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 Company’s principal executive office is located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441.

Effective November 1, 2019, the Company entered a new prime operating lease with the landlord “431 Fairway Associates, LLC” ending June 30, 2023, for the Company’s executive offices located 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 of each subsequent year during the term. Under the lease agreement, Capstone is also responsible for approximately 4,694 square feet of common area maintenance charges in the leased premises which has been estimated at $12.00 per square foot or approximately $56,000 on an annualized basis.

The Company’s rent expense is recorded on a straight-line basis over the term of the lease. The rent expense for the years ended December 31, 2021 and 2020 amounted to $144,916 and $165,706, including short-term lease expense discussed below, respectively, including the common area maintenance charges. At the commencement date of the new office lease, the Company recorded a right-of-use asset and lease liability under ASU 2016-02, Topic 842.

Supplemental balance sheet information related to leases as of 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:

Year	Operating Lease
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 Company’s 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. McClinton’s 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. McClinton’s employment agreements, if the officer’s employment is terminated by death or disability or without cause, the Company is obligated to pay to the officer’s estate or the officer, an amount equal to accrued and unpaid base salary as well as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal to

(a) the sum of twelve (12) months base salary at the rate the Executive was earning as of the date of termination and (b) the sum of “merit” based bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by the Company shall be paid from a normal payroll account on a bi-weekly basis in accordance with the normal payroll policies of the Company. The amount owed by the Company to the Executive, from the effective Termination date, will be payout bi-weekly over the course of the year but at no time will be no more than twenty (26) installments. The Company will also continue to pay the Executive’s health and dental insurance benefits for 6 months starting at the Executives date of termination. If the Executive had family health coverage at the time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive’s severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment.

The following table summarizes potential payments upon termination of employment:

	Salary Severance		Bonus   Severance		Gross up  Taxes		Benefit  Compensation		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 Company’s Health Benefit Plan, subject to compliance with all plan participation requirements and on acceptance into the plan the director will be responsible to pay 100% of their plan’s 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 day of the effective date. MBA would receive a monthly fee of $11,250 and $476 subscription fee due on the first of each month. During 2019 both Companies agreed to temporarily pause the MBA agreement for specific months and in May 2019 the engagement restarted with the same statement of work and terms as originally agreed. On January 21, 2020, the Company provided MBA with 60 days cancellation notice and the agreement ended March 31, 2020. Accordingly, Capstone’s last payment and the deposit on file was applied towards 60 days of service between Capstone and MBA at a future date. On October 18, 2021, Capstone activated services with MBA for a 60-day deliverable to end on December 18, 2021.

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.