Florida
|
84-1047159
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441
|
(Address of principal executive offices)
|
(954) 252-3440
|
(Issuer's Telephone Number)
|
Large accelerated filer [_]
|
Accelerated filer [_]
|
Non-accelerated filer [_]
|
Smaller reporting company [x]
|
Emerging Growth company [ ]
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
None
|
N/A
|
N/A
|
PART 1
|
FINANCIAL INFORMATION
|
3
|
Item 1.
|
Condensed Consolidated Financial Statements (Unaudited)
|
3
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operation
|
25
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
45
|
Item 4.
|
Controls and Procedures
|
45
|
PART II
|
Other Information
|
47
|
Item 1.
|
Legal Proceedings
|
47
|
Item 1A.
|
Risk Factors
|
47
|
Item 2.
|
Unregistered Sale of Equity Securities and Use of Proceeds
|
52
|
Item 3.
|
Defaults of Senior Securities
|
52
|
Item 4.
|
Mine Safety Disclosures
|
52
|
Item 5.
|
Other Information
|
52
|
Item 6.
|
Exhibits
|
53
|
CAPSTONE COMPANIES, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
March 31,
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
Assets:
|
(Unaudited)
|
|||||||
Current Assets:
|
||||||||
Cash
|
$
|
2,452,652
|
$
|
3,131,249
|
||||
Accounts receivable, net
|
69,973
|
13,459
|
||||||
Inventories
|
13,426
|
24,818
|
||||||
Prepaid expenses
|
140,583
|
182,782
|
||||||
Income tax refundable
|
966,179
|
220,207
|
||||||
Total Current Assets
|
3,642,813
|
3,572,515
|
||||||
Property and equipment, net
|
75,314
|
65,649
|
||||||
Operating lease – right of use asset
|
200,619
|
214,202
|
||||||
Deposit
|
11,147
|
46,021
|
||||||
Goodwill
|
1,645,961
|
1,936,020
|
||||||
Total Assets
|
$
|
5,575,854
|
$
|
5,834,407
|
||||
Liabilities and Stockholders’ Equity:
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
$
|
837,344
|
$
|
635,593
|
||||
Operating lease – current portion
|
58,514
|
51,174
|
||||||
Total Current Liabilities
|
895,858
|
686,767
|
||||||
Long-Term Liabilities:
|
||||||||
Operating lease – long-term portion
|
155,851
|
170,998
|
||||||
Deferred tax liabilities
|
172,287
|
-
|
||||||
Total Long-Term Liabilities
|
328,138
|
170,998
|
||||||
Total Liabilities
|
1,223,996
|
857,765
|
||||||
Commitments and Contingencies
|
||||||||
Stockholders' Equity:
|
||||||||
Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares
|
-
|
-
|
||||||
Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares
|
-
|
-
|
||||||
Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued -0- shares
|
-
|
-
|
||||||
Common Stock, par value $.0001 per share, authorized 56,666,667 shares, outstanding 46,296,364 shares at March 31, 2020 and 46,579,747 shares at December 31, 2019
|
4,630
|
4,658
|
||||||
Additional paid-in capital
|
7,034,185
|
7,061,565
|
||||||
Accumulated deficit
|
(2,686,957
|
)
|
(2,089,581
|
)
|
||||
Total Stockholders' Equity
|
4,351,858
|
4,976,642
|
||||||
Total Liabilities and Stockholders’ Equity
|
$
|
5,575,854
|
$
|
5,834,407
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
CAPSTONE COMPANIES, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
(Unaudited)
|
||||||||
For the Three Months Ended
|
||||||||
March 31,
|
||||||||
2020
|
2019
|
|||||||
Revenues, net
|
$
|
148,977
|
$
|
2,978,802
|
||||
Cost of sales
|
(114,821
|
)
|
(2,352,215
|
)
|
||||
Gross Profit
|
34,156
|
626,587
|
||||||
Operating Expenses:
|
||||||||
Sales and marketing
|
211,973
|
191,875
|
||||||
Compensation
|
376,675
|
374,848
|
||||||
Professional fees
|
130,530
|
157,803
|
||||||
Product development
|
51,614
|
85,229
|
||||||
Other general and administrative
|
144,366
|
163,711
|
||||||
Goodwill impairment charge
|
290,059
|
-
|
||||||
Total Operating Expenses
|
1,205,217
|
973,466
|
||||||
Operating Loss
|
(1,171,061
|
)
|
(346,879
|
)
|
||||
Other Expenses, net
|
-
|
(10,461
|
)
|
|||||
Loss Before Tax Benefit
|
(1,171,061
|
)
|
(357,340
|
)
|
||||
Benefit for Income Tax
|
(573,685
|
)
|
(12,000
|
)
|
||||
Net Loss
|
$
|
(597,376
|
)
|
$
|
(345,340
|
)
|
||
Net Loss per Common Share
|
||||||||
Basic and Diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
||
Weighted Average Shares Outstanding
|
||||||||
Basic and Diluted
|
46,463,365
|
47,033,670
|
||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
CAPSTONE COMPANIES, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||||||||||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND MARCH 31, 2019
|
||||||||||||||||||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock
|
Preferred Stock
|
Preferred Stock
|
Additional
|
|||||||||||||||||||||||||||||||||||||||||
Series A
|
Series B
|
Series C
|
Common Stock
|
Paid-In
|
Accumulated
|
Total
|
||||||||||||||||||||||||||||||||||||||
Shares
|
Par Value |
Shares
|
Par Value
|
Shares
|
Par Value
|
Shares
|
Par Value
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||||||||||||||||||||
Balance at December 31, 2019
|
-
|
$
|
-
|
-
|
$
|
-
|
-
|
$
|
-
|
46,579,747
|
$
|
4,658
|
$
|
7,061,565
|
$
|
(2,089,581
|
)
|
$
|
4,967,642
|
|||||||||||||||||||||||||
Stock options for compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
8,925
|
-
|
8,925
|
|||||||||||||||||||||||||||||||||
Repurchase of shares
|
-
|
-
|
-
|
-
|
-
|
-
|
(283,383
|
)
|
(28
|
)
|
(36,305
|
)
|
-
|
(36,333
|
)
|
|||||||||||||||||||||||||||||
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(597,376
|
)
|
(597,376
|
)
|
|||||||||||||||||||||||||||||||
Balance at March 31, 2020
|
-
|
$
|
-
|
-
|
$
|
-
|
-
|
$
|
-
|
46,296,364
|
$
|
4,630
|
$
|
7,034,185
|
$
|
(2,686,957
|
)
|
$
|
4,351,858
|
|||||||||||||||||||||||||
Balance at December 31, 2018
|
-
|
$
|
-
|
-
|
$
|
-
|
-
|
$
|
-
|
47,046,364
|
$
|
4,704
|
$
|
7,092,219
|
$
|
(1,197,912
|
)
|
$
|
5,899,011
|
|||||||||||||||||||||||||
Stock options for compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
11,025
|
-
|
11,025
|
|||||||||||||||||||||||||||||||||
Repurchase of shares
|
-
|
-
|
-
|
-
|
-
|
-
|
(45,470
|
)
|
(3
|
)
|
(8,612
|
)
|
-
|
(8,615
|
)
|
|||||||||||||||||||||||||||||
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(345,340
|
)
|
(345,340
|
)
|
|||||||||||||||||||||||||||||||
Balance at March 31, 2019
|
-
|
$
|
-
|
-
|
$
|
-
|
-
|
$
|
-
|
47,000,894
|
$
|
4,701
|
$
|
7,094,632
|
$
|
(1,543,252
|
)
|
$
|
5,556,081
|
|||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
CAPSTONE COMPANIES, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(Unaudited)
|
||||||||
For the Three Months Ended
|
||||||||
March 31,
|
||||||||
2020
|
2019
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(597,376
|
)
|
$
|
(345,340
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
6,074
|
10,830
|
||||||
Stock based compensation expense
|
8,925
|
11,025
|
||||||
Noncash lease expense
|
13,583
|
-
|
||||||
Goodwill impairment charge
|
290,059
|
-
|
||||||
Provision (Benefit) for deferred income tax
|
172,287
|
(12,000
|
)
|
|||||
(Increase) in accounts receivable, net
|
(56,515
|
)
|
(2,284,747
|
)
|
||||
Decrease in inventories
|
11,392
|
10,196
|
||||||
Decrease in prepaid expenses
|
42,199
|
167,152
|
||||||
(Increase) decrease in deposits
|
34,874
|
(388
|
)
|
|||||
Increase in accounts payable and accrued liabilities
|
201,752
|
277,389
|
||||||
(Increase) in income tax refundable
|
(745,972
|
)
|
-
|
|||||
(Decrease) in deferred rent incentive
|
-
|
(25,017
|
)
|
|||||
(Decrease) in operating lease liabilities
|
(7,807
|
)
|
-
|
|||||
Net cash used in operating activities
|
(626,525
|
)
|
(2,190,900
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase of property and equipment
|
(15,739
|
)
|
-
|
|||||
Net cash used in investing activities
|
(15,739
|
)
|
-
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Repurchase of Shares
|
(36,333
|
)
|
(8,615
|
)
|
||||
Net cash used in financing activities
|
(36,333
|
)
|
(8,615
|
)
|
||||
Net Decrease in Cash
|
(678,597
|
)
|
(2,199,515
|
)
|
||||
Cash at Beginning of Period
|
3,131,249
|
3,822,359
|
||||||
Cash at End of Period
|
$
|
2,452,652
|
$
|
1,622,844
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$
|
-
|
$
|
-
|
||||
Income taxes
|
$
|
-
|
$
|
-
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
March 31,
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
Trade Accounts Receivables at period end
|
$
|
69,973
|
$
|
276,551
|
||||
Reserve for estimated marketing allowances, cash discounts and other incentives
|
-
|
(263,092
|
)
|
|||||
Total Accounts Receivable, net
|
$
|
69,973
|
$
|
13,459
|
Balance at December 31, 2019
|
$
|
1,936,020
|
||
Impairment charge
|
(290,059
|
)
|
||
Balance at March 31, 2020
|
$
|
1,645,961
|
•
|
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.
|
Three months ended
|
Three months ended
|
|||||||
March 31, 2020
|
March 31, 2019
|
|||||||
Basic weighted average shares outstanding
|
46,463,365
|
47,033,670
|
||||||
Dilutive options
|
-
|
-
|
||||||
Diluted weighted average shares outstanding
|
46,463,365
|
47,033,670
|
For the Three Months Ended March 31, 2020
|
For the Three Months Ended March 31, 2019
|
|||||||||||||||||||||||
Capstone Brand
|
License Brands
|
Total Consolidated
|
Capstone Brand
|
License Brands
|
Total Consolidated
|
|||||||||||||||||||
Lighting Products- U.S.
|
$
|
48,303
|
$
|
-
|
$
|
48,303
|
$
|
2,677,627
|
$
|
-
|
$
|
2,677,627
|
||||||||||||
Lighting Products-International
|
100,674
|
-
|
100,674
|
301,175
|
-
|
301,175
|
||||||||||||||||||
Total Revenue
|
$
|
148,977
|
$
|
-
|
$
|
148,977
|
$
|
2,978,802
|
$
|
-
|
$
|
2,978,802
|
March 31,
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
Balance at the beginning of the period
|
$
|
247,850
|
$
|
212,495
|
||||
Amount accrued
|
-
|
180,797
|
||||||
Expenditures
|
(115,919
|
)
|
(145,442
|
)
|
||||
Balance at period-end
|
$
|
131,931
|
$
|
247,850
|
March 31,
|
December 31,
|
|||||||
2020
|
2019
|
|||||||
Accounts payable
|
$
|
189,008
|
$
|
273,606
|
||||
Accrued warranty reserve
|
131,931
|
247,850
|
||||||
Accrued compensation, benefits, marketing allowances and other liabilities
|
516,405
|
114,137
|
||||||
Total accrued liabilities
|
648,336
|
361,987
|
||||||
Total
|
$
|
837,344
|
$
|
635,593
|
Assets
|
||||
Operating lease - right-of-use asset
|
$
|
200,619
|
||
Liabilities
|
||||
Current
|
||||
Current portion of operating lease
|
$
|
58,514
|
||
Noncurrent
|
||||
Operating lease liability, net of current portion
|
$
|
155,851
|
Operating lease expense as a component of other general and administrative
|
$
|
17,460
|
Year
|
Operating Lease
|
|||
2020, remaining nine months
|
$
|
53,628
|
||
2021
|
73,290
|
|||
2022
|
75,492
|
|||
2023
|
38,304
|
|||
Total Minimum Future Payments
|
240,714
|
|||
Less: Imputed Interest
|
26,349
|
|||
Present Value of Lease Liabilities
|
$
|
214,365
|
2020
|
2019
|
|||||||
Current:
|
||||||||
Federal
|
$
|
(745,972
|
)
|
$
|
-
|
|||
State
|
-
|
-
|
||||||
Deferred:
|
||||||||
Federal
|
167,538
|
(11,340
|
)
|
|||||
State
|
4,749
|
(660
|
)
|
|||||
Income Tax (Benefit)
|
$
|
(573,685
|
)
|
$
|
(12,000
|
)
|
•
|
COVID-19 on our financial condition and operations, which could adversely affect our ability to obtain acceptable financing in an amount equal to
the resulting reduction in cash from operations, and the current, and uncertain future, other impacts of the COVID-19 outbreak, including its effect on the retail market place and the closure of retail stores and its effect on consumer
confidence and on the ability or desire of consumers to purchase nonessential goods, which are expected to continue to adversely impact our results, operations, outlook, plans, goals, growth, cash flows, liquidity, demand for consumer
products and share price.
|
•
|
our success in reducing operating expenses and the impact of any such reductions.
|
•
|
our ability to work with Sterling National Bank to renew our existing credit facility and maintain sufficient collateral.
|
•
|
adverse general economic and related factors, such as fluctuating or increasing levels of unemployment, declines in the securities and real estate
markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence.
|
•
|
the spread of epidemics, pandemics, and viral outbreaks.
|
•
|
our anticipated need for additional financing, which may not be available on favorable terms, or at all, and may be dilutive to existing
shareholders.
|
•
|
our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our liquidity requirements
that are sufficient to eliminate the substantial doubt about our ability to continue as a going concern.
|
•
|
an impairment of our goodwill, including in connection with the preparation of our financial statements as of March 31, 2020 and in future
reporting periods.
|
•
|
the risks and increased costs associated with operating internationally.
|
•
|
fluctuations in foreign currency exchange rates.
|
•
|
our expansion into and investments in new categories.
|
•
|
our inability to obtain adequate insurance coverage.
|
•
|
volatility and disruptions in the credit and financial markets, which may adversely affect our ability to borrow.
|
•
|
our inability to recruit or retain qualified personnel or the loss of key personnel.
|
•
|
our inability to keep pace with developments in technology.
|
•
|
other factors are set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.
|
(1) |
"Capstone Lighting Technologies, L.L.C." or "CLTL" is a wholly owned subsidiary of Capstone Companies, Inc.
|
(2) |
"Capstone International Hong Kong Ltd" or "CIHK" is a wholly owned subsidiary of Capstone Companies, Inc. and a Hong Kong registered Company.
|
(3) |
"Capstone Industries, Inc., a Florida corporation and a wholly owned subsidiary of CAPC, may also be referred to as "CAPI" or "Capstone".
|
(4) |
"Capstone Companies, Inc.," a Florida corporation, may also be referred to as "we," "us" "our," "Company," or "CAPC". Unless the context indicates otherwise, "Company" includes in its meaning all of Capstone Companies, Inc.
Subsidiaries.
|
(5) |
"China" means People’s Republic of China.
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(6) |
"W" means watts.
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(7) |
References to "33 Act" or "Securities Act" means the Securities Act of 1933, as amended.
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(8) |
References to "34 Act" or "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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(9) |
"SEC" or "Commission" means the U.S. Securities and Exchange Commission.
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(10) |
"Subsidiaries" means Capstone Industries, Inc. ("CAPI"), Capstone International H.K Ltd., ("CIHK"), and Capstone Lighting Technologies, Inc. ("CLTL").
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(11) |
Any reference to fiscal year in this Annual Report on Form 10-K means our fiscal year, ending December 31st, 2019.
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(12) |
"LED" or "LED's" means a light-emitting diode component(s) which can be assembled into light bulbs or can be used in lighting fixtures.
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(13) |
"OEM" means "original equipment manufacturer."
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(14) |
“Connected Surfaces” or “Connected Products” means smart home devices with embedded sensors that provide communication and data transfer between the Connected Surface and internet-enabled systems of the Company or associated third
parties. Connected Surfaces may permit internet access for defined functions.
|
•
|
To make everyday tasks or usage simpler and more enjoyable for consumers.
|
•
|
While continuing to focus on increased profit margins, the products must be affordable to win at the point of sale and deliver increased revenues for retail partners.
|
•
|
The products must represent significant value when compared with items produced or marketed by competitive consumer product companies; and
|
•
|
Wherever feasible, the products must be unique to the market whether this be accomplished though design techniques, added functionality or some proprietary
innovation.
|
•
|
develop product with increasing technology and functionality with enhanced quality and performance, and at a very competitive cost.
|
•
|
solidify new manufacturing relationships with contract manufacturers in Thailand.
|
•
|
Raw Materials – Components and supplies are subject to sample inspections upon arrival at the contract manufacturer, to ensure the correct specified components are being used in
production.
|
•
|
Work in Process – Our quality control team conducts quality control tests at different points during the product stages of our manufacturing process to ensure that quality integrity is
maintained.
|
•
|
Finished Goods – Our team performs tests on finished and packaged products to assess product safety, integrity and package compliance.
|
•
|
hurricanes, fire, flood and other natural disasters
|
•
|
power outage
|
•
|
internet, telecommunications or data network failure.
|
Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019
|
||||||||||||||||
(In Thousands)
|
||||||||||||||||
March 31, 2020
|
March 31, 2019
|
|||||||||||||||
Dollars
|
% of Revenue
|
Dollars
|
% of Revenue
|
|||||||||||||
Revenues, net
|
$
|
149
|
100.0
|
%
|
$
|
2,979
|
100.0
|
%
|
||||||||
Cost of sales
|
(115
|
)
|
(77.2
|
)%
|
(2,352
|
)
|
(79.0
|
)%
|
||||||||
Gross Profit
|
34
|
22.8
|
%
|
627
|
21.0
|
%
|
||||||||||
Operating Expenses:
|
||||||||||||||||
Sales and marketing
|
212
|
142.3
|
%
|
192
|
6.4
|
%
|
||||||||||
Compensation
|
377
|
253.0
|
%
|
375
|
12.6
|
%
|
||||||||||
Professional fees
|
130
|
87.3
|
%
|
158
|
5.3
|
%
|
||||||||||
Product development
|
52
|
34.9
|
%
|
85
|
2.8
|
%
|
||||||||||
Other general and administrative
|
144
|
96.6
|
%
|
164
|
5.5
|
%
|
||||||||||
Goodwill impairment charge
|
290
|
194.6
|
%
|
-
|
-
|
%
|
||||||||||
Total Operating Expenses
|
1,205
|
808.7
|
%
|
974
|
32.6
|
%
|
||||||||||
Operating Loss
|
(1,171
|
)
|
(785.9
|
)%
|
(347
|
)
|
(11.6
|
)%
|
||||||||
Other expense, net
|
-
|
-
|
%
|
(10
|
)
|
(0.4
|
)%
|
|||||||||
Loss Before Tax Benefit
|
(1,171
|
)
|
(785.9
|
)%
|
(357
|
)
|
(12.0
|
)%
|
||||||||
Benefit for Income Tax
|
(574
|
)
|
385.3
|
%
|
(12
|
)
|
0.4
|
%
|
||||||||
Net Loss
|
$
|
(597
|
)
|
(400.6
|
)%
|
$
|
(345
|
)
|
(11.6
|
)%
|
•
|
$146.7 thousand for the CES show and the launch of the Smart Mirror project.
|
•
|
$31.3 thousand in continued development of the Connected surfaces software.
|
•
|
$18.2 thousand in website development for Connected Surfaces online sales and social media marketing
|
Summary of Cash Flows
|
For the Three Months ended March 31,
|
|||||||
2020
|
2019
|
|||||||
(In thousands)
|
||||||||
Net cash used in :
|
||||||||
Operating Activities
|
$
|
(627
|
)
|
$
|
(2,191
|
)
|
||
Investing Activities
|
(16
|
)
|
-
|
|||||
Financing Activities
|
(36
|
)
|
(9
|
)
|
||||
Net decrease in cash and cash equivalents
|
$
|
(679
|
)
|
$
|
(2,200
|
)
|
•
|
Accounts payable of approximately $189 thousand due vendors and service providers.
|
•
|
Accrued expenses of approximately $516 thousand for various services and allowances.
|
•
|
Warranty provision for estimated defective returns in the amount of approximately $132 thousand.
|
•
|
Operating lease-current portion of approximately $59 thousand.
|
•
|
The possibility of expropriation, confiscatory taxation or price controls.
|
•
|
Adverse changes in local investment or exchange control regulations.
|
•
|
Political or economic instability, government nationalization of business or industries, government corruption, and civil unrest.
|
•
|
Legal and regulatory constraints.
|
•
|
Tariffs and other trade barriers, including trade disputes between the U.S. and China.
|
•
|
Political or military conflict between the U.S. and China, or between U.S. and North Korea, resulting in adverse or restricted access by U.S.-based companies to Chinese manufacturing and
markets.
|
•
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company.
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the
financial statements.
|
•
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
|
•
|
an increase or decrease in consumer demand for our products.
|
•
|
our failure to accurately forecast consumer acceptance for our new products.
|
•
|
product introductions by competitors.
|
•
|
unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction or increase in the rate of reorders or at-once
orders placed by retailers.
|
•
|
weakening of economic conditions or consumer confidence in future economic conditions, which could reduce demand for discretionary items, such as our products; and
|
•
|
terrorism or acts of war, or the threat thereof, political or labor instability or unrest or public health concerns and disease epidemics, such as the current COVID-19 pandemic, which
could adversely affect consumer confidence and spending or interrupt production and distribution of product and raw materials.
|
•
|
political or labor unrest, terrorism, public health crises, disease epidemics and economic instability resulting in the disruption of trade from foreign countries in which our products
are manufactured.
|
•
|
currency exchange fluctuations or requirements to transact in specific currencies.
|
•
|
the imposition of new laws and regulations or government-imposed protective or preventative measures, including those relating to labor conditions, quality and safety standards and
disease epidemics or other public health concerns, as well as rules and regulations regarding climate change.
|
•
|
actions of foreign or U.S. governmental authorities impacting trade and foreign investment, particularly during periods of heightened tension between U.S. and foreign governments,
including the imposition of new import limitations, duties, anti-dumping penalties, trade restrictions or restrictions on the transfer of funds.
|
•
|
reduced protection for intellectual property rights in some countries.
|
•
|
disruptions or delays in shipments; and
|
•
|
changes in local economic conditions in countries where our customers, manufacturers and suppliers are located.
|
EXHIBIT #
|
EXHIBIT TITLE
|
31.1
|
Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
31.2
|
Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
32.1
|
Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350,
|
32.2
|
Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350,
|
/s/ Stewart Wallach
|
|
Stewart Wallach
|
Chief Executive Officer
|
Principal Executive Officer
|
|
/s/James G. McClinton
|
|
James G. McClinton
|
Chief Financial Officer and Chief Operating Officer
|
Principal Financial
Executive and Accounting Officer
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most
recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over
financial reporting; and
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over
financial reporting.
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most
recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over
financial reporting; and
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over
financial reporting.
|
(1) |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
(1) |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|