ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2024

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, 2024, and 2023, 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 Company’s consolidated financial statements. The accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the consolidated financial statements.

Organization and 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 Company’s other subsidiaries. With the shift of manufacturing to Thailand from China, the CIHK operation was downsized and dormant as of March 2022.

The Company’s focus through 2017 was the integration of LEDs into most commonly used consumer lighting products in today’s home. The LED category has matured and is no longer the innovative “must have” consumer product as in previous years, as such, revenues for the LED product line have declined significantly in 2024 and 2023 from previous years. The Connected Surfaces was the Company’s effort to establish business in an emerging segment that was intended for future revenue growth. The Connected Surfaces Smart Mirror products did not achieve significant sales in 2023, and all inventory was expensed as of December 31, 2023.

During 2023, the Company manufactured the Connected Chef, a purpose-built kitchen tablet with an accessory platform to accommodate food prep accessories such as a cutting board. The Connected Chef has Google mobile service allowing for pre-installation of specific Google applications including Playstore, voice assistant, and YouTube. The Connected Chef was ready for formal introduction in quarter four of 2023, and the Company began marketing the Connected Chef tablet to appliance manufacturers and distributors. The ability of the Company to promote any new, related “connected” consumer products was dependent on securing adequate, affordable and timely funding from lenders and investors.  Due to the lack of orders and funding, the Connected Chef is not currently in production.

On October 31, 2024, the Company secured a working capital promissory note (“note”) for $125,914, maturing July 31, 2025, accruing 7% interest per annum. On January 27, 2025, the note was amended for principal of $485,163 and a maturity date of December 31, 2025 and working capital installments to be paid on a quarterly basis through September 30, 2025. For consideration for the working capital loan, the Company signed a Management Transition Agreement on October 31, 2024. This funding will not be used for promotion or launch of the Connected Chef.  See Note 8 – Subsequent Events.

The Company has explored development or acquisition of a new business line. As of the filing of this report, the Company has not identified a new business line that could, in the judgment of the Company, attract working capital funding to sustain company operations, or provide sufficient operating revenues to sustain Company operations through 2025. The Company is continuing efforts to locate a new business line in case efforts to internally establish a new product line do not succeed. The financial condition of the Company and low market price of its Common Stock adversely affects the Company’s ability to acquire or fund a new business line.

The Company’s operations consist of one reportable segment for financial reporting purposes: Consumer Home Goods. 

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.

During the year ended December 31, 2024, the Company used cash in operations of $289,548 and generated net operating losses of approximately $996,000. As of December 31, 2024, the Company had a working capital deficit of $144,755 and an accumulated deficit of $11,784,360. The Company’s cash balance decreased by $20,616 from $36,466 as of December 31, 2023 to $15,850 as of December 31, 2024. As of December 31, 2024, the Company does not have sufficient cash on hand to finance its plan of operations and sought additional capital through debt financing, which is projected to sustain the operations of the Company through September 30, 2025. The Company will need to source additional capital through further debt and/or equity financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

We are seeking alternative sources of liquidity, including but not limited to accessing the capital markets, or other alternative financing measures and strategic partnerships. 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 lack of operating income from products and the financial condition of the Company are also hindering efforts to locate working capital funding.

Certain directors have provided necessary funding including a working capital line to support the Company’s cash needs through this period of revenue development, but this funding is limited in amount and frequency. Unless the Company succeeds in raising additional capital or successfully increases cash generated from operations, management believes there is substantial doubt about the Company’s ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this report. 

Concentrations of Credit Risk

Cash is deposited with major banks in the United States. From time to time, such deposits may be in excess of insured limit. Generally, the FDIC limit per bank is $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows.

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.

The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company becomes aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will recognize an allowance against amounts due and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes an allowance for credit losses based on the length of time the receivables are past due and consideration of other factors such as industry conditions, the current business environment and the Company’s historical payment experience. An allowance for credit losses 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 December 31, 2024, and 2023, management has not recorded an allowance for doubtful accounts and does not have an accounts receivable balance.

Inventory

The Company’s inventory, which consisted of finished Thin Cast Smart Mirror products for resale to consumers by Capstone, was 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 Company’s investment in inventories for such declines in value. The write-downs are recognized as a component of cost of sales.

During the fourth quarter of 2023, Management reviewed the valuation of inventory on hand and wrote off all Smart Mirror inventory as of December 31, 2023, resulting in a $133,775 reduction in inventory to bring the balance to $0 and a corresponding expense to cost of sales. The write off of the remaining inventory was due to lower-than-expected sales of the Smart Mirrors coupled with limited working capital to advance marketing efforts.

The Company liquidated all remaining Smart Mirror inventory on hand during the second quarter of 2024 to one wholesaler for $80,000. There is no inventory on hand as of December 31, 2024.

Prepaid Expenses

The Company’s prepaid expenses consist primarily of prepaid insurance, public company listing fees and investor relation services. As of December 31, 2024 and 2023, prepaid expenses were $20,455 and $22,120, respectively.

Due from Related Party

During 2023, the Company offered supplemental health care benefits for employees. Employees may add dependents to the health plan where the employee would pay for the additional dependent’s coverage through payroll deductions. Due to the deferral of wages from the CEO, Stewart Wallach, the portion of health insurance benefits paid by the Company for his dependents were not paid for via employee payroll deductions. As a result, the Company recorded a $9,570 receivable from a related party for the amounts owed for Mr. Wallach’s dependents health insurance coverage. The Company wrote off the receivable during 2024 due to the cancellation of the CEO’s deferred wages and notes payable held by the CEO. See Note 3.

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:

	Useful Life		December 31, 2024			December 31, 2023
Machinery and equipment		3 years		42,970			42,970
Less: Accumulated depreciation				(14,323	)		—
Property and Equipment, Net			$	28,647		$	42,970

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.

In 2023, the Company invested $42,970 in a manufacturing mold for the Connected Chef. The mold was not ready for production in 2023 and therefore was not depreciated during 2023.

Depreciation and amortization expense was $14,323 and $0 for the years ended December 31, 2024 and 2023, respectively.

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 6 “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 (“CAPI”). 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 CAPI’s Common Stock, and recorded goodwill of $1,936,020.

Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired. Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company will then perform a one-step quantitative impairment text, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company’s market capitalization. The Company recognized $623,538 of impairment charges during 2020. During the annual analysis of goodwill, management determined the fair value of the single reporting unit was less than the carrying value of the Company, as such, management recorded a goodwill impairment of $539,317 as of December 31, 2024. There was no goodwill impairment recorded for the year ended December 31, 2023. The Company reported goodwill of $773,165 and $1,312,482, respectively as of December 31, 2024 and 2023.

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, 2024, and 2023. 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, 2024 and 2023, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 208,288 options and 199,733 warrants for 2024, and 408,288 options and 199,733 warrants for 2023.

Revenue Recognition

The Company generates revenue from developing, marketing and selling consumer products through national and regional retailers. Capstone currently operates in the consumer electronic products category in the Unites States and in specific overseas markets. These products may be offered either under the Capstone brand or a private brand.

A sales contract occurs when the customer-retailer submits a purchase order to buy a specific product, a specific quantity, at an agreed-fixed price, within a ship window, from a specific location and on agreed payment terms. The selling price in all of our customers’ orders has been previously negotiated and agreed to including any applicable discount prior to receiving the customer’s purchase order. The stated unit price in the customer’s order has already been determined and is fixed at the time of invoicing.

The Company recognizes lighting product revenue when the Company’s performance obligations as per the terms in the customers purchase order have been fully satisfied, specifically, when the specified product and quantity ordered has been manufactured and shipped pursuant to the customers requested ship window, when the sales price as detailed in the purchase order is fixed, when the product title and risk of loss for that order has passed to the customer, and collection of the invoice is reasonably assured. This means that the product ordered and to be shipped has gone through quality assurance inspection, customs and commercial documentation preparation, the goods have been delivered, title transferred to the customer and confirmed by a signed cargo receipt or bill of lading. Only at the time of shipment when all performance obligations have been satisfied will the judgement be made to invoice the customer and complete the sales contract.

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, 2024, and 2023, the Company had no reversals into other income of previously accrued marketing and promotional allowances for previous product sales that were 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.

The Connected Surfaces Smart Mirror program was sold direct-to-consumer with orders sold through e-commerce platforms. The Company also sold the Connected Surfaces Smart Mirror program through independent retailers. The Company will only bill the customer and recognize revenue upon the customer obtaining control of the Smart Mirror order which generally occurs upon delivery.

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:

	For the Year Ended December 31, 2024					For the Year Ended December 31, 2023
	Capstone Brand		% of Revenue			Capstone Brand		% of Revenue
Lighting Products- U.S.	$	57,829		40	%	$	65,025		34	%
Smart Mirror Products- U.S.		85,440		60	%		127,151		66	%
Total Revenue	$	143,269		100	%	$	192,176		100	%

We provide our Smart Mirror and Lighting Product 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 we may receive back residual inventory. No residual inventory has been received as of the date of filing this Form 10-K.

Smart Mirror customer orders are shipped within one to two days of receipt. Revenue is recorded upon processing of the sale with a third-party merchant processor such as Stripe or Amazon Pay. Lighting Product 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 Smart Mirror customers are charged when executing the e-commerce purchase. We do not have extended payment terms for our Smart Mirror customers. Our Lighting Product payment terms may vary by the type of customer, the customer’s credit standing, the location where the product will be picked up from and for international customers 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.

Sales reductions for anticipated discounts, allowances and promotional coupons are recognized during the period the related revenue is recorded. The discounts, allowances and promotional coupons amounted to approximately $850 and $17,000 for the years ended December 31, 2024 and 2023, respectively.

Warranties

For the LED product line, 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 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 Smart Mirror liquidation sale of $80,000 was sold “as-is” without warranty terms.

The following table summarizes the changes in the Company’s product warranty liabilities which are included in accounts payable and accrued liabilities in the accompanying December 31, 2024, and 2023 balance sheets:

	December 31,			December 31,
	2024			2023
Balance at the beginning of the year	$	1,200		$	1,926
Amount accrued		—			853
Payments and credits		—			(1,579	)
Reversal of prior years’ accrual unclaimed		(1,200	)		—
Balance at year-end	$	—		$	1,200

Advertising and Promotion

Advertising and promotion costs, including advertising, social media, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expenses were $120 and $11,903 for the years ended December 31, 2024, and 2023, respectively.

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, 2024 and 2023, product development expenses were $6,233 and $101,409, respectively. Product development expenses for 2024 were related to the maintenance of the Connected Chef. Product development expenses for 2023 were related to the development of the Company’s Connected Chef.

Shipping and Handling

The Company’s shipping and handling costs are included in sales and marketing expenses and are recognized as an expense during the period in which they are incurred and amounted to $13,193 and $62,923 for the years ended December 31, 2024 and 2023, respectively.

Accounts Payable and Accrued Liabilities

The following table summarizes the components of accounts payable and accrued liabilities on December 31, 2024, and 2023:

	December 31,		December 31,
	2024		2023
Accounts payable	$	300	$	69,267
Accrued warranty reserve		—		1,200
Accrued compensation and deferred wages, marketing allowances, customer deposits and other liabilities		—		734,156
Total	$	300	$	804,623

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. ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. The Company and its U.S. subsidiaries file consolidated income tax returns.

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.

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

The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation- Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expenses over the requisite service periods in the Company’s consolidated statements of operations.

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, 2024 and 2023 was $0, respectively.

Other Income (Expense)

Other income was $4 in 2024 compared to $77,106 in 2023, a decrease of $77,102. The other income for the year ended December 31, 2023 resulted from $49,000 in employee retention tax credit received under Cares act 2020-2021 coupled with insurance premium refunds and insurance payouts on damage freight claims.

Interest expense for 2024 amounted to approximately $90,000 compared to $104,000 in 2023, a decrease of $14,000 or 13%, due to the cancellation of debt and issuance of preferred B-1 stock. See Note 3 – Notes Payable to Related and Unrelated Parties. 

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 valuation of inventories, goodwill impairment, valuation of deferred tax assets, and valuation of stock-based compensation. The Company generally bases its estimates on historical experience, agreed obligations, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Historically, past changes to these estimates have not had a material impact on the Company’s consolidated financial statements. However, circumstances could change, and actual results could differ materially from those estimates.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update 2023-07 – Segment Reporting (Topic ASC 280) Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosure about significant segment expenses. The enhancements under this update require disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss, require disclosure of other segment items by reportable segment and a description of the composition of other segment items, require annual disclosures under ASC 280 to be provided in interim periods, clarify use of more than one measure of segment profit or loss by the CODM, require that the title of the CODM be disclosed with an explanation of how the CODM uses the reported measures of segment profit or loss to make decisions, and require that entities with a single reportable segment provide all disclosures required by this update and required under ASC 280. The Company adopted ASU 2023-07 for the annual period ending December 31, 2024. See Note 7 – Operating Segments.

Recently Issued Accounting Pronouncements Not Yet Adopted 

In December 2023, the FASB issued Accounting Standards Update 2023-09 – Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 will become effective beginning of our 2025 fiscal year. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect that this guidance will have a material impact upon our financial position and results of operations.

November 2024, the Financial Account Standards Board (FASB), issued Accounting Standards Update (ASU) 2024-04, Debt-Debt with Conversions and Other Option. ASU 2024-04 is intended to clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This ASU is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures.

In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), and in January 2025, the FASB issued Accounting Standards Update No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date ("ASU 2025-01"). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for us for our annual reporting for fiscal 2028 and for interim period reporting beginning in fiscal 2029 on a prospective basis. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures.

The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change.