 2020 and ended February 5, 2022 (see Note 8). Effective September 1, 2020 through March 31, 2021, payments equivalent to fifty percent of both Mr. Wallach and Mr. McClintons salary of approximately $48,707 and $30,925, respectively for a total of $76,932 as of 12-31-20 and $86,977 and $20,616, respectively for 2021 and have been deferred until 2022. As of December 31, 2021 and 2020, , total wages accrued for both were approximately $107,593 and $79,632, respectively. There is a common provision in both Mr. Wallach and Mr. McClintons employment agreements, if the officers employment is terminated by death or disability or without cause, the Company is obligated to pay to the officers estate or the officer, an amount equal to accrued and unpaid base salary as well as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal to (a) the sum of twelve (12) months base salary at the rate the Executive was earning as of the date of termination and (b) the sum of merit based bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by the Company shall be paid from a normal payroll account on a bi-weekly basis in accordance with the normal payroll policies of the Company. The amount owed by the Company to the Executive, from the effective Termination date, will be payout bi-weekly over the course of the year but at no time will be no more than twenty (26) installments. The Company will also continue to pay the Executives 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 Executives severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment. The following table summarizes potential payments upon termination of employment: Summary of Potential Payments upon Termination of Employment Salary Bonus Gross up Benefit Grand Total Stewart Wallach $ 301,521 $ — $ 12,600 $ 6,600 $ 320,721 Gerry McClinton $ 191,442 $ — $ 11,000 $ 6,600 $ 209,042 Directors Compensation On May 31, 2019, the Company approved that effective on June 1, 2019, each independent director, namely Jeffrey Guzy and Jeffrey Postal, would each receive $750 per calendar month, as a Form 1099 compensation, for their continued services as directors of the Company. This compensation would be additional to the stock option grants awarded for their participation on the Audit Committee and Compensation and Nominating Committee. On May 31, 2019, the Company also approved that the independent directors would be offered effective from June 1, 2019, the opportunity to participate as a non-employee in the Companys 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. On May 6, 2021, the Company approved the following basic compensation arrangement for independent directors of the Company, effective August 6, 2021 and ending August 5, 2022: A total compensation value of $15,000 per annum, payable $750 monthly cash compensation or $9,000 or (60% of total value) and remainder $6,000 payable in non-qualified stock options vesting as of August 6, 2022 and with an exercise price equal to market price of common stock as of August 6, 2021, less 20% (discount). See Note 6 Stock Transactions for further disclosures. 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. As the Company did not achieve the stated net sales volume for the renewal period, the License expired on February 3, 2020. Royalty expense related to this Licensing Agreement for the years ended December 31, 2021 and 2020, was $ 0 Public Relations Agreement On September 27, 2018, the Company executed a public relations services agreement with Max Borges Agency, (MBA), a full service public relations and communications agency with offices in Miami and San Francisco. The Company entered into the Agreement to obtain assistance from a nationally recognized firm, specializing in the development of product branding, marketing, and launching of technology products. The agreement was effective on October 1, 2018, with an initial 180-day term, which either party can cancel with 60 days advanced notice in writing on or after the 120 th Legal Matters The Company is not a party to any other pending or threatened legal proceedings and, to the best our knowledge, no such action by or against us has been threatened. From time to time, we are subject to legal proceedings and claims that arise in the ordinary course of our business. Although occasional adverse decisions or settlements may occur in such routine lawsuits, we believe that the final disposition of such routine lawsuits will not have material adverse effect on its financial position, results of operations or status as a going concern. |
STOCK TRANSACTIONS
STOCK TRANSACTIONS | 12 Months Ended |
Dec. 31, 2021 | |
Equity [Abstract] | |
STOCK TRANSACTIONS | NOTE 6 - STOCK TRANSACTIONS Stock Purchase Agreements On April 5, 2021, the Company entered into a Private Equity Placement with five separate securities purchase agreements (SPAs) whereby the Company privately placed an aggregate of 2,496,667 shares (Shares) of its common stock, $0.0001 par value per share, (common stock) for an aggregate purchase price $1,498,000. The five unrelated investors in the Private Placement consisted of four private equity funds and one individual all being accredited investors (under Rule 501(a) of Regulation D under the Securities Act of 1933, as amended, (Securities Act). The $1,498,000 in proceeds from the Private Placement was used mostly to purchase start up inventory for the Companys new Smart Mirror product line, and the remainder for advertising and working capital. Under the SPA, each investor is granted five-year piggyback, best efforts registration rights with no penalties. The Shares are restricted securities under Rule 144 of the Securities Act and are subject to a minimum six month hold period. Based on representations made to the Company, the five investors do not constitute a group under 17 C.F.R. 240.13d-3 and have purchased the Shares solely as an investment for each investors own account. No individual investor owns more than 2% of the issued and outstanding shares of common stock. The Private Placement was required to raise needed working capital to purchase U.S. domestic inventory, to support the Companys new Smart Mirror product line that initially was to be sold online in the second quarter 2021. The Company engaged Wilmington Capital Securities, LLC, a FINRA and SEC registered broker to act as a placement agent to assist to raise capital through a private placement from one or more accredited investors. As compensation for their services Wilmington was paid 7% of the gross proceeds or $104,860 as a placement fee. The placement fee was offset against the $1,498,000 proceeds and the net amount of $1,393,140. This increased the Companys additional paid in capital as presented on the accompanying condensed consolidated statement of stockholders equity statement as of December 31, 2021. In addition, the Company issued to Wilmington as consideration for their placement fee services, warrants equal to 8% of the shares issued or 199,733 warrants. The warrants can be exercised for five years from date of issuance, exercisable at a price per share equal to 110% or $0.66 of the price per share paid by the investors. Warrants On April 28, 2021, Company issued common stock warrants to purchase 199,733 shares of common stock at an exercise price of $0.66 and exercisable for five years from the issuance date. The warrants were issued to Wilmington Capital Securities, LLC, a FINRA and SEC registered broker under a financial services and placement agreement with a broker-dealer in connection with the Companys placement of $1.4 million of restricted shares of common stock to five investors on April 5, 2021. The issuance of these warrants were made an exemption from registration under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act. The estimated fair value of these warrants since issued as issuance costs, had no impact on the Companys consolidated financial statements as of December 31, 2021. As of December 31, 2021, and 2020, the Company had 199,733 0 Series B-1 Preferred Stock In 2009, the Company authorized 2,108,313 shares of Series B-1 preferred stock (B-1). The B-1 preferred stock are convertible into common shares, at a rate of 66.66 of common stock for each share of B-1 convertible preferred stock. The par value of the B-1 preferred shares is $0.0001. The B-1 shares shall not be entitled to any dividends and have no voting rights. In the event of a liquidation, the B-1 holders are entitled to distribution prior to common stockholders but not before any other preferred stockholders. On June 7, 2016, the Company authorized 3,333,333 of the B-1 preferred stock. The B-1 shares have a liquidation preference of $1.0 per share or $15,000 as of September 30, 2021. On January 4, 2021, the Company entered a $750,000 working capital loan agreement with Directors, Stewart Wallach and Jeffrey Postal (Lenders). In consideration for the Lenders allowing for loan advances under the loan agreement, a below market rate of interest and the loan made on an unsecured basis, as payment of a finance fee for the loan, the Company issued a total of seven thousand five hundred shares of Companys Series B-1 Convertible Preferred Stock, $0.0001 par value per share, (Preferred Shares) to each of the Lenders. Each preferred share converts into 66.66 shares of common stock at option of Lender. The Preferred Shares and any shares of common stock issued under the loan agreement are restricted securities under Rule 144 of the Securities Act of 1933, as amended (See Note 4). 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 Companys Board of Directors amended the Companys 2005 Equity Incentive Plan to extend the Plans expiration date from December 31, 2016 to December 31, 2021. On May 31, 2019, the Company granted 100,000 stock options each to two directors of the Company for their participation as members of the Audit Committee and Nominating and Compensation Committee, and 10,000 stock options to the Company Secretary. The Director options have a strike price of $.435 with an effective date of August 6, 2019 and will vest on August 5, 2020 and have a term of 5 years. The Company Secretary options have a strike price of $.435 with an effective date of August 6, 2019 and vested 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 vested on August 5, 2021 and have a term of 10 years. On May 6, 2021, the Company approved the following basic compensation arrangement for independent directors of the Company, effective August 6, 2021 and ending August 5, 2022: A total compensation value of $15,000 per annum, payable $750 monthly cash compensation or $9,000 or (60% of total value) and remainder $6,000 payable in non- qualified stock options vesting as of August 6, 2022 and with an exercise price equal to $1.4448 per share and exercisable for a period of five years. On July 15, 2021, Jeffrey Guzy a Company director, exercised a previously granted non-qualified stock option and purchased 100,000 shares of Company common stock for an aggregate purchase price of $43,500 or a per share price of $.435. The shares are restricted shares under federal securities laws and were acquired by independent Director Guzy. The proceeds will be used by the Company for general working capital to support the rollout of the Smart Mirror product line. As of December 31, 2021, there were 880,000 0.435 2.40 Stock options were issued under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933. The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the stock options granted. The following weighted average assumptions were used in the fair value calculations during the year ended December 31, 2020: Risk free interest rate 0.21 0.55 Expected term 5 10 Expected volatility of stock 500 Expected dividend yield 0 Suboptimal Exercise Behavior Multiple 2.0 Number of Steps 150 The Binomial Lattice (Suboptimal) option pricing model was used to calculate the fair value of the stock options granted. The following weighted average assumptions were used in the fair value calculations during the year ended December 31, 2021: Risk free interest rate 0.8 Expected term 5 Expected volatility of stock 140 Expected dividend yield 0 Suboptimal Exercise Behavior Multiple 2.0 Number of Steps 150 The risk-free interest rate is based on rates of treasury securities with the same expected term as the options. The Company uses the expected term of employee and director stock-based options. The Company is utilizing an expected volatility based on a review of the Companys historical volatility, over a period of time, equivalent to the expected life of the instrument being valued. The expected dividend yield is based upon the fact that the Company has not historically paid dividends and does not expect to pay dividends in the near future. For the years ended December 31, 2021 and 2020, the Company recognized stock-based compensation expense of $15,619 and $28,068, respectively, related to these stock options. Such amounts are included in compensation expense in the accompanying consolidated statements of income. A further compensation expense expected to be approximately $13 thousand will be recognized for these options in 2022. The following table sets forth the Companys stock options outstanding as of December 31, 2021 and 2020 and activity for the years then ended. Schedule of Stock Options Outstanding and Activity Shares Weighted Average Exercise Price Weighted Average Fair Value Weighted Average Remaining Contractual Term (Years) Intrinsic Value Outstanding, January 1, 2020 1,000,000 0.435 0.284 2.88 (305,000 ) Granted 210,000 0.435 0.080 6.27 Exercised Forfeited/expired (220,000 ) 0.435 0.179 83,820 Outstanding, December 31, 2020 990,000 0.435 0.264 3.07 (377,190 ) Granted 8,288 1.448 1.620 4.60 (7,940 ) Exercised (100,000 ) 0.390 1.40 Forfeited/expired (10,000 ) 0.435 0.150 Outstanding, December 31, 2021 888,288 0.444 0.249 2.40 48,856 Vested/exercisable at December 31, 2020 780,000 0.435 0.264 2.60 (300,990 ) Vested/exercisable at December 31, 2021 888,288 0.444 0.251 2.38 48,856 The following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 Plan: Schedule of Options Granted, Outstanding and Exercisable Under the 2005 Plan Exercise Price Options Outstanding Remaining Contractual Life in Years Average Exercise Price Number of Options Currently Exercisable $ .435 10,000 2.00 $ .435 10,000 $ .435 10,000 3.50 $ .435 10,000 $ .435 10,000 3.60 $ .435 10,000 $ .435 10,000 4.60 $ .435 10,000 $ .435 200,000 0.60 $ .435 200,000 $ .435 10,000 5.60 $ .435 10,000 $ .435 200,000 1.60 $ .435 200,000 $ .435 10,000 6.60 $ .435 10,000 $ .435 200,000 2.60 $ .435 200,000 $ .435 10,000 7.60 $ .435 10,000 $ .435 200,000 3.60 $ .435 200,000 $ .435 10,000 8.60 $ .435 10,000 $ 1.448 4,144 4.60 $ 1.448 $ 1.448 4,144 4.60 $ 1.448 Adoption of Stock Repurchase Plan On August 23, 2016, the Companys Board of Directors authorized the Company to implement a stock repurchase plan for up to $750,000 worth of shares of the Companys outstanding common stock. The stock purchases can be made in the open market, structured repurchase programs, or in privately negotiated transactions. The Company has no obligation to repurchase shares under the authorization, and the timing, actual number and value of the shares which are repurchased will be at the discretion of management and will depend on several factors including the price of the Companys common stock, market conditions, corporate developments, and the Companys financial condition. The repurchase plan may be discontinued at any time at the Companys discretion. On February 13, 2017, as authorized under the Companys 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 Companys 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 Companys Board of Directors authorized at the Companys 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 Companys Board of Directors approved an extension of the Companys stock repurchase plan for up to $750,000 through June 30, 2018. On December 19, 2018, Company entered a Purchase Plan pursuant to Rule 10b5-1 under the Exchange Act, with Wilson Davis & Co., Inc., a registered broker-dealer. Under the Purchase Plan, Wilson Davis & Co., Inc will make periodic purchases of up to an aggregate of 750,000 shares at prevailing market prices, subject to the terms of the Purchase Plan. On June 10, 2020, the Companys Board of Directors approved a further extension of the Companys stock repurchase plan through August 31, 2021. Since the Board of Director approval there have been no further repurchase of the Companys common stock during 2020 and further Stock repurchases have been placed on hold in order to conserve cash during the COVID-19 pandemic. On May 6, 2021, the Companys Board of Directors approved a further extension of Rule 10b-5, the Companys stock purchase agreement with Wilson-Davis & Company, Inc. through August 31, 2022. The cap on shares of common stock eligible for purchase under the agreement is set at 750,000 shares. Since the Board of Director approval last year, there have been no further repurchase of the Companys common stock during 2020-2021. Further Stock repurchases will be dependent on the Company future liquidity position. As of December 31, 2021, and December 31, 2020, a total of 750,000 of the Companys common stock has been repurchased since the p On August 29, 2018, the Companys Board of Directors approved a further extension of the Companys 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 Companys Board authorized and directed the Companys management to establish a trading account at a brokerage firm for the Company to conduct open market purchases of the Companys Common Stock in accordance with the terms and conditions of the Companys 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 Companys Board of Directors approved a further extension of the Companys 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 Companys Common Stock had been repurchased to complete the authorized Purchase Plan. On June 10, 2020, the Companys Board of Directors approved a further extension of the Companys stock repurchase plan through August 31, 2021. Since the Board of Director approval there have been no further repurchase of the Companys Common Stock during 2020 and further Stock repurchases have been placed on hold in order to conserve cash during the COVID-19 pandemic. As of December 31, 2021 a total of 750,000 107,740 For the year ended December 31, 2021 and 2020 respectively, 0 and 283,383 Common shares were repurchased at a cost of $0 in 2021 and $36,333 in 2020. The program was initiated at a total cost of $ 107,740 . |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 7 - INCOME TAXES As of December 31, 2021, the Company had federal and state net operating loss carry forwards of approximately $ 2,687,000 5,073,000 offset up to 80% of future taxable income each year. 274,000 260,000 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 2018 and the 2019 NOLs to 2017 tax year and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of $575,645 which was recorded in the first quarter 2020. The Company was also able to carryback a portion of its 2020 NOL, for which it recorded a further net benefit of $286,433. For the year ended December 31, 2020, the Company has recorded $2,320 in net tax expense. Tax benefit for income taxes differs from the amount computed using the federal US statutory income tax rate as follows: Schedule of income tax reconciliation Years Ended December 31, 2021 2020 Tax benefit at U.S. statutory rate $ (409,203 ) $ (629,108 ) State income taxes, net of federal benefit (25,607 ) (86,744 ) Tax effect of foreign operations 47,428 119,558 Non-deductible items 5 57 NOL carryback rate difference (329,618 ) Valuation allowance 420,570 345,397 Other (18,138 ) (31,481 ) Income Tax Expense (Benefit) $ 15,055 $ (611,939 ) The effective tax rate for the years ended December 31, 2021 and 2020, respectively, was -0.77 20.43 23.70 24.46 The income tax benefit for the years ended December 31, 2021 and 2020 consists of: Schedule of income tax benefit 2021 2020 Current: Federal $ $ (873,278 ) State 823 1,600 Foreign Deferred: Federal 18,070 230,562 State (3,838 ) 29,177 Income Tax Expense (Benefit) $ 15,055 $ (611,939 ) Deferred tax assets are to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Companys history of cumulative net losses incurred and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2021 and 2020. Since indefinite-lived assets cannot be used as a source of taxable income to support the realization of deferred tax asset, a valuation allowance was recorded against the deferred tax assets, and a net deferred tax liability or naked credit of approximately $274,000 and $260,000 is presented on the companys balance sheet. The Companys valuation allowance increased by $ 345,397 The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes. As of December 31, 2020, the Company had an income tax refundable of approximately $861 thousand of which approximately $576 thousand income tax and $10.4 thousand of interest was refunded on February 3, 2021. As of December 31, 2021, the Company has a remaining tax refund of $285 thousand. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 8 - SUBSEQUENT EVENTS Employment Agreements On February 6, 2022, the Company entered into an Employment Agreement with James McClinton (Chief Financial Officer and Director), whereby Mr. McClinton will be paid $736.41 per day. The term of this new agreement began February 6, 2022 and ends August 30, 2022. With the pending closure of the CIHK operation, on March 4, 2022, the Company entered a consulting agreement with Fayyyaz Fakhruddin Bootwala (Frank),who previously was a direct employee as the Business Development and Product Manager. Frank will continue to perform similar duties but as an independent contractor. The agreement will end February 28, 2023, which term maybe extended by mutual agreement between the consultant and Company on an agreed upon schedule with prior written notice. Notwithstanding the foregoing , the Agreement may be terminated by either party at any time after the initial 60 day term, upon 30 days prior written notice. The consulting fee in consideration for these services will be $6,119.00 USD paid in arrears monthly on receipt of invoice. With the pending closure of the CIHK operation, on March 4, 2022, the Company entered a consulting agreement with Yee Moi Choi (Johnny),who previously was a direct employee as the Logistics Manager. Johnny will continue to perform similar duties but as an independent contractor. The agreement will end February 28, 2023, which term maybe extended by mutual agreement between the consultant and Company on an agreed upon schedule with prior written notice. Notwithstanding the foregoing , the Agreement may be terminated by either party at any time after the initial 60 day term, upon 30 days prior written notice. The consulting fee in consideration for these services will be $4,127.00 USD paid in arrears monthly on receipt of invoice. Consulting Agreements On January 1, 2022, the sales operations consulting agreement with George Wolf, was further extended, whereby Mr. Wolf will be paid $13,750 per month from January 1, 2022 through December 31, 2022. Director Appointment George Wolf, who was appointed as a director on January 13, 2022, waived any compensation as a director for 2022. |
ORGANIZATION AND SUMMARY OF S_2
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements for the years ended December 31, 2021 and 2020 include the accounts of the parent entity and its wholly-owned subsidiaries. All intra-entity transactions and balances have been eliminated in consolidation. This summary of accounting policies for Capstone Companies, Inc. (CAPC), a Florida corporation (formerly, CHDT Corporation) and its wholly-owned subsidiaries (collectively referred to as the Company, we, our or us), is presented to assist in understanding the Companys consolidated financial statements. The accounting policies conform to accounting principles generally accepted in the United States of America (U.S. GAAP) and have been consistently applied in the preparation of the consolidated financial statements. |
Organization and Nature of Business | Organization and Nature of Business Capstone Companies, Inc. is headquartered in Deerfield Beach, Florida and is incorporated under the laws of the State of Florida. On April 13, 2012, the Company established a wholly owned subsidiary in Hong Kong, named Capstone International Hong Kong Ltd (CIHK) which provides support services such as engineering, new product development, product sourcing, factory certification and compliance, product price negotiating, product testing and quality control and ocean freight logistics for the Companys other subsidiaries. CIHK is also engaged in selling the Companys products internationally. Since the beginning of fiscal year 2007, the Company through Capstone Industries has been primarily engaged in the business of developing, marketing, and selling home LED products (Lighting Products) through national and regional retailers in North America and in certain overseas markets. The Companys products are targeted for applications such as home indoor and outdoor lighting and have different functionalities to meet consumers 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 was delayed due to product development delays at the Companys suppliers, resulting from the impact of COVID-19. The development of the smart interactive mirror or Smart Mirrors is part of the Companys strategic effort to find new product lines to replace or supplement existing products that are nearing or at the end of their product life cycle. These products are offered either under the Capstone brand or licensed brands. The Companys products are typically manufactured in Thailand and China by contract manufacturing companies. As of the date of these consolidated financial statements, the Companys future product development effort is focused on the Smart Mirrors category because the Company believes, based on Companys management understanding of the industry, the Smart Mirrors have the potential for greater profit margin than the Companys 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 Companys operations in 2021 consist of one reportable segment for financial reporting purposes: Lighting Products. |
Effects of COVID-19 | Effects of COVID-19 During the year ended December 31, 2021, the outbreak and global spread of COVID-19 pandemic caused significant economic volatility, uncertainty and disruption in our operating environment. We began 2020 in an environment exhibiting strong economic conditions combined with the successful launch of our new product category, the Smart Mirror at the 2020 CES Show. However, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, and the various containment and mitigation measures adopted by governments and institutions globally and in the U.S. began to have a severe economic impact, including causing the U.S. to enter an economic recession. In response to the COVID-19 and various state and local orders, the Company instituted the following actions in March 2020: ● Placed restrictions on business travel for our employees. ● Closed our Corporate offices both in the U.S. and in Hong Kong. ● Modified our corporate and division office functions to allow all employees to work remotely. During the months of February and March 2020, the Companys Chinese suppliers were impacted by the closedown of facilities by local and regional authorities in their efforts to combat the spread of COVID-19. The factory closures delayed shipment of certain orders from the first quarter of 2020 until the second and third quarter 2020. During the end of March 2020, the Companys Chinese suppliers that had been previously closed started to gradually reopen their factories. Company orders that had been previously delayed because of the close started to ship. These factories are fully functioning, and orders are being produced both in Thailand and in China. CIHK staff have continued to work remotely from home. On March 20, 2020, the Companys U.S. staff started to work remotely from their homes. With the State of Florida lifting its Stay at Home requirement on May 20, 2020, the Corporate office reopened with staff working on a rotating schedule between the office and remotely from home. While all the above-referenced steps were, and some remain, necessary and appropriate in light of COVID-19, they impacted the Companys ability to operate the business in its ordinary and traditional course. As the result of COVID-19 and the economic uncertainties, our core LED lighting orders declined significantly starting in March 2020 and the Company was unable to expand on the marketing success of the launch of the Smart Mirror at the CES Show in January 2020. As the pandemic spread and federal, state and local government mandated movement restrictions, management maintained its focus on shifting production into Thailand, expansion of the Smart Mirror portfolio, protecting our liquidity and closely managing our cash flows. In the fiscal second and third quarters, 2020, the Company implemented cost controls to mitigate the loss of revenue. The Company took action to reduce expenses, including promotional activities, travel, meetings, and compensation expenses with the elimination of certain positions overseas and the deferment of senior executive compensation and consulting expenses. Our business operations and financial performance for the year ended December 31, 2021 was adversely impacted by the developments discussed above, The Company reported a decrease in net revenue from $ 2.7 686 2.0 2.4 2.4 The decrease in net sales for the year was driven by the uncertainty felt by retail buyers as to the continuing impact on the retail market of COVID-19 and its overall long-term negative impact on the U.S. economy. However, the Warehouse Club channel, which includes our customers Costco Wholesale and Sams Club, has seen a substantial increase in foot traffic because of the changed buying trend of consumers during the pandemic, which has recently resulted in the resumption of some promotional opportunities. Management believes that with the national distribution of vaccines now occurring, the impact of the pandemic on the general brick and mortar retail market will carry through to mid-2021. As a result of the economic uncertainties caused by the COVID-19 pandemic, during the year ended December 31, 2020, management determined sufficient indicators existed to trigger quarterly goodwill impairment analyses. The total impairment charge for the year ended December 31, 2020 was approximately $ 623.5 On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, which we refer to as the CARES Act. was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (NOLs) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. The Company was able to carryback the 2018 and the 2019 NOLs to 2017 tax year and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of $575,645 which was recorded in the first quarter 2020. The Company expects to carryback a portion of its 2020 NOL, for which it recorded a further net benefit of $286,433. In the third quarter 2020, the Company recorded a $21,222 net tax benefit for deferred tax liability adjustment related to goodwill impairment. For the year ended December 31, 2020, the Company has recorded $ 861,318 284,873 The CARES Act also provided for the Paycheck Protection Program (PPP). On May 11, 2020, the Company received a $89.6 thousand loan under PPP which was processed through Sterling National Bank. The Company filed SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application. On October 30, 2020, the SBA notified the Company that the PPP loan principal of $89,600 and $428 of accumulated interest had been fully forgiven. This forgiveness has been reflected in Other Income on the consolidated statements of operations |
Liquidity and Going Concern | Liquidity and Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The uncertainty and the continuing negative impact that the COVID-19 disruption could have on the future retail business and consumers willingness to visit retail stores, causing reduced consumer foot traffic and consumer spending, could negatively impact the demand for our products or delay future planned promotional opportunities. However, with a successful relaunch of the Smart Mirror portfolio using the online retail platform, the Company may need a purchase order credit line to support increased U.S. domestic inventory to facilitate revenue growth in that category. During the year ended December 31, 2021, the Company used cash in operations of approximately $ 2.4 2.0 2.0 (6,437,026) 1,223 1,277 As discussed above, the overall impact of the COVID-19 pandemic to our business, financial condition, cash flow and results of operations remains uncertain. For example, if any of our major wholesale customers fail to maintain normal operations, our revenue could further decline, which could have a material adverse effect on our business, financial condition, results of operations and liquidity. Management believes that with the ongoing national distribution of vaccines, the economic impact of the COVID-19 pandemic in the U.S. will continue through to mid-2021, but ultimately should not impact the Companys long-term strategy and initiatives. On July 31, 2020, the Company terminated its factoring agreement with Sterling National Bank. The Company has been in discussions with alternate funding sources that offer extensive programs that are more in line with the Companys future business model, particularly a facility that provides funding options that are suitable for the e-commerce business that the Company is transitioning into. The borrowing costs associated with such financing are dependent upon market conditions and our credit rating. We cannot assure that we will be able to negotiate competitive rates, which could increase our cost of borrowing in the future. In addition, we could seek alternative sources of liquidity, including but not limited to accessing the capital markets, or other alternative financing measures. However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital markets on terms acceptable to us. An economic recession or a slow recovery could adversely affect our business and liquidity. The ongoing impact of the COVID-19 pandemic on the Companys business and financial performance may also affect the Companys 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 Companys ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this report. However, there are compensating factors and actions that are being and have been taken to address these uncertainties, including the following: ● The Company has outstanding note payable due to related parties of approximately $1.0 million. The Company has working capital of approximately $2.0 million consisting mostly of cash of $1.3 million. ● The Company had an estimated income tax refundable as of December 31, 2020 of approximately $861 thousand of which approximately $576 thousand and $10.3 thousand of interest was received on February 3, 2021, (see Note 8). ● On July 31, 2020 with the termination of the Sterling National Bank factoring agreement, the Company has been in discussions with alternate funding sources that offers varying programs that are more in line with the Companys future business model, particularly a facility that provides funding options that are more suitable for the e-commerce business that the Company is transitioning into. ● The Company has entered a $750,000 working capital loan agreement effective January 4, 2021 that was ended June 30, 2021. fo(see Note 4). ● The Companys plan is to sell direct to consumers. The funding and cashflow requirements for this business model will require e-commerce funding. The Company has been in discussions with a funding source that provides this option. ● The Company has in place a mitigation plan that reduces discretionary expenses, executive managements compensation, and significantly reduces the cost of the Hong Kong operation and also reduces future travel, lodging and show expenses. ● Since September 1, 2020, through December 31, 2020 in order to conserve operating cashflow, the Companys executive management deferred 50% of their compensation until later in 2021. The compensation deferral was further extended until 2022. |
Accounts Receivable | Accounts Receivable For product revenue, the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivables are recognized at the amount expected to be collected and are not subject to any interest or finance charges. The Company does not have any off-balance sheet credit exposure related to any of its customers. Previously in the factoring agreement with Sterling National Bank, accounts receivable served as collateral when the Company borrowed against its credit facilities. With the termination of the Sterling National Bank factoring agreement, the accounts receivables are unencumbered. As of December 31, 2021, accounts receivable has not been collateralized against debt. |
Schedule of Changes in Reserve Included in Net Accounts Receivable | 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 customers 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 Companys historical payment experience. An allowance for doubtful accounts is established as losses are estimated to have occurred through a provision for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes available. As of both Decembers 31, 2021 and 2020, management determined that accounts receivable are fully collectible. As such, management has not recorded an allowance for doubtful accounts. The following table summarizes the components of Accounts Receivable, net: Schedule of Components of Accounts Receivable, net December 31, December 31, 2021 2020 Trade Accounts Receivables at year end $ 1,481 $ 197,166 Reserve for estimated marketing allowances, cash discounts and other incentives (77,102 ) Total Accounts Receivable, net $ 1,481 $ 120,064 The following table summarizes the changes in the Companys reserve for marketing allowances, cash discounts and other incentives which is included in net accounts receivable: Schedule of Changes in Reserve Included in Net Accounts Receivable December 31, December 31, 2021 2020 Balance at beginning of the year $ (77,102 )) $ (263,092 ) Accrued allowances Reclassification of allowance from accounts receivable to accounts payable and accrued liabilities 77,102 173,426 Expenditures 12,564 Balance at year-end $ $ (77,102 ) Marketing allowances include the cost of underwriting an in-store instant rebate coupon or a target markdown allowance on a specific product. The Company retains these allowances for a period of 3 to 5 years in the event the customer chargebacks for a promotional allowance against an open invoice or submits an invoice for their claim. Cash discounts represent discounts offered to the retailer off outstanding accounts receivable in order to initiate early payment. These allowances are evaluated when our relationship with a customer is terminated, or we cease selling a specific product to a customer and may be released as other income if deemed not required. During the year ended December 31, 2021, the Company reversed into other income approximately $340,000 of previously accrued marketing and promotional allowances for previous product sales that are deemed highly unlikely for the customer to chargeback the Company due to the age of the allowance and the sales of the specific item ceasing. |
Inventory | Inventory The Companys inventory, which consists of finished Thin Cast Smart Mirror products for resale to consumers by Capstone, is recorded at the lower of landed cost (first-in, first-out) or net realizable value. The Company writes down its inventory balances for estimates of excess and obsolete amounts. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when the expected realizable value of a specific inventory item falls below its original cost. Management regularly reviews the Companys investment in inventories for such declines in value. The write-downs are recognized as a component of cost of sales. During the fiscal year 2021 and 2020, inventory write downs were $ 154 0 508,920 8,775 |
Prepaid Expenses | Prepaid Expenses The Companys prepaid expenses consist primarily of deposits on inventory purchases for future orders as well as prepaid insurance, trade show and subscription expense. As of December 31, 2021 and 2020, respectively, prepaid expenses were $ 500,748 75,622 |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives of the related assets as follows: Schedule of Useful Lives, Depreciation of Property and Equipment Useful Life December 31, 2021 December 31, 2020 Computer equipment and software 3 7 $ 53,819 $ 53,819 Machinery and equipment 3 7 151,251 119,323 Furniture and fixtures 3 7 6,828 6,828 Less: Accumulated depreciation (134,970 ) (125,118 ) Property and Equipment, Net $ 76,928 $ 54,852 Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. Long-lived assets to be disposed of, if any, are reported at the lower of carrying amount or fair value less cost to sell. Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss. Major overhauls and betterments are capitalized and depreciated over their estimated economic useful lives. Depreciation and amortization expense was $ 9,852 24,297 |
Leases | Leases The Company accounts for leases under ASU 2016-02 which requires leases with durations greater than twelve months to be recognized on the balance sheet and disclose key information about the leasing arrangements. Operating leases are included in operating lease right-of-use (ROU) assets and operating lease liabilities on the consolidated balance sheets. See Note 5 Operating Leases for additional disclosures as required by the new standard. |
Goodwill | Goodwill On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation (Capstone). Capstone was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of Capstones 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 Companys market capitalization. As a result of the economic uncertainties caused by the COVID-19 pandemic during the year ended December 31, 2021 and 2020, management determined sufficient indicators existed to trigger the performance of interim goodwill impairment analyses for each reporting quarter. The total impairment charges for the year ended December 31, 2021 and 2020 was $ 0 623.5 The following table summarizes the changes in the Companys goodwill asset which is included in the total assets in the accompanying consolidated balance sheets: Schedule of Goodwill Impairment Charges December 31, December 31, 2021 2020 Balance at the beginning of the period $ 1,312,482 $ 1,936,020 Impairment charges (623,538 ) Balance at December 31, 2021 $ 1,312,482 $ 1,312,482 With the continuing economic uncertainties caused by the COVID-19 pandemic, the capital markets may continue to have a downturn and adversely affect the Companys stock price which will require the Company to test its goodwill for impairment in future reporting periods. The Companys stock is deemed a penny stock under Commission rules. The Company estimates the fair value of its single reporting unit relative to the Companys market capitalization. |
Fair Value Measurement | Fair Value Measurement The accounting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), Fair Value Measurements and Disclosures (ASC 820-10) requires the Company to make disclosures about the fair value of certain of its assets and liabilities. ASC 820-10 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. ASC 820-10 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are as follows: Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3: Significant unobservable inputs. |
Earnings Per Common Share | Earnings Per Common Share Basic earnings per common share is computed by dividing net income(loss) by the weighted average number of shares of common stock outstanding as of December 31, 2021and 2020. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of December 31, 2021 and 2020, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 888,288 options and 199,733 warrants and 990,000 options, respectively. Basic weighted average shares outstanding is reconciled to diluted share outstanding as follows: Schedule of Basic Weighted Average Shares Outstanding is Reconciled to Diluted Year Ended Year Ended Basic and Diluted weighted average shares outstanding 48,196,903 46,337,198 |
Revenue Recognition | Revenue Recognition The Company generates revenue from developing, marketing and selling consumer lighting products through national and regional retailers. The Companys products are targeted for applications such as home indoor and outdoor lighting and have different functionalities. Capstone currently operates in the consumer lighting products category and is expanding into the Smart Mirror category in the United States and in certain overseas markets. These products may be offered either under the Capstone brand or licensed brands. A sales contract occurs when the customer-retailer submits a purchase order to buy a specific product, a specific quantity, at an agreed-fixed price, within a ship window, from a specific location and on agreed payment terms. The selling price in all of our customers orders has been previously negotiated and agreed to including any applicable discount prior to receiving the customers purchase order. The stated unit price in the customers order has already been determined and is fixed at the time of invoicing. The Company recognizes lighting product revenue when the Companys 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. As the Company launches the Smart Mirror program ,these orders will be sold through e-commerce. The Company will only bill the customer and recognize revenue upon the customer obtaining control of the Smart Mirror which will generally occur upon delivery. The Company may enter into a licensing agreement with globally recognized companies, that allows the Company to market products under a licensed brand to retailers for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage of licensed product revenue to the licensor in order to market the licensed product. The Company expenses license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale is recorded. These costs are recorded within sales and marketing expenses. The following table presents net revenue by geographic location which is recognized at a point in time: Schedule of Net Revenue by Major Source For the Year Ended For the Year Ended Capstone Brand % of Capstone Brand % of Lighting Products- U.S. $ 340,896 49 % $ 2,066,519 75 % Smart Mirror Products- U.S. 3,795 1 % — — Lighting Products-International 341,163 50 % 703,839 25 % Total Revenue $ 685,854 100 % $ 2,770,358 100 % We provide our customers with limited rights of return for non-conforming product warranty claims. As a policy, the Company does not accept product returns from customers, however occasionally as part of a customers in store test for new product, we may receive back residual inventory. Customer orders received are not long-term orders and are typically shipped within six months of the order receipt, but certainly within a one-year period. Our payment terms may vary by the type of customer, the customers credit standing, the location where the product will be picked up from and for international customers and which country their corporate office is located. The time between invoicing date and when payment is due may vary between 30 days and 90 days depending on the customer type. To ensure there are no payment issues, overseas customers or new customers may be required to provide a deposit or full payment before the order is delivered to the customer. The Company selectively supports retailers initiatives to maximize sales of the Companys products on the retail floor or to assist in developing consumer awareness of new products launches, by providing marketing fund allowances to the customer. The Company recognizes these incentives at the time they are offered to the customers and records a credit to their account with an offsetting charge as either a reduction to revenue, increase to cost of sales, or marketing expenses depending on the type of sales incentives. Sales reductions for anticipated discounts, allowances and other deductions are recognized during the period the related revenue is recorded. The reduction of accrued allowances is included in net revenues and amounted to $8.0 thousand and $341.2 thousand for the years ended December 31, 2021 and 2020, respectively. |
Warranties | Warranties The Company provides the end user with limited rights of return as a consumer assurance warranty on all products sold, stipulating that the product will function properly for the warranty period. The warranty period for all products is one year from date of consumer purchase. Certain retail customers may receive an off-invoice based discount such as a defective/warranty allowance, that will automatically reduce the unit selling price at the time the order is invoiced. This allowance will be used by the retail customer to defray the cost of any returned units from consumers and therefore negate the need to ship defective units back to the Company. Such allowances are charged to cost of sales at the time the order is invoiced. For those customers that do not receive a discount off-invoice, the Company recognizes a charge to cost of sales for anticipated non-conforming returns based upon an analysis of historical product warranty claims and other relevant data. For the new online Smart Mirror customers the product has a One Year Limited Warranty. The purchaser must register the product within 30 days from date of purchase with specific product information to activate the warranty. Capstone warrants the product to be free from defects in workmanship and materials for the warranty period. If the product fails during normal and proper use within the warranty period, Capstone at its discretion, will repair or replace the defective parts of the product, or the product itself. We evaluate our warranty reserves based on various factors including historical warranty claims assumptions about frequency of warranty claims, and assumptions about the frequency of product failures derived from our reliability estimates. Actual product failure rates that materially differ from our estimates could have a significant impact on our operating results. Product warranty reserves are reviewed each quarter and recognized at the time we recognize revenue. The following table summarizes the changes in the Companys product warranty liabilities which are included in accounts payable and accrued liabilities in the accompanying December 31, 2021 and 2020 balance sheets: Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities December 31, December 31, 2021 2020 Balance at the beginning of the year $ 56,465 $ 247,850 Amount accrued 46,322 Payments and credits (10,142 ) (237,707 ) Balance at year-end $ 46,322 $ 56,465 |
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 $ 23,425 214,856 |
Product Development | Product Development Our research and development team located in Thailand working with our designated factories, are responsible for the design, development, testing, and certification of new product releases. Our engineering efforts support product development across all products, as well as product testing for specific overseas markets. All research and development costs are charged to results of operations as incurred. For the year ended December 31, 2021 and 2020, product development expenses were $308,823 and $249,879, respectively, and were primarily related to the development of the Companys Smart Mirror products. |
Shipping and Handling | Shipping and Handling The Companys 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 $ 1,237 16,870 |
Accounts Payable and Accrued Liabilities | Accounts Payable and Accrued Liabilities The following table summarizes the components of accounts payable and accrued liabilities at December 31, 2021 and 2020: Schedule of Components of Accounts Payable and Accrued Liabilities December 31, December 31, 2021 2020 Accounts payable $ 126,281 $ 246,158 Accrued warranty reserve 46,322 56,465 Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities 365,948 523,067 Total $ 538,551 $ 825,690 |
Income Taxes | Income Taxes The Company is subject to income taxes in the U.S. federal jurisdiction, various state jurisdictions and certain other jurisdictions. The Company accounts for income taxes under the provisions of 740 Income Taxes The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Tax regulations within each jurisdiction are subject to the interpretation of the relaxed tax laws and regulations and require significant judgement to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities generally for a period of 3 years from the later of each return due date or date filed. On March 27, 2020, the CARES Act was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic. The CARES Act includes several significant income and other business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (NOLs) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be recorded as a component of income tax expense. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation- Stock Compensation Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. In conjunction with the adoption of ASC 718, the Company adopted the straight-line single option method of attributing the value of stock-based compensation expense. The Company accounts for forfeitures as they occur. Stock-based compensation expense recognized during the years ended December 31, 2021 and 2020 was $ 15,619 28,068 |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. The Company evaluates its estimates on an ongoing basis, including those related to revenue recognition, product warranty obligations and marketing allowances, valuation of inventories, impairments, tax related contingencies, valuation of stock-based compensation, other contingencies and litigation, among others. The Company generally bases its estimates on historical experience, agreed obligations, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Historically, past changes to these estimates have not had a material impact on the Companys financial statements. However, circumstances could change, and actual results could differ materially from those estimates. |
Recent Accounting Standards | Recent Accounting Standards To be Adopted in a Future Period In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments Credit Losses In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) consistent application and simplify GAAP in other areas of Topic 740. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2019-12 may have on the Companys consolidated financial statements. 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 Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Companys financials properly reflect the change. |
ORGANIZATION AND SUMMARY OF S_3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Components of Accounts Receivable, net | Schedule of Components of Accounts Receivable, net December 31, December 31, 2021 2020 Trade Accounts Receivables at year end $ 1,481 $ 197,166 Reserve for estimated marketing allowances, cash discounts and other incentives (77,102 ) Total Accounts Receivable, net $ 1,481 $ 120,064 |
Schedule of Changes in Reserve Included in Net Accounts Receivable | Schedule of Changes in Reserve Included in Net Accounts Receivable December 31, December 31, 2021 2020 Balance at beginning of the year $ (77,102 )) $ (263,092 ) Accrued allowances Reclassification of allowance from accounts receivable to accounts payable and accrued liabilities 77,102 173,426 Expenditures 12,564 Balance at year-end $ $ (77,102 ) |
Schedule of Useful Lives, Depreciation of Property and Equipment | Schedule of Useful Lives, Depreciation of Property and Equipment Useful Life December 31, 2021 December 31, 2020 Computer equipment and software 3 7 $ 53,819 $ 53,819 Machinery and equipment 3 7 151,251 119,323 Furniture and fixtures 3 7 6,828 6,828 Less: Accumulated depreciation (134,970 ) (125,118 ) Property and Equipment, Net $ 76,928 $ 54,852 |
Schedule of Goodwill Impairment Charges | Schedule of Goodwill Impairment Charges December 31, December 31, 2021 2020 Balance at the beginning of the period $ 1,312,482 $ 1,936,020 Impairment charges (623,538 ) Balance at December 31, 2021 $ 1,312,482 $ 1,312,482 |
Schedule of Basic Weighted Average Shares Outstanding is Reconciled to Diluted | Schedule of Basic Weighted Average Shares Outstanding is Reconciled to Diluted Year Ended Year Ended Basic and Diluted weighted average shares outstanding 48,196,903 46,337,198 |
Schedule of Net Revenue by Major Source | Schedule of Net Revenue by Major Source For the Year Ended For the Year Ended Capstone Brand % of Capstone Brand % of Lighting Products- U.S. $ 340,896 49 % $ 2,066,519 75 % Smart Mirror Products- U.S. 3,795 1 % — — Lighting Products-International 341,163 50 % 703,839 25 % Total Revenue $ 685,854 100 % $ 2,770,358 100 % |
Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities | Schedule of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities December 31, December 31, 2021 2020 Balance at the beginning of the year $ 56,465 $ 247,850 Amount accrued 46,322 Payments and credits (10,142 ) (237,707 ) Balance at year-end $ 46,322 $ 56,465 |
Schedule of Components of Accounts Payable and Accrued Liabilities | Schedule of Components of Accounts Payable and Accrued Liabilities December 31, December 31, 2021 2020 Accounts payable $ 126,281 $ 246,158 Accrued warranty reserve 46,322 56,465 Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities 365,948 523,067 Total $ 538,551 $ 825,690 |
CONCENTRATIONS OF CREDIT RISK_2
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
Schedule of Concentration of Credit Risk of Major Customers And Major Vendors | Schedule of Concentration of Credit Risk of Major Customers And Major Vendors Net Revenue % Net Accounts Receivable Year Ended December 31, Year Ended December 31, 2021 2020 2021 2020 Customer A 50 % 63 % $ — $ — Customer B 37 % 26 % — 120,064 Total 87 % 89 % $ — 120,064 Major Vendors The Company had two vendors from which it purchased 59 23 68 23 As of December 31, 2021, and 2020 , approximately 73 47 Purchases % Accounts Payable Year Ended December 31, Year Ended December 31, 2021 2020 2021 2020 Vendor A 59 % 68 % $ 92,761 $ — Vendor B 23 % 23 % — 114,870 Total 82 % 91 % $ 92,761 $ 114,870 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Right Of Use Asset and Lease Liability | Schedule of Right Of Use Asset and Lease Liability Supplemental balance sheet information related to leases as of December 31, 2021 is as follows: Assets Operating lease - right-of-use asset $ 98,651 Liabilities Current Current portion of operating lease $ 70,157 Noncurrent Operating lease liability, net of current portion $ 37,533 Lease term and Discount Rate Weighted average remaining lease term (months) Operating lease 18 Weighted average Discount Rate Operating lease 7 % |
Scheduled Maturities of Operating Lease Liabilities Outstanding | Scheduled Maturities of Operating Lease Liabilities Outstanding Year Operating 2022 75,492 2023 38,304 Total Minimum Future Payments 113,796 Less: Imputed Interest 6,106 Present Value of Lease Liabilities $ 107,690 |
Summary of Potential Payments upon Termination of Employment | Summary of Potential Payments upon Termination of Employment Salary Bonus Gross up Benefit Grand Total Stewart Wallach $ 301,521 $ — $ 12,600 $ 6,600 $ 320,721 Gerry McClinton $ 191,442 $ — $ 11,000 $ 6,600 $ 209,042 |
STOCK TRANSACTIONS (Tables)
STOCK TRANSACTIONS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Equity [Abstract] | |
Schedule of Stock Options Outstanding and Activity | Schedule of Stock Options Outstanding and Activity Shares Weighted Average Exercise Price Weighted Average Fair Value Weighted Average Remaining Contractual Term (Years) Intrinsic Value Outstanding, January 1, 2020 1,000,000 0.435 0.284 2.88 (305,000 ) Granted 210,000 0.435 0.080 6.27 Exercised Forfeited/expired (220,000 ) 0.435 0.179 83,820 Outstanding, December 31, 2020 990,000 0.435 0.264 3.07 (377,190 ) Granted 8,288 1.448 1.620 4.60 (7,940 ) Exercised (100,000 ) 0.390 1.40 Forfeited/expired (10,000 ) 0.435 0.150 Outstanding, December 31, 2021 888,288 0.444 0.249 2.40 48,856 Vested/exercisable at December 31, 2020 780,000 0.435 0.264 2.60 (300,990 ) Vested/exercisable at December 31, 2021 888,288 0.444 0.251 2.38 48,856 |
Schedule of Options Granted, Outstanding and Exercisable Under the 2005 Plan | Schedule of Options Granted, Outstanding and Exercisable Under the 2005 Plan Exercise Price Options Outstanding Remaining Contractual Life in Years Average Exercise Price Number of Options Currently Exercisable $ .435 10,000 2.00 $ .435 10,000 $ .435 10,000 3.50 $ .435 10,000 $ .435 10,000 3.60 $ .435 10,000 $ .435 10,000 4.60 $ .435 10,000 $ .435 200,000 0.60 $ .435 200,000 $ .435 10,000 5.60 $ .435 10,000 $ .435 200,000 1.60 $ .435 200,000 $ .435 10,000 6.60 $ .435 10,000 $ .435 200,000 2.60 $ .435 200,000 $ .435 10,000 7.60 $ .435 10,000 $ .435 200,000 3.60 $ .435 200,000 $ .435 10,000 8.60 $ .435 10,000 $ 1.448 4,144 4.60 $ 1.448 $ 1.448 4,144 4.60 $ 1.448 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax reconciliation | Schedule of income tax reconciliation Years Ended December 31, 2021 2020 Tax benefit at U.S. statutory rate $ (409,203 ) $ (629,108 ) State income taxes, net of federal benefit (25,607 ) (86,744 ) Tax effect of foreign operations 47,428 119,558 Non-deductible items 5 57 NOL carryback rate difference (329,618 ) Valuation allowance 420,570 345,397 Other (18,138 ) (31,481 ) Income Tax Expense (Benefit) $ 15,055 $ (611,939 ) |
Schedule of income tax benefit | Schedule of income tax benefit 2021 2020 Current: Federal $ $ (873,278 ) State 823 1,600 Foreign Deferred: Federal 18,070 230,562 State (3,838 ) 29,177 Income Tax Expense (Benefit) $ 15,055 $ (611,939 ) |
ORGANIZATION AND SUMMARY OF S_4
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Components Of Accounts Receivable, Net) (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Trade Accounts Receivables at year end | $ 1,481 | $ 197,166 | |
Reserve for estimated marketing allowances, cash discounts and other incentives | (77,102) | $ (263,092) | |
Total Accounts Receivable, net | $ 1,481 | $ 120,064 |
ORGANIZATION AND SUMMARY OF S_5
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule Of Changes In Reserve) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Balance at beginning of the year | $ (77,102) | $ (263,092) |
Accrued allowances | ||
Reclassification of allowance from accounts receivable to accounts payable and accrued liabilities | 77,102 | 173,426 |
Expenditures | 12,564 | |
Balance at year-end | $ (77,102) |
ORGANIZATION AND SUMMARY OF S_6
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Property And Equipments) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Property, Plant and Equipment [Line Items] | ||
Less: Accumulated depreciation | $ (134,970) | $ (125,118) |
Property and Equipment, Net | 76,928 | 54,852 |
Computer Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and Equipment, Gross | $ 53,819 | 53,819 |
Computer Equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 3 years | |
Computer Equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 7 years | |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and Equipment, Gross | $ 151,251 | 119,323 |
Machinery and Equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 3 years | |
Machinery and Equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 7 years | |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and Equipment, Gross | $ 6,828 | $ 6,828 |
Furniture and Fixtures [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 3 years | |
Furniture and Fixtures [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 7 years |
ORGANIZATION AND SUMMARY OF S_7
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule Of Goodwill Impairment Charges) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Balance at Beginning | $ 1,312,482 | $ 1,936,020 |
Impairment charges | (623,538) | |
Balance at Ending | $ 1,312,482 | $ 1,312,482 |
ORGANIZATION AND SUMMARY OF S_8
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule Of Basic Weighted Average Shares) (Details) - shares | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Basic and Diluted weighted average shares outstanding | 48,196,903 | 46,337,198 |
ORGANIZATION AND SUMMARY OF S_9
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule Of Net Revenue By Major Source) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 685,854 | $ 2,770,358 |
Capstone Brand [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 685,854 | $ 2,770,358 |
Percentage of revenue | 100.00% | 100.00% |
Geographic Distribution, Domestic [Member] | Capstone Brand [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 340,896 | $ 2,066,519 |
Percentage of revenue | 49.00% | 75.00% |
Smart Mirror Products U S [Member] | Capstone Brand [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 3,795 | |
Percentage of revenue | 1.00% | |
Geographic Distribution, Foreign [Member] | Capstone Brand [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Total Revenue | $ 341,163 | $ 703,839 |
Percentage of revenue | 50.00% | 25.00% |
ORGANIZATION AND SUMMARY OF _10
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule Of Product Warranty Liabilities) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Balance at the beginning of the year | $ 56,465 | $ 247,850 |
Amount accrued | 46,322 | |
Payments and credits | (10,142) | (237,707) |
Balance at end of the year | $ 46,322 | $ 56,465 |
ORGANIZATION AND SUMMARY OF _11
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Components Of Accounts Payable) (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Accounts payable | $ 126,281 | $ 246,158 | |
Accrued warranty reserve | 46,322 | 56,465 | $ 247,850 |
Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities | 365,948 | 523,067 | |
Total | $ 538,551 | $ 825,690 |
ORGANIZATION AND SUMMARY OF _12
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Decrease in net revenue | $ 2,700,000 | $ 686,000 |
Net loss for the quarter | 2,000,000 | 2,400,000 |
Cash generated from operations | 2,400,000 | |
Impairment charge | 0 | 623,500 |
Tax benefit | 861,318 | |
Income tax refundable | 284,873 | |
Operating losses | 2,000,000 | |
Working capital | 2 | |
Accumulated Deficit | (6,437,026) | (4,473,397) |
Cash | 1,277,000 | 1,223,000 |
Inventory write down | 154,000 | 0 |
Inventories | 508,920 | 8,775 |
Prepaid expenses | 500,748 | 75,622 |
Depreciation and amortization expense | 9,852 | 24,297 |
Stock-based compensation expense | 15,619 | 28,068 |
Selling and Marketing Expense [Member] | ||
Advertising and promotion expense | 23,425 | 214,856 |
Shipping and handling costs | $ 1,237 | $ 16,870 |
CONCENTRATIONS OF CREDIT RISK_3
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | $ 1,481 | $ 197,166 |
Accounts Payable | 126,281 | 246,158 |
Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | ||
Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | 120,064 | |
Customer Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Gross Accounts Receivable | 120,064 | |
Vendor A [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | 92,761 | |
Vendor B [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | 114,870 | |
Supplier Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Accounts Payable | $ 92,761 | $ 114,870 |
Revenue Benchmark [Member] | Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 50.00% | 63.00% |
Revenue Benchmark [Member] | Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 37.00% | 26.00% |
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 87.00% | 89.00% |
Cost of Goods and Service Benchmark [Member] | Vendor A [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 59.00% | 68.00% |
Cost of Goods and Service Benchmark [Member] | Vendor B [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 23.00% | 23.00% |
Cost of Goods and Service Benchmark [Member] | Supplier Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 82.00% | 91.00% |
CONCENTRATIONS OF CREDIT RISK_4
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Concentration Risk [Line Items] | ||
FIDC insurance limits | $ 471,600 | |
Accounts receivable approximately | $ 1,481 | $ 120,064 |
Revenue Benchmark [Member] | One Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 50.00% | 63.00% |
Revenue Benchmark [Member] | Two Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 37.00% | 26.00% |
Revenue Benchmark [Member] | Geographic Concentration Risk [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 50.00% | 25.00% |
Liabilities, Total [Member] | One Customer [Member] | ||
Concentration Risk [Line Items] | ||
Accounts receivable approximately | $ 0 | $ 120,100 |
Liabilities, Total [Member] | Vendor A [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 73.00% | 4700.00% |
Cost of Goods and Service Benchmark [Member] | One Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 59.00% | 68.00% |
Cost of Goods and Service Benchmark [Member] | Two Vendor [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 23.00% | 23.00% |
Cost of Goods and Service Benchmark [Member] | Vendor A [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 59.00% | 68.00% |
NOTES PAYABLE TO RELATED PART_2
NOTES PAYABLE TO RELATED PARTIES (Details Narrative) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Related Party Transactions [Abstract] | ||
Notes payable related parties | $ 1,030,340 | |
Accrued interest | $ 10,340 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Schedule Of Right Of Use Asset And Lease Liability) (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Operating lease - right-of-use asset | $ 98,651 | $ 158,504 |
Current portion of operating lease | 70,157 | 63,307 |
Operating lease liability, net of current portion | 37,533 | $ 107,690 |
Commitments [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Operating lease - right-of-use asset | 98,651 | |
Current portion of operating lease | 70,157 | |
Operating lease liability, net of current portion | $ 37,533 | |
Weighted average remaining lease term (months) operating lease | 18 years | |
Operating lease | 7.00% |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Scheduled Maturities Of Operating Lease Liabilities Outstanding) (Details) | Dec. 31, 2021USD ($) |
Year | |
2022 | $ 75,492 |
2023 | 38,304 |
Total Minimum Future Payments | 113,796 |
Less: Imputed Interest | 6,106 |
Present Value of Lease Liabilities | $ 107,690 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Summary Of Payments Upon Termination Of Employment) (Details) | Dec. 31, 2021USD ($) |
Stewart Wallach [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Salary Severance | $ 301,521 |
Bonus Severance | |
Gross up Taxes | 12,600 |
Benefit Compensation | 6,600 |
Grand Total | 320,721 |
Gerry Mc Clinton [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Salary Severance | 191,442 |
Bonus Severance | |
Gross up Taxes | 11,000 |
Benefit Compensation | 6,600 |
Grand Total | $ 209,042 |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Other Commitments [Line Items] | ||
Rent expenses | $ 144,916 | $ 165,706 |
Licensing Agreement With Floorcare Company | ||
Other Commitments [Line Items] | ||
Royalty expenses | $ 0 | $ 0 |
STOCK TRANSACTIONS (Schedule Of
STOCK TRANSACTIONS (Schedule Of Stock Options Outstanding And Activity) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Equity [Abstract] | ||
Outstanding, beginning | 990,000 | 1,000,000 |
Outstanding, Beginning | $ 0.435 | $ 0.435 |
Outstanding, beginning | $ 0.264 | $ 0.284 |
Outstanding, beginning | 2 years 10 months 17 days | |
Outstanding, beginning | $ (377,190) | $ (305,000) |
Granted | 8,288 | 210,000 |
Granted | $ 1.448 | $ 0.435 |
Granted | $ 1.620 | $ 0.080 |
Granted | 4 years 7 months 6 days | 6 years 3 months 7 days |
Granted | $ (7,940) | |
Exercised | (100,000) | |
Exercised | ||
Exercised | $ 0.390 | |
Exercised | 1 year 4 months 24 days | |
Exercised | ||
Forfeited/expired | (10,000) | (220,000) |
Forfeited/expired | $ 0.435 | $ 0.435 |
Forfeited/expired | $ 0.150 | $ 0.179 |
Forfeited/expired | $ 83,820 | |
Outstanding, end | 2 years 4 months 24 days | 3 years 25 days |
Outstanding, end | $ 0.444 | $ 0.435 |
Outstanding, end | 888,288 | 990,000 |
Outstanding, end | $ 0.249 | $ 0.264 |
Outstanding, end | $ 48,856 | $ (377,190) |
Vested/exercisable | 888,288 | 780,000 |
Vested/exercisable | $ 0.444 | $ 0.435 |
Vested/exercisable | $ 0.251 | $ 0.264 |
Vested/exercisable | 2 years 4 months 17 days | 2 years 7 months 6 days |
Vested/exercisable | $ 48,856 | $ (300,990) |
STOCK TRANSACTIONS (Schedule _2
STOCK TRANSACTIONS (Schedule Of Options Granted, Outstanding And Exercisable) (Details) - 2005 Plan [Member] | 12 Months Ended |
Dec. 31, 2021$ / sharesshares | |
Exercise Price Point Four Three Five [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 2 years |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price - .435 [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 3 years 6 months |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price Point Four Three Five Two [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 3 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price Point Four Three Five Three [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 4 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price Point Four Three Five Four [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price Point Four Three Five Five [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 5 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price Point Four Three Five Seven [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 1 year 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price Point Four Three Five Eight [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 6 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price Point Four Three Five Nine [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 2 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price Point Four Three Five Ten [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 7 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price Point Four Three Five Eleven [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 200,000 |
Remaining Contractual Life in Years | 3 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 200,000 |
Exercise Price Point Four Three Five Twelve [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 0.435 |
Options Outstanding | shares | 10,000 |
Remaining Contractual Life in Years | 8 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 0.435 |
Number of Options Currently Exercisable | shares | 10,000 |
Exercise Price One Point Four Four Eight [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 1.448 |
Options Outstanding | shares | 4,144 |
Remaining Contractual Life in Years | 4 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 1.448 |
Number of Options Currently Exercisable | shares | |
Exercise Price One Point Four Four Eight One [Member] | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |
Exercise Price | $ / shares | $ 1.448 |
Options Outstanding | shares | 4,144 |
Remaining Contractual Life in Years | 4 years 7 months 6 days |
Average Exercise Price | $ / shares | $ 1.448 |
Number of Options Currently Exercisable | shares |
STOCK TRANSACTIONS (Details Nar
STOCK TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Warrants outstanding | $ 199,733 | $ 0 | |
Stock options outstanding | 888,288 | 990,000 | 1,000,000 |
Stock options vested | 880,000 | ||
Weighted average exercise price of options | $ 0.444 | $ 0.435 | $ 0.435 |
Term of options | 2 years 4 months 17 days | 2 years 7 months 6 days | |
Stock Repurchase Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Repurchase of shares, shares | 750,000 | ||
Repurchase of shares, value | $ 107,740 | ||
Equity Option [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock options outstanding | 880,000 | ||
Term of options | 2 years 4 months 24 days | ||
Risk free interest rate | 0.80% | ||
Expected term | 5 years | ||
Expected volatility of stock | 140.00% | 500.00% | |
Expected dividend yield | 0.00% | 0.00% | |
Number of Steps | 150 | 150 | |
Equity Option [Member] | Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk free interest rate | 0.21% | ||
Expected term | 5 years | ||
Equity Option [Member] | Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk free interest rate | 0.55% | ||
Expected term | 10 years |
INCOME TAXES (Schedule Of Recon
INCOME TAXES (Schedule Of Reconciliation Of Income Tax Provision) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Tax benefit at U.S. statutory rate | $ (409,203) | $ (629,108) |
State income taxes, net of federal benefit | (25,607) | (86,744) |
Tax effect of foreign operations | 47,428 | 119,558 |
Non-deductible items | 5 | 57 |
NOL carryback rate difference | (329,618) | |
Valuation allowance | 420,570 | 345,397 |
Other | (18,138) | (31,481) |
Income Tax Expense (Benefit) | $ 15,055 | $ (611,939) |
INCOME TAXES (Schedule Of Incom
INCOME TAXES (Schedule Of Incometax Provision Benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Current: | ||
Federal | $ (873,278) | |
State | 823 | 1,600 |
Foreign | ||
Deferred: | ||
Federal | 18,070 | 230,562 |
State | (3,838) | 29,177 |
Income Tax Expense (Benefit) | $ 15,055 | $ (611,939) |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforward limitations on use | offset up to 80% of future taxable income each year. | |
Net deferred tax liability | $ 274,000 | $ 260,000 |
Effective income tax rate | (0.77%) | 20.43% |
Statutory income tax rate | 23.70% | 24.46% |
Valuation allowance increased | $ 345,397 | |
Statel Net Operating Loss Carry Forward [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforward | 2,687,000 | |
Federal Net Operating Loss Carry Forward [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carryforward | $ 5,073,000 |