Commitments and Contingencies |
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Commitments and Contingencies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | NOTE 8: COMMITMENTS AND CONTINGENCIES
Lease Agreements
Warehouse and Office Space
On May 19, 2022, the Company entered into a 5-year of approximately 3,100 square feet of warehouse and office space. The lease requires base monthly rent of $3,358 per month for the first year and provides for 5% increase in base rent on each anniversary date. At inception of the lease, the Company recorded a right to use asset and obligation of $157,363, equal to the present value of remaining payments of minimum required lease payments.
As of March 31, 2024 and December 31, 2023, right-of-use assets (“ROU”) are summarized as follows:
As of March 31, 2024 and December 31, 2023, operating lease liabilities related to the ROU assets are summarized as follows:
As of March 31, 2024, the weighted average lease term remaining is 3.17 years and the imputed interest rate is 14%.
The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2024:
The Company amortized $6,868 and $6,072 of the right to use asset during the three months ended March 31, 2024 and 2023, respectively.
Rent expense for the three months ended March 31, 2024 and 2023 totaled $16,806 and $16,791, respectively.
Legal Matters
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. There are no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations and there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
On April 20, 2023, the Company entered into a Litigation Resolution Agreement (the “Agreement”) with Safa Goods, LLC regarding trademark and patent infringements of Company branded products. Pursuant to the terms of the Agreement, the Company is to receive cash payments $5,300,197 over 18-months which will be recognized as settlement income when received due to uncertainty in timing and amount to be received. The Company received cash payments under the Agreement totaling $486,639, net of settlement legal fees during the three months ended March 31, 2024 and are included in net settlement income in the accompanying statements of operations.
Voluntary Recall
In February 2024, the Company initiated a voluntary recall of approximately 62,200 lighters due to a missing child safety feature. Under ASC 606, these products are not eligible for revenue recognition, as revenue cannot be recognized for amounts that are not expected to be entitled. Consequently, the Company recorded this as a refund liability. For the year ended December 31, 2023, the total impact of the recall, amounting to $198,068, has been recognized against revenues and receivables for potential credits associated with the recalled products.
During the three months ended March 31, 2024, $363 was refunded to retail consumers in cash, and $79,670 in credits was issued to wholesale and distributor customers. Only $1,971 of the credits were utilized during the three months ended March 31, 2024, the remaining unutilized credits are still included in the refund liability. The Company anticipates issuing refunds related to the recall throughout the year and will continue to evaluate potential losses.
As of March 31, 2024, and December 31, 2023, the refund liability was $184,151 and $186,485, respectively.
Customer Concentration
During the three months ended March 31, 2024, 60% of the Company’s net revenues were generated from five customers. Accounts receivable and royalty receivable due from these customers as of March 31, 2024 and December 2023 totaled $391,697 and $110,051, respectively
During the three months ended March 31, 2023, 72% of the Company’s net revenues were generated from two customers. Accounts receivable and royalty receivable due from these customers as of March 31, 2023 totaled $218,600 |