CAPSTONE COMPANIES, INC.
For the period ended Dec 31, 2024. Filed Mar 17, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 17, 2025
CAPCStored price and day change unavailable
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-29.
0001903596-24-000189
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-17.
0001903596-25-000126
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 122 previous paragraphs and 111 current paragraphs.
68 unchanged; 34 reworded; 9 added; 19 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
The Company developed and commenced development of the HFS business in 2024 as the long-term strategic plan and business line. Company has not acquired or internally developed a HFS facility in 2024.
Current report
In April 2024, the Company liquidated the remaining Smart Mirror inventory for $80,000. The remaining sales for 2024 relate to e-commerce sales of Smart Mirrors and $58,000 in LED lighting sales.
Current report
All sales were domestic for 2024 and 2023.
Current report
Goodwill Impairment Expense
Current report
The Company recognized a goodwill impairment of approximately $539,000 during 2024, as the fair value of the Company was less than the carrying value of the Company.
Current report
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.
Current report
Our goal is to license the Connected Chef kitchen utility device in 2025 through licensing arrangements with an appliance or other condumer product distributors, consumer product manufacturers and possibly other commercial food or kitchen product companies.
Current report
The Company will require additional working capital funding until such time as its Connected Chef licensing business and/or HFS business establish revenue generating operations. The Company may also require additional funding to cover the costs of manufacturing Connected Chef product under certain licensing arrangements.
Current report
Revenue Recognition
Removed paragraphs (19)
Previous report
Due to working capital constraints during 2023, the Company was unable to effectively market the Smart Mirrors, resulting in lower than anticipated revenues .
Previous report
For the years ended December 31, 2023 and 2022, international sales were approximately $0 or 0% of revenue and $44,000 or 13 % of revenue, respectively.
Previous report
Social Media expense in 2023 was $3,500, a reduction of $142,500 or 98% from $146,0000 in 2022. Advertising and promotional expenses were $4,700 in 2023 as compared to $24,900 in 2022, a reduction of $20,200 or 81%. The decrease in social media and advertising expenses were in connection with the working capital restraints. Trade Show expense was $0 in 2023 as compared to $113,300 in 2022, a reduction of $113,300 as the Company did not attend any trade shows during 2023.
Previous report
Interest expense for 2023 amounted to $104,000 compared to $70,000 in 2022, an increase of $34,000 or 49%, due to the increase of $632,500 in notes payable held by the Company, accruing interest at 5% per annum.
Previous report
Our goal is for the new Connected Chef kitchen utility device to launch in early 2024 through a partnership with a appliance manufacturer and distributor. Approximately 46% of domestic households have one smart device in their home. Our Connected Surfaces portfolio falls in line with the average user of internet-of-things home devices. Management believes that the execution of the Company’s strategy and development of the Connected Surfaces category will provide attractive opportunities for profitable growth over the long term.
Previous report
The Company will require additional funding to build its marketing effort, inventory levels and service levels once the revised marketing back to retail phase validates the Company’s strategic initiatives. The future growth will be directly impacted by the level of exposure, messaging and distribution capabilities.
Previous report
By working diligently overseas with alternate manufacturers located outside China, particularly in Thailand, we anticipate minimal impact to our selling prices and related margins of profit that could otherwise be impacted by an ongoing trade dispute between the United States and China. Other factors, like inflation and its impact on consumer confidence and willingness to purchase discretionary purchases like our Connected Chef, may impact selling prices and related margins of profit.
Previous report
Short Term Debt – note payable with unrelated parties – Related to working capital funding.
Previous report
Long Term Debt – related parties – Related to working capital and purchase order funding.
Previous report
Long Term Debt — note payable unrelated parties – Related to purchase order funding.
Previous report
RELATED-PARTY TRANSACTIONS
Previous report
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.
Previous report
Our 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, which country their corporate office is located. The term between invoicing date and when payment is due may vary between 30 days and 90 days depending on the customer type. In order 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.
Previous report
The Company selectively supports retailer’s initiatives to maximize sales of the Company’s 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.
Previous report
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.
Previous report
Allowance for Credit Losses
Previous report
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.
Previous report
As of both December 31, 2023 and 2022, management determined that the accounts receivable is fully collectible. As such, management has not recorded an allowance for credit losses.
Previous report
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 included 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 approximately $862,000 which was recorded in the first quarter 2020 of which a total of $806,800 was subsequently received. During the year ended December 31, 2022, the difference of $55,265 was reflected in income tax expense on the consolidated statement of operations.
Reworded paragraphs (34)
Previous wording
This Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other parts of this Report contain forward-looking statements, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in this Report under the heading “Risk Factors,” which are incorporated herein by reference. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this Report. All information presented herein is based on CAPC’s fiscal year 2023 results. Unless otherwise stated, references to particular years or quarters refer to the CAPC’s fiscal years ended in December and the associated quarters of those fiscal years. Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Current wording
This Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other parts of this Report contain forward-looking statements that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in this Report under the heading “Risk Factors,” which are incorporated herein by reference. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this Report. All information presented herein is based on Company’s fiscal year 2024 results. Unless otherwise stated, references to particular years or quarters refer to the Company’s fiscal years ended in December and the associated quarters of those fiscal years. Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Previous wording
Total net revenue for the year ended December 31, 2023, decreased 45% to $192,176 as compared to $346,474 in the same period of last year. The net operating loss was approximately $1,634,854 for the year 2023 compared to a net loss of $2,921,514 in 2022. The Company had an estimated net tax provision in 2023 and 2022 of $35,000 and $68,000, respectively.
Current wording
Total net revenue for the year ended December 31, 2024, decreased 25% to $143,269 as compared to $192,176 in the same period of last year. The net operating loss was $995,815 for the year 2024 compared to $1,634,854 for the year 2023. The Company had an estimated net tax (benefit) expense provision in 2024 and 2023 of approximately ($100,000) and $35,000, respectively.
Previous wording
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 2023. The Connected Surfaces is the Company’s effort to establish business in an emerging segment that is intended for future revenue growth. The smart home segment is the umbrella category in which we intend to participate with the Connected Surfaces program. The Connected Surfaces products have not enjoyed significant sales in 2023 – either online or through efforts to sell in bulk to brick-and-mortar, “big box” retailers. The Smart Mirror product line had limited sales for 2023, and all inventory was expensed as of December 31, 2023.
Current wording
The Company’s focus through 2017 was the integration of LEDs into most commonly used consumer lighting products in today’s home and the resulting LED lighting products was the Company’s initial consumer product line. 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 2023. The Smart Mirror failed to replace the LEG lighting products as the new product line. The Connected Chef is the Company’s effort to establish business in an emerging segment that is intended for future revenue growth.
Previous wording
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, YouTube to name those highly recognized. The Connected Chef was ready for formal introduction in quarter four of 2023, and Management is actively marketing the Connected Chef tablet to appliance manufacturers and distributors, but the product has no purchase commitments from retailers as of the date of this filing. Further, the Company will have to raise funding to fund production costs, which funding may not be available to the Company.
Current wording
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, YouTube to name those highly recognized. 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 was not in production in 2024.
Previous wording
For 2023, revenue was derived from sales of our residential lighting products and Connected Surfaces Smart Mirrors. The residential products were directed towards consumer home LED lighting for both indoor and outdoor applications while the Smart Mirrors were sold directly to consumers via e-commerce efforts. We recognize revenue upon shipment of the order to the customer when all performance obligations have been completed and title has transferred to the customer and in accordance with the respective sale’s contractual arrangements. Each contract on acceptance will have a fixed unit price. All of our sales were to the U.S. market in 2023 and we expect to the U.S Market to continue to be the major source of revenue for the Company. Net revenue also includes the cost of instant rebate coupons, promotional coupons, and product support allowances provided to retailers to promote certain products. All of our revenue is denominated in U.S. dollars.
Current wording
For 2024, revenue was derived from sales of our residential lighting products and Connected Surfaces Smart Mirrors. The residential products were directed towards consumer home LED lighting for both indoor and outdoor applications while the Smart Mirrors were sold directly to consumers and liquidators via e-commerce efforts. We recognize revenue upon shipment of the order to the customer when all performance obligations have been completed, and title has transferred to the customer and in accordance with the respective sale’s contractual arrangements. Each contract on acceptance will have a fixed unit price. All of our sales were to the U.S. market in 2024. Net revenue also includes the cost of instant rebate coupons, promotional coupons, and product support allowances provided to retailers to promote certain products. All of our revenue is denominated in U.S. dollars.
Previous wording
Operating expenses include sales and marketing expenses, consisting of social media advertising, sales representatives’ commissions, advertising, show expense and costs related to employee’s compensation. In addition, operating expensed includes charges relating to product development, office and warehousing, accounting, legal, insurance and stock-based compensation.
Current wording
Operating expenses include sales and marketing expenses, consisting of sales representatives’ commissions, advertising, and costs related to employee’s compensation. In addition, operating expensed includes charges relating to product development, office and warehousing, accounting, legal, and insurance.
Previous wording
For the year ended December 31, 2023, net revenues were $192,176, a decrease of $154,298 or 45% from $346,474 in fiscal 2022.
Current wording
For the year ended December 31, 2024, net revenues were $143,269, a decrease of 25% from $192,176, in fiscal 2023.
Previous wording
The Company selectively supports retailer’s initiatives to maximize sales of the Company’s products on the retail floor or to assist in developing consumer product awareness, by providing marketing und allowances to the customer. The Company also provides promotional coupons for the Connected Surfaces Smart Mirror when determined necessary. Sales reductions for anticipated discounts, coupons, 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 approximately $17,000 and $26,700 for the years ended December 31, 2023 and 2022, respectively.
Current wording
Sales reductions for anticipated discounts, coupons, 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 approximately $850 and $17,000 for the years ended December 31, 2024, and 2023, respectively.
Previous wording
Gross loss for the year ended December 31, 2023, was approximately ($265,640), or (138.2%) of net revenues, as compared to ($602,548) or (173.9%) of net revenues, for fiscal 2022. For the years ended December 31, 2023 and 2022, cost of sales were approximately $458,000 and $949,022, respectively, a reduction of $491,206 or 22% from the previous year. The gross profit reduction was the direct result of the reduced revenue in the year, relating to the low sales of the Smart Mirror and reduction in sales of the LED lighting products. Costs represented 239% and 274% of net revenues for 2023 and 2022, respectively. This increased cost was primarily due to a write off of ending Smart Mirror inventory at December 31, 2023 of $133,775. Management is currently reviewing liquidation opportunities on the Smart Mirror while actively marketing the new product line of 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 services allowing for pre-installation of specific Google applications including Playstore, voice assistant, YouTube to name those highly recognized.
Current wording
Gross profit (loss) for the year ended December 31, 2024, was approximately $105,250, or 73.4% of net revenues and ($265,640), or (138.2%) of net revenues, for fiscal 2023. For the years ended December 31, 2024, and 2023, cost of sales was approximately $0 and $458,000, respectively. The gross profit increase is the result of the write off of the Smart Mirror inventory in 2023 and the final liquidation sales of the remaining inventory on hand during 2024. Management is currently reviewing licensing opportunities for 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 services allowing for pre-installation of specific Google applications including Playstore, voice assistant, YouTube, to name those highly recognized.
Previous wording
In fiscal 2023 and 2022, sales and marketing expenses were approximately $76,000 and $360,000 respectively, a reduction of $284,000 or 79%. As a percent to revenue, 2023 sales and marketing expenses were 39.6% as compared to 104% in 2022
Current wording
In fiscal 2024 and 2023, sales and marketing expenses were approximately $17,000 and $76,000 respectively, a reduction of $59,000 or 77%. As a percent to revenue, 2024 sales and marketing expenses were 12% as compared to 40% in 2023. The Company did not have an active product line for the last half of 2024 and therefore marketing expenses decreased accordingly.
Previous wording
For the years ended December 31, 2023 and 2022 compensation expenses were approximately $469,600 and $817,400, respectively, a reduction of $347,800 or 43.0%. As a percent of net revenues, 2023 expenses were 244.8% as compared to 235.9% in 2022. The Company reduced the workforce during 2023 as a result of the poor sales on the Smart Mirror.
Current wording
For the years ended December 31, 2024, and 2023 compensation expenses were approximately $139,000 and $469,600, respectively, a reduction of $330,000 or 70%. As a percent of net revenues, 2024 expenses were 97.2% as compared to 244.4% in 2023. The Company continued to reduce the workforce as a result of not having an active product line during 2024.
Previous wording
For fiscal 2023, professional fees were approximately $426,200 compared to $457,500 in 2022, a reduction of $31,300 or 7 %. As a percent of net revenue 2023 expenses were 221.9% as compared to 132.0% in 2022. In 2023, consulting fees were approximately $190,000 compared to $260,000 for 2022. Accounting, legal and other expenses were $235,700, an increase of $38,100 from $197,600 in the prior year.
Current wording
For fiscal 2024, professional fees were approximately $275,000 compared to $426,200 in 2023, a reduction of $151,200 or 36%. As a percent of net revenue 2024 expenses were 192.6% as compared to 221.8% in 2023. In 2024, consulting fees were approximately $97,000, a decrease of $93,000, compared to $190,000 for 2023. Accounting, legal and other expenses were $178,000, a decrease of $197,600 from $235,700 in the prior year.
Previous wording
For the years ended December 31, 2023, and 2022, product development expenses were approximately $101,000 and $204,000, respectively, a decrease of $103,000 or 50%. In 2023 the Company invested $79,000 in the development of the Connected Chef compared to $44,000 in 2022. In 2023, the Company spent $22,000 in Smart Mirror development compared to approximately $138,000 in 2022.
Current wording
For the years ended December 31, 2024, and 2023, product development expenses were approximately $6,000 and $101,000, respectively, a decrease of $95,000 or 94%. In 2023 the Company invested $79,000 in the development of the Connected Chef and spent $22,000 in Smart Mirror development. In 2024, the Company maintained the product certifications for the Connected Chef.
Previous wording
For fiscal 2023 and 2022, other general and administration expenses were approximately $296,000 and $481,000, respectively, a decrease of $185,000 or 38.6%. As a percent to revenue 2023 other general and administrative expenses were 154.2% as compared to 138.8% in 2022. The Directors insurance decreased in 2023 from $124,000 in 2022 to $114,000 a $10,000 or 8% decrease. The Company’s liability insurance also decreased in 2023 from $32,000 to $17,000, a decrease of $15,000 or 46.9%. Lodging fees decreased from $41,000 in 2022 to $12,000 in 2023. These reductions are a result of the cost reduction strategies taking by Management to streamline and reduce operating overhead as much as possible.
Current wording
For fiscal 2024 and 2023, other general and administration expenses were approximately $124,000 and $296,000, respectively, a decrease of $172,000 or 58%. As a percent to revenue, other general and administrative expenses were 86.9% as compared to 154.2% in 2023. The directors and officers insurance decreased in 2024 from $114,000 in 2023 to $71,000 a $43,000 or 38% decrease. As the Company did not have an active product line during the last half of 2024, we discontinued the product liability insurance, a decrease of $18,000. Travel expenses decreased from $12,000 in 2023 to $1,000 in 2024. Rent expense decreased from $96,000 in 2023 to $2,500 in 2024. These reductions are a result of the cost reduction strategies taking by Management to reduce operating overhead as much as possible.
Previous wording
For the years ended December 31, 2023, and 2022, total operating expenses were approximately $1,369,000 and $2,319,000, respectively. This represents a $950,000 or 41.0% decrease over fiscal year 2022.
Current wording
For the years ended December 31, 2024, and 2023, total operating expenses were approximately $1,000,000 and $1,370,000, respectively. This represents a $370,000 or 27.0% decrease over fiscal year 2023.
Previous wording
For the year ended December 31, 2023, the operating loss was approximately $1,634,000 as compared to $2,922,000 in 2022, a loss decrease of $1,288,000 over 2022.
Current wording
For the year ended December 31, 2024, the operating loss was approximately $996,000 as compared to $1,634,000 in 2023, a loss decrease of $737,000 over 2023.
Previous wording
For fiscal 2023 other income was approximately $77,000 compared to $395,000 in 2022, a decrease of $318,000 over 2022. The other income for the year ended December 31, 2022 resulted from $152,000 in employee retention tax credit received under Cares act 2020-2021, versus $49,000 received in 2023 and $162,000 freight claim recovery for the damaged Smart Mirror inventory that was written off in December 31, 2021.
Current wording
For fiscal 2024 other income was $4 compared to $77,106 in 2023, a decrease of $77,102 over 2023. 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.
Previous wording
For the years ended December 31, 2023, the net tax expense for income tax was estimated at $35,000 compared to a net tax expense of $67,000 in the same period 2022.
Current wording
For the years ended December 31, 2024, the net tax expense for income tax was estimated at $100,000 compared to a net tax expense of $35,000 in the same period 2023.
Previous wording
The effective tax rate for the years ended December 31, 2023 and 2022, respectively, was (2.10%) and (2.61%) and the statutory tax rate was 23.82% in 2023 and 25.9% in 2022.
Current wording
The effective tax rate for the years ended December 31, 2024, and 2023, respectively, was (10.07%) and (2.10%) and the statutory tax rate was 23.5% in 2024 and 23.82% in 2023.
Previous wording
For fiscal 2023 and 2022 net loss before taxes was approximately $1,661,000 and $2,596,000, respectively, a net loss decrease of approximately $934,000 over the previous year due to the reasons summarized above.
Current wording
For fiscal 2024 and 2023 net loss before taxes was approximately $1,087,000 and $1,661,000, respectively, a net loss decrease of approximately $578,000 over the previous year due to the reasons summarized above.
Previous wording
During the year ended December 31, 2023, the Company used cash in operations of approximately $614,000 and generated net operating losses of $1,634,000. As of December 31, 2022, the Company had working capital deficit of $3,277,000 and an accumulated deficit of $10,797,000. The Company’s cash balance decreased by approximately $25,000 from $61,000 as of December 31, 2022 to $36,000 as of December 31, 2023. With the reduced revenues in 2022 and 2023 the Company initiated an expense mitigation plan that reduced discretionary spending including travel, lodging and trade show expenses, deferred executive management compensation, and closed the Hong Kong operation. These efforts assisted the Company in conserving cash and allowing for management to focus on finalizing production of the Connected Chef by the end of 2023.
Current wording
During the year ended December 31, 2024, the Company used cash in operations of approximately $290,000 and generated net operating losses of $996,000. As of December 31, 2024, the Company had working capital deficit of $144,755 and an accumulated deficit of $11,784,360. The Company’s cash balance decreased by approximately $20,000 from $36,000 as of December 31, 2023, to $16,000 as of December 31, 2024. With the reduced revenues in 2024 and 2023 the Company initiated an expense mitigation plan that reduced discretionary spending including travel, and trade show expenses, deferred executive management compensation, and closed the Hong Kong operation.
Previous wording
The Company is actively seeking alternative sources of liquidity, including but not limited to accessing the capital markets, strategic partnerships, or other alternative financing measures. but has been unable to secure long term funding or establish strategic partnerships, or secure other sources of liquidity. As stated, Company’s low market price for its common stock and poor financial condition and performance hinder these efforts.
Current wording
The Company is actively seeking alternative sources of liquidity, including but not limited to accessing the capital markets, strategic partnerships, or other alternative financing measures. but has been unable to secure unrelated, long-term funding or secure other sources of liquidity. As stated, Company’s low market price for its common stock and poor financial condition and performance hinder these efforts.
Previous wording
Besides the efforts to finish development the Connected Chef kitchen appliance product line, the Company is exploring the merger of the Company with a private operating company as a possible means of developing a new business line as well as considering other common strategic alternatives for a company facing business and financial challenges and uncertainties such as ours. Management is closely monitoring its operations, liquidity, and capital resources and is actively working to minimize the current and future impact of this unprecedented situation.
Current wording
Besides the efforts to license the Connected Chef kitchen appliance product, the Company is seeking to establish revenue generating operations in the HFS business by internal development of HFS operations or acquiring or being acquired by an existing, operating HFS company. Management is closely monitoring its operations, liquidity, and capital resources and is actively working to minimize the current and future impact of this unprecedented situation.
Previous wording
Director and Chief Executive Officer, Stewart Wallach, has funded working capital since 2022 as the Company navigates these challenges. Total working capital note proceeds received as of the date of this filing are $672,500. The note payable accrues simple interest at a rate of 5 percent per annum, matures June 15, 2024, with the ability for the Company to request a 90-day extension.
Current wording
Director and former Chief Executive Officer, Stewart Wallach, has funded working capital since 2022 as the Company navigates these challenges. Total working capital note proceeds received as of the date of this filing are $672,500. Coppermine has funding working capital beginning in 2024. Total working capital note proceeds received as of the date of this filing of the Form 10-K report from Coppermine are $292,295. Coppermine has committed to lending a total of $485,163 in working capital funding through September 30, 2025. However, there is no assurance that level of funding provided by Coppermine will be adequate to meet the operating needs, licensing expenses and operating expenses of a potential business combination during 2025.
Previous wording
The Company can make no assurances that it will be able to raise the required capital. The Company does not have sufficient cash on hand to finance its plan of operations for the next 12 months from the filing of this report and will need to seek additional capital through debt and/or equity financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Current wording
The Company does not have sufficient cash on hand to finance its plan of operations for the next 12 months from the date of the filing of this report and will need to seek additional capital through debt and/or equity financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Previous wording
As of December 31, 2023 the Company’s working capital deficit was approximately $3,300,000 of which $36,000 was cash. Current liabilities were $3,345,000 and include:
Current wording
As of December 31, 2024, the Company’s working capital deficit was approximately $145,000 of which $16,000 was cash. Current liabilities were $181,000 and include:
Previous wording
Cash used in operating activities was approximately $614,000 in 2023 compared with approximately $1,900,000 in 2022. The cash used in operating activities in 2023 included the negative cash impact of the net loss, which was approximately $1,696,000, offset by a decrease in inventory of $412,000, an increase in accounts payable and accrued expenses of $495,000.
Current wording
Cash used in operating activities was approximately $290,000 in 2024 compared with approximately $614,000 in 2023. The cash used in operating activities in 2024 included the negative cash impact of the net loss, which was approximately $962,000, offset by the goodwill impairment of $539,000, a decrease in accounts payable and accrued expenses of $141,000.
Previous wording
Cash provided by in investing activities in 2023 was $42,970 compared to cash used in investing activities of $0 in 2022. The Company continued and finalized production of the Connected Chef during 2023 and purchased the product mold for future manufacturing. Future capital requirements will increase to fund future mold and tooling as the Company expands the Connected Chef manufacturing.
Current wording
Cash provided by in investing activities in 2024 was $0 compared to cash used in investing activities of $42,970 in 2023. The Company finalized production of the Connected Chef during 2023 and purchased the product mold for future manufacturing. Future capital requirements will increase to fund future mold and tooling if the Company expands the Connected Chef manufacturing.
Previous wording
Cash received and used in financing activities for the years ended December 31, 2023 and 2022, was approximately $632,000 and $688,000, respectively. During 2023, the Company received $632,000 in working capital. In 2022, the Company received $700,000 in working capital funding netted against a $12,000 repurchase of common shares.
Current wording
Cash received and used in financing activities for the years ended December 31, 2024, and 2023, was approximately $269,000 and $632,000, respectively. During 2023, the Company received $632,000 in working capital. In 2024, the Company received $269,000 in working capital funding from related parties.
Previous wording
Sales reductions for anticipated discounts, promotional and marketing allowances, defective warranty claims, and other deductions are recognized during the period the related revenue is recorded. The Company may be subject to chargebacks from customers for negotiated promotional allowances, that are deducted from open invoices and reduce collectability of open invoices. For the years ended December 31, 2023 and 2022, the Company had processed approximately $17,000 and $26,700, respectively for such allowances.
Current wording
Sales reductions for anticipated discounts, promotional and marketing allowances, defective warranty claims, and other deductions are recognized during the period the related revenue is recorded. The Company may be subject to chargebacks from customers for negotiated promotional allowances, that are deducted from open invoices and reduce collectability of open invoices. For the years ended December 31, 2024, and 2023, the Company had processed approximately $0 and $17,000, respectively for such allowances.
Previous wording
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 Company’s market capitalization. There was no impairment charge for the year ended December 31, 2023 and 2022.
Current wording
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 Company’s market capitalization. There was an impairment expense of $539,317 and $0, respectively, for the year ended December 31, 2024 and 2023, for a balance of goodwill of $773,165 and $1,312,482, respectively as of December 31, 2024, and 2023.
Previous wording
As of December 31, 2023, the Company had federal and state net operating loss carry forwards of approximately $6,540,000 and $5,028,000 respectively. The federal net operating loss is available to the Company indefinitely and available to offset up to 80% of future taxable income each year. The net deferred tax liability as of December 31, 2023 and 2022 was $320,000 and $285,000, respectively, and is reflected in long-term liabilities in the accompanying consolidated balance sheets.
Current wording
As of December 31, 2024, the Company had federal and state net operating loss carry forwards of approximately $6,672,000 and $6,540,000 respectively. The federal net operating loss is available to the Company indefinitely and available to offset up to 80% of future taxable income each year. The net deferred tax liability as of December 31, 2024, and 2023 was $196,000 and $320,000, respectively, and is reflected in long-term liabilities in the accompanying consolidated balance sheets.
Previous wording
The effective tax rate for the years ended December 31, 2023 and 2022, respectively, was (2.10 %) and (2.61%) and the statutory tax rate was 23.82% in 2023 and 25.39% in 2022.
Current wording
The effective tax rate for the years ended December 31, 2024, and 2023, respectively, was 11.44% and (2.10%) and the statutory tax rate was 23.5% in 2024 and 23.82% in 2023.
Previous wording
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 Company’s 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, 2023 and 2022. 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 $320,000 and $285,000 is presented on the company’s balance sheet, respectively. The Company’s valuation allowance increased by $248,056 in 2023.
Current wording
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 Company’s 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, 2024, and 2023. 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 $196,000 and $320,000 is presented on the company’s balance sheet, respectively. The Company’s valuation allowance decreased by $112,000 in 2024.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
See Note 1 of the Consolidated Financial Statements at Item 15 of this Report.