COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2022

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES

NOTE 4– 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 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 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 ,respectively in the leased premises which has been estimated at $12.00 per square foot or approximately $56,000 on an annualized basis.

The Companys rent expense is recorded on a straight-line basis over the term of the lease. The rent expense for the three months ended June 30, 2022, and 2021 amounted to $35,783 and $35,483, respectively and $74,683 and $71,083 for the six months ended June 30, 2022 and 2021,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 June 30, 2022 is as follows:
Assets
Operating lease - right-of-use asset	$	231,077
Accumulated amortization	$	(164,066	)
Operating lease - right - of -use asset , net	$	67,011
Liabilities
Current
Current portion of operating lease	$	73,781
Noncurrent
Operating lease liability, net of current portion	$	—
Supplemental statement of operations information related to leases for the period ended June 30, 2022, is as follows:
Operating lease expense as a component of other general and administrative expenses	$	33,910
Supplemental cash flow information related to leases for the period ended June 30, 2022, is as follows:
Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow paid for operating lease	$	37,188
Lease term and Discount Rate
Weighted average remaining lease term (months)
Operating lease		12
Weighted average Discount Rate
Operating lease		7	%

Scheduled maturities of operating lease liabilities outstanding as of June 30, 2022 are as follows:

Year	Operating Lease
2022 (remaining months)	$	38,304
2023		38,304
Total Minimum Future Payments		76,608
Less: Imputed Interest		2,827
Present Value of Lease Liabilities	$	73,781

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 and was further amended at various periods to be paid at the same rate through December 31, 2021.

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.

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. As of March 31, 2022 and December 31, 2021, the amount due to Mr. Wolf for deferred consulting fees was $48,125 and $48,125, respectively, which is included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets.

Effective April 1, 2021, the sales operations consulting fee with Mr. Wolf was restored to the contract amount of $13,750 per month.

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 was paid $191,442 per annum. The term of agreement began February 5, 2020 and ended February 5, 2022.

Effective September 1, 2020, through March 31, 2021, payments equivalent to fifty percent of both Mr. Wallach and Mr. McClintons salary were deferred to be repaid in the future. As of December 31, 2021, $86,977 and $20,616, respectively, have been deferred until later in 2022. As of June 30, 2022, total wages deferred for Mr. Wallach were approximately $86,977 and $0 for Mr. McClinton.

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.

There is a provision in Mr. Wallachs employment agreement, 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 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.

On March 4, 2022,with the closure of the CIHK operation, 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.

On March 4, 2022, with the closure of the CIHK operation, 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.

Public Relations

Effective May 1^st the Company finalized a marketing/ public relations agreement with Tongal, which is an online service that connects companies with branding and marketing consultants and services, will provide services for the development and creation of digital assets for use on the Companys website, social media ads and other ecommerce websites such as Amazon. The platform fee will be $30,000 with production expenses additional. The initial period will be for six months. The Company can terminate the agreement with a written notice 30 days prior to the end of the Agreement and will automatically renew for a further six months at the same rate.

Directors Compensation

On May 6, 2021, the Company approved the following basic compensation arrangement for independent directors of the Company for their continued services, 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 5– Stock Transactions for further disclosures.