COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 4 – COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has operating lease agreements for offices in Fort Lauderdale, Florida expiring 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 at 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. At the commencement date of the office lease, the Company recorded a right-of-use asset and lease liability under ASU 2016-02, Topic 842. In an effort to reduce operating expenses in 2023, the Company does not intend to renew the operating lease for the executive offices and arrangements are being made for staff to work remotely.

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, 2022 and 2021 amounted to $145,693 and $144,916, including short-term lease expense discussed below, respectively, and the common area maintenance charges.

Supplemental balance sheet information related to leases as of December 31, 2022 is as follows:
Assets
Operating lease – right-of-use asset	$	34,151
Liabilities
Current portion of operating lease	$	37,535
Noncurrent
Operating lease liability, net of current portion	$	—
Lease term and Discount Rate
Weighted average remaining lease term (months)		6
Weighted average Discount Rate		7	%

Scheduled maturities of operating lease liabilities outstanding as of December 31, 2022 are as follows:

Year	Operating Lease
2023	$	38,304
Total Minimum Future Payments		38,304
Less: Imputed Interest		769
Present Value of Lease Liabilities	$	37,535

The Company has a short-term storage rental with durations of less than twelve months  with rent expense of $2,958 and $3,291 recorded in other general and administrative expenses as of December 31, 2022 and 2021, respectively.

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, 2023, the employment agreement was extended, See Note 7.

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. On February 6, 2022, the Company entered into an Employment Agreement with James McClinton (Chief Financial Officer and Director), whereby Mr. McClinton was paid $736 per day. On November 30, 2022, Mr. McClinton retired from the Company.

Beginning in 2020 and through 2022, executive salaries and consulting fees have been deferred from time to time to conserve cash flow. Deferrals amounted to approximately $252,000 and $140,000, respectively, and are included in accounts payable and accrued liabilities as of December 31, 2022 and 2021, respectively.

Employment Agreements

There is a provision in Mr. Wallach’s employment agreement, 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

Directors Compensation

On July 5, 2022, The Board of Directors voted to suspend compensation to the independent directors for the remainder of the fiscal year 2022.

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.