Filed 2026-04-01 · Period ending 2025-12-31 · 45,477 words · SEC EDGAR
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# CAPSTONE COMPANIES, INC. (CAPC) — 10-K
**Filed:** 2026-04-01
**Period ending:** 2025-12-31
**Accession:** 0001903596-26-000120
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/814926/000190359626000120/)
**Origin leaf:** 087edfc682016a619099c590544af2ce17af128aeaeca1e6050d46edf55c2f15
**Words:** 45,477
---
**
UNITED
STATES**
**SECURITIES
AND EXCHANGE COMMISSION**
**Washington,
DC 20549**
**FORM
10-K**
(Mark
One)
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2025
or
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from _______ to _______
Commission
File Number 000-28831
CAPSTONE COMPANIES, INC.
(Exact
name of small business issuer as specified in its charter)
|
Florida |
84-1047159 | |
|
(State
or Other Jurisdiction of Incorporation) |
(I.R.S.
Employer No.) | |
# 144-V 10 Fairway Drive,Suite 100,
Deerfield Beach,Florida33441
(Address
of principal executive offices) (Zip Code)
(954)
252-3440
(Small
business issuers telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Exchange Act:
|
Title
of each class Trading |
Name
of each exchange on which registered |
Symbol(s) | |
|
|
|
| |
|
None |
N/A |
N/A | |
Securities
registered pursuant to Section 12(g) of the Act:
COMMON
STOCK, $0.0001 PAR VALUE
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes
No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes No
Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.Yes
No
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes No
Indicate
by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, emerging growth
company or a smaller reporting company. See definitions of large, accelerated filer, accelerated filer,
emerging growth company and smaller reporting Company in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filerAccelerated filer Non-accelerated filerSmaller reporting Company
Emerging Growth Company
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate
by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As
of June 30, 2025, the last business day of the registrants most recently completed second fiscal quarter, the aggregate
market value of our common stock issued and outstanding, other than shares held by persons who may be deemed affiliates of the
registrant, computed by reference to the closing sales price for the common stock on June 30, 2025, as reported on the OTC QB
Venture Market, was $1,168,270.
Number
of estimated shares outstanding of the Registrants Common Stock as of March 30, 2026, is 48,826,864.
DOCUMENTS
INCORPORATED BY REFERENCE
None
1
TABLE
OF CONTENTS
|
Item
Number |
Description |
Page | |
|
|
Part I |
5 | |
|
|
|
| |
|
Item 1. |
Business |
5 | |
|
Item 1A. |
Risk Factors |
15 | |
|
Item 1B. |
Unresolved Staff Comments |
21 | |
|
Item 1C. |
Cybersecurity |
24 | |
|
Item 2. |
Properties |
21 | |
|
Item 3. |
Legal Proceedings |
22 | |
|
Item 4. |
Mine Safety Disclosures (Not Applicable) |
22 | |
|
|
Part II |
22 | |
|
|
|
| |
|
Item 5. |
Market for Registrants Common Equity and Related Stockholder Matters |
22 | |
|
Item 6. |
[RESERVED] |
24 | |
|
Item 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operation |
24 | |
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk (Not Applicable) |
35 | |
|
Item 8. |
Financial Statements and Supplementary Data |
35 | |
|
Item 9. |
Change in and Disagreements with Accountants on Accounting and Financial Disclosure |
35 | |
|
Item 9A. |
Controls and Procedures |
36 | |
|
Item 9B. |
Other Information |
37 | |
|
Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection |
37 | |
|
|
Part III |
37 | |
|
|
|
| |
|
Item 10. |
Directors, Executive Officers and Corporate Governance |
37 | |
|
Item 11. |
Executive Compensation |
46 | |
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
52 | |
|
Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
54 | |
|
Item 14. |
Principal Accounting Fees and Services |
56 | |
|
|
Part IV |
57 | |
|
|
|
| |
|
Item 15. |
Exhibits, Financial Statement Schedules |
57 | |
|
Item 16. |
Form 10-K Summary |
58 | |
2
DEFINITIONS:
As
used in this Annual Report on Form 10-K, the following terms have the stated meaning or meanings:
|
|
(1) |
Capstone
International Hong Kong Ltd or CIHK is a wholly owned subsidiary of Capstone Companies, Inc. and a Hong
Kong registered Company. | |
|
|
(2) |
Capstone
Industries, Inc., a Florida corporation and a wholly owned subsidiary of CAPC, may also be referred to as CAPI
or Capstone. | |
|
|
(3) |
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. | |
|
|
(4) |
China
means Peoples Republic of China. | |
|
|
(5) |
References
to 33 Act or Securities Act means the Securities Act of 1933, as amended. | |
|
|
(6) |
References
to 34 Act or Exchange Act means the Securities Exchange Act of 1934, as amended. | |
|
|
(7) |
SEC
or Commission means the U.S. Securities and Exchange Commission. | |
|
|
(9) |
Subsidiaries
means Capstone Industries, Inc. (CAPI), Capstone International H.K Ltd., (CIHK). | |
|
|
(10) |
Any
reference to fiscal year in this Annual Report on Form 10-K means our fiscal year, ending December 31st. | |
|
|
(11) |
LED
or LEDs means a light-emitting diode component(s) which can be assembled into light bulbs or can be used
in lighting fixtures. | |
|
|
(12) |
OEM
means original equipment manufacturer. | |
|
|
|
| |
|
|
(13) |
GMS
means Google Mobile Service | |
We
may use FY to mean fiscal year and Q or QTR to mean fiscal quarter in this Report.
3
FORWARD
LOOKING STATEMENTS
This
Annual Report on Form 10-K (Form 10-K report) contains forward-looking statements. Those statements
appear in a number of places in this Form 10-K report and include, without limitation, statements regarding the intent, belief
and current expectations of the Company, its directors or its officers, with respect to: Companys future business and financial
prospects and ability to sustain operations; the prospects for developing a new business line or product line and commercialization
of any new business line or new product line; prospects for raising working capital to sustain operations; the Companys
policies regarding investments, dispositions, financings, conflicts of interest and other matters; and trends or developments
affecting the Companys financial condition, ability to continue operations or results of operations. Forward looking statements
include words like expect, anticipate, hope, project, may,
should, could, or similar words or variants thereof. Company cautions that the foregoing list may
not contain all of the forward-looking statements made in this Form 10-K report.
Any
forward-looking statement is not a guarantee of future performance and involves several risks and uncertainties. These statements
are based upon information available to us as of the date of this Form 10-K report. These statements should not be read to indicate
that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information and relate only
to expectations as of the date on which the statements are made. New risks and uncertainties emerge from time to time and it is
not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained
in this Form 10-K report. results may differ materially from those results implied in the forward-looking statement as a result
of various factors, some factors being beyond the Companys control or ability to foresee. Among the factors that could
cause plans, actions and results to differ materially from current expectations are, without limitation: ability to raise working
capital funding to sustain operations, general economic conditions and consumer confidence in the economy and impact on business
development efforts, impact of government actions on the economy, and disruption from natural or human causes, including severe
weather, accidents, fires, earthquakes, terrorist acts and epidemic or pandemic diseases, government or other restrictions in
response to epidemics or pandemics, and trade disputes between the U.S. and other nations, on business development and working
capital funding of the Company. Our forward-looking statements do not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures or investments, if any.
The
accompanying information contained in this Form 10-K report, including the Managements Discussion and Analysis of
Results of Operations and Financial Condition and Risk Factors identifies other important factors that could
cause such differences. With respect to any forward-looking statement that includes a statement of its underlying assumptions
or bases, the Company cautions that, while it believes such assumptions or bases to be reasonable and has formed them in good
faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual
results can be significant or material depending on the circumstances. When, in any forward-looking statement, the
Company, or its management, expresses an expectation or belief as to future results, that expectation or belief is expressed in
good faith and is believed to have a reasonable basis, but there can be no assurance that the stated expectation or belief will
result or be achieved or accomplished. Further, the Company is a penny stock company with no primary market makers
and the public auditors of the Company have expressed doubt as to the Company as a going concern*.*Company has no current
revenue generating operations and is focused on business development for a new business line or product line. Connected Chef product
lines licensing arrangement was terminated in 2025 due to inability of licensee to reach satisfactory arrangements with
OEMs*.*Such a status makes highly risky any investment in the Company securities. See Risk Factors below.
The forward-looking statements in this Form 10-K report are made as of the date hereof, and, unless required by law or regulation,
we do not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring
after the date hereof.
You
should read this Form 10-K report and the documents that we may reference in this Form 10-K report and have filed with the SEC,
with the understanding that our actual future results, performance, and events and circumstances may be materially different from
what we expect.
4
**PART
I**
**Item
1. Business**
**Overview**
*General.*Capstone Companies, Inc. (Company or CAPC) is a Florida corporation. The Company was a designer,
promoter and licensor of consumer products that were designed to simplify daily living through technology. The most recent product
was the Connected Chef kitchen tablet, but the Company was unable to successfully commercialize the Connected Chef kitchen tablet
in fiscal year 2025. The Company pursued development o a new business line in health, fitness and social activities industry (as
described in Health, Fitness and Social Activities Business below) in fiscal year 2025, which effort has not resulted
in the acquisition or development of a health, fitness and social activities industry (HFS industry) in fiscal year
2025. The Company has and will consider opportunities in other industries in fiscal year 2025 and in fiscal year 2026.
**2026
Business Development Efforts: eBliss Note.**On March 3, 2026, the Company entered into a promissory note with eBliss Global,
Inc. (eBliss Note), a private early-stage Delaware corporation engaged in the developing and production of e-mobility
solutions (including and initially making e-bikes as transportation vehicles at a Utica, New York factory). The interest rate
under the eBliss Note is seven percent simple annual interest. Principal and accrued interest are due in a single lump sum payment
due on March 4, 2027. The eBliss Note is unsecured and does not provide for a conversion of debt-to-equity securities. The Loan
is being made to supply working capital to the Company and as partial consideration for a 90-day no shop provision
in the e-Bliss Note. During the 90 days following the funding of the principal of the eBliss Note (No Shop Period),
the Company will not entertain third party proposals for a merger, business combination, stock or asset acquisition, strategic
alliance or joint venture for product development or similar transactions (collectively, Transactions) and will
cease any third party discussions for any Transactions for the No Shop Period, except that the Company may entertain third party
proposals during the last 30 days of the No Shop Period if the Company and eBliss have not signed a definitive agreement or letter
of intent for a Transaction during the first 60 days of the No Shop Period and the third party proposal is deemed superior
to any existing proposal for a Transaction from eBliss, if any. The purpose of the no shop provision is to afford
the Company and eBliss an opportunity to discuss the possibility and feasibility of a mutually beneficial Transaction by eBliss
and the Company and conduct any desired due diligence.
**2025
Product Development Efforts.**The following discusses efforts by the Company to develop a new product line in 2025 and in 2023
and 2024. The Company has been unable to successfully launch a new product line with the maturation of its former traditional
business line in LED Lighting Products.
*Connected
Chef Product Line.* During 2023, the Company developed the Connected Chef (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 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, which the Company was unsuccessful in obtaining since 2023. On March
21, 2025, the Company executed a license agreement (the License Agreement) with a company (Licensee)
based in the United Kingdom. The Licensee received a limited, exclusive, non-transferable, worldwide license to promote, market,
sell, distribute, produce and manufacture Connected Chef. Under the License, the Company would receive a license fee of $15 for
each Connected Chef sold and received by a buyer. Promotion, marketing and sale of the Connected Chef was subject to finalizing
production arrangements with the contract manufacturer of the Connected Chef. The term of the License Agreement was 5 years plus
one (1) year, post-termination extension was to permit selloff of any inventory. During the first week of November 2025, the Company
was advised by the Licensee that the prospective Chinese OEM would not produce the Connected Chef because it was developed by
an American company. Consequently, and with no suitable replacements evident for the OEM, the Company and Licensee ended the License
Agreement in the first week of November 2025. The Company is not considering further efforts to license the Connected Chef as
of the date of the fling of this Form 10-K, but the Company may reconsider efforts to license. The Company received no license
revenue during 2025.
5
*Smart
Mirror Product Line*. The Connected Surfaces was the Companys effort to establish a business line in an emerging segment
and was intended for future revenue growth and to replace the declining LED Lighting business line. The Connected Surfaces Smart
Mirror products did not achieve significant sales, therefore all inventory was expensed as of December 31, 2023, and the remaining
inventory on hand was liquidated as of June 30,2024. The Company ended the Smart Mirror Product business line in 2024.
*LED
Lighting Product Line*. The Companys focus through 2017 was the integration of LEDs into most commonly used consumer
lighting products in todays home. The LED category has matured and is no longer the innovative must have
consumer product as in previous years and, as such, revenues for the LED product line have declined significantly from previous
years. From time to time, the Company receives orders from one distributor which the Company will fulfill, but in 2023 the Company
ceased to promote the LED Lighting product line as its primary business line.
**HFS
Business Development Efforts***.*The following section discusses Companys efforts to develop a business line in
the HFS industry in 2025, which efforts have not produced a new business line or operation in fiscal year 2025 or in the first
fiscal quarter of 2026. These efforts have been suspended in March 2026 for the 90-day no shop period as described
in eBliss Note above.
The
Company commenced in 2024 its business development of a new business line focused on year-round health, fitness and social activities
business at facilities that would be owned, leased or operated by the Company (this business line being referred to as HFS
or HFS business). The Company started this initiative due to the popularity of sports like pickle ball and flag
football, health, fitness and social activities at dedicated facilities are being developed nationwide and interactions with Coppermine
Ventures, LLC, a private Maryland limited liability company that operates through its subsidiaries HFS operations in Maryland,
(Coppermine). Coppermine provided working capital to the Company beginning in 2024 and through 2025 and 2026 under
an unsecured promissory note and amendments thereto with the managing member of Coppermine, Alexander Jacobs, becoming Chief Executive
Officer and a director of the Company in December 2024. The expertise of Mr. Jacobs in HFS industry enhanced the ability of the
Company to identify and evaluate any HFS industry opportunities. While the possibility of cooperative business activities by Coppermine
and the Company were discussed from time to time in 2024 and 2025, and may be revisited in fiscal year 2026, if circumstances
warrant such discussions, no legally binding agreements or actual cooperative efforts developed (other than an initial proposal
for the Company developing a customer management software system for Coppermine operations), the only transactions between Coppermine
and the Company to date have been working capital funding by Coppermine of the Company and the Management Transition Agreement,
dated October 31, 2024, between Coppermine and the Company.
The
Companys business concept in its HFS business development concept has been to feature indoor and outdoor pickle ball courts
as a primary attraction, but also to offer other sports and entertainment-social events in order to attract customers year-round
and morning-to-evening and also to attract league, tournament and corporate events. The Company was unable in 2025 to locate a
suitable HFS industry opportunity or to secure working capital funding to enable consummating a HFS industry opportunity.
**2024
Management Transition Agreement**. In furtherance of the HFS business development efforts, the Company entered into a Management
Transition Agreement, dated October 31, 2024, with Coppermine to identify and nominate a chief executive officer and two board
members for the Company as a management team to focus on development of the health, fitness and social business line. Coppermine
operates a successful and growing health, fitness and sports business in the State of Maryland. On December 4, 2024, the Company
employed Alexander Jacobs as Companys Chief Executive Officer, in order to assist the HFS business development. Mr. Jacobs
is the founder, senior executive and owner of Coppermine. On January 20, 2025, the Companys Board of Directors (Board)
appointed Brian Rosen, a nominee of Coppermine, as a non-employee director of the Company. Mr. Rosen has a business relationship
with Coppermine. The Company also appointed Warner Session, a Washington, D.C. real estate lawyer and lobbyist, as an independent
director to the Board on January 9, 2025, in order to assist in the Companys efforts to develop the health, fitness and
social business line. Mr. Sessions experience and skills in real estate transaction and funding and lobbying are deemed
as important skill sets for the HFS business. These appointments were intended to assist in evaluation of potential business development
opportunities and to expand the potential network for locating opportunities.
6
*March
13, 2025 Coppermine Memorandum of Understanding*. On March 13, 2025, the Company entered into a Memorandum of Understanding
(MOU) with Coppermine whereby the Company would produce a development plan (Plan) for an online customer
registration and management application (CRM Application) for Coppermines owned, affiliated or managed HFS
business facilities in the State of Maryland (Facilities). Work under the MOU was suspended in 2025 due to Coppermine
re-evaluating its customer management program management.
This
summary of the MOU is qualified in its entirety by reference to MOU, which is attached as Exhibit 10.1 to the Current Report on
Form 8-K filed by the Company with the SEC on March 14, 2025. The summary of the MTA is qualified in its entirety by reference
to the MTA, which is attached as Exhibit 10.2 to the Current Report on Form 10-K filed by the Company with the SEC on November
5, 2024.
*Corporate
Status*. With the failure of the Connected Chef product licensing arrangement in 2025, the Companys business activities
were limited to business development efforts in the latter half of 2025. The Company has no revenue generating business and no
products in active commercialization as of the latter half of fiscal year 2025.
*Working
Capital Funding*. In 2025 and into 2026, the Company sought working capital funding for basic working capital for essential
corporate operations and regulatory compliance costs necessary as a reporting company under the Exchange Act and a company with
its common stock quoted on the OTC Market Group QB Venture Market. During 2024, the Company was successful in securing a new funding
source for operating working capital from Coppermine Ventures LLC (Coppermine). The Company received capital advances
during 2024, 2025 and into 2026, totaling $530,163 under an unsecured promissory note, most recently amended on January 5, 2026,
(Note) issued by Coppermine. The Note accrues simple interest at 7% and matures December 31, 2026. Also see eBliss
Note above for a discussion of additional working capital 2026 funding.
*Additional
Funding*. Certain members of the Companys management (Corporate Insiders and Directors) provided short-term
funding from time to time prior to 2025 to support the Companys basic operational funding needs, but there is no guarantee
that this funding will be available in the future to fund operations or third-party licensing program or the efforts to develop
the health, fitness and social business development, of the e-mobility products. The Company has been relying upon funding from
Coppermine since November 2024 to fund essential corporate operations and regulatory compliance costs. There is no assurance that funding from Coppermine will extend beyond the first fiscal quarter of 2026.
*Special
Board Committee*. In order to conduct and as part of discussions between the Company and eBliss during the No Shop Period,
the Company formed a special committee of independent, disinterested Company directors, which consist of Company directors Jeffrey
Guzy and Warner Session.
Finding
affordable, timely and adequate funding from third party sources in 2026 will be essential to sustaining Company basic corporate
operations and business development efforts. The funding from the eBliss Note is estimated to provide adequate funding of basic
corporate compliance and operational overhead into the latter half of 2026.
7
**Our
Current Strategy**
The
Companys business operations in 2024 and into 2025 were the HFS business development efforts and third-party licensing
of the Connected Chef. The long-term business strategy of the Company in 2025 was focused on the HFS business development with
the third-party licensing of the Connected Chef as a secondary business. The implementation of the long-term business strategy
depends on having adequate working capital until revenue flow from new business operations or revenues from Connected Chef product
replaces third party funding as the principal means of funding overhead. The failure of the licensing effort for the Connected
Chef in late 2025 has left only business development efforts. We have third party funding for basic operational overhead through
the third fiscal quarter of 2025. We may be unable to achieve sufficient working capital when and, in the amounts, required to
meet operational overhead beyond three fiscal quarters of 2026. We have not achieved adequate funding for all anticipated working
capital needs for fiscal year 2026 as of the date of the filing of this Form 10-K. We were not able to secure adequate funding
for internal development and launch of a new business line.
In
terms of HFS business, the Company sought in 2025 to penetrate an industry that was and continues to enjoy rapid expansion nationwide
with many existing and new companies that have established operations and brand recognition. The Companys strategy for
any developed or acquired HFS operation was to provide offerings and facilities that appeal to a broad demographic group (children,
families and adults) as opposed to offerings that are primarily aimed at appealing to adults seeking pickle ball courts with a
sport bar or social activities environment. This model is based on Coppermines business approach. The inability of the
Company to secure adequate business development funding hampered efforts in 2025 to either acquire or internally develop a new
HFS industry business line. The Company believes that identification of a suitable acquisition target or a strategic alliance
with an established HFS industry business may potentially enhance the ability of the Company to attract funding for acquiring
or establishing a new HFS business (either internally or through an acquisition). Due to the no shop provision in
the eBliss Note, the HFS industry business development efforts, which have not succeeded to date, are suspended for the 90-day
no shop period.
With
the failure of the licensing effort for the Connected Chef product in November 2025, the Company is not actively pursuing product
development as of the first fiscal quarter of 2026, but the Company would resume the licensing effort if an alternative business
line or product opportunity is not developed by mid 2026. Due to working capital constraints, the Companys focus for the
Connected Chef in 2025 was licensing of the promotion, marketing, production and sales/distribution to third parties. A typical
arrangement would be a distributor or product company licensing the right to promote, market, distribute and sell the Connected
Chef, which would be ordered from a Companys authorized contract manufacturer. The Company would be merely the licensor
and would not be required to fund or handle the promotion, marketing, production, distribution and sale of the product. The Company
is exploring such an arrangement with a limited number of prospective distributors.
**Perceived
or Essential Strengths**
Capstone
believes that the following competitive strengths have traditionally served to support its business strategies in development
of new business line:
*HFS
Development*. The Companys Chief Executive Officer, Alexander Jacobs, has an established record since 2011 of successfully
founding, operating, and growing a HFS company. His expertise is key to the HFS development effort of the Company. He has developed
for his Coppermine company a selection of HFS offerings that appeal to and attracts a broad demographic group children,
adults, families, elders as well as appealing to corporate events and sports tournament and league events. Unlike other
HFS companies that are geared primarily to appeal to adults seeking pickle ball and sports bar entertainment, the concept developed
by Mr. Jacobs, and the concept that the Company is pursuing, is to tailor facility offerings to the locality and to appeal to
a broader demographic group rather than the demographic approach aimed primarily at adults seeking pickle ball/sports bar facility.
The
success of Mr. Jacobs at another company is a not an indication of and should not be deemed to be an indication or projection
or guarantee of the potential performance of any Company HFS operation. The Company cannot fully implement its HFS business without
sufficient working capital for internal development of an HFS operation or acquisition of an existing HFS company or operation,
and such working capital has not been obtained as of the date of the filing of this Form 10-K report. Even with adequate funding,
the Company will face significant competition in the growing HFS industry and may, as a new entrant in the industry, be unable
to successfully compete in that industry. As noted, the HFS business development effort is suspended for the 90-day no
shop period under the eBliss Note.
8
*Connected
Chef Product*. With respect to 2025 efforts to develop the Connected Chef product into a new product line, the Company regards
the following as potential strategic strengths in the consumer product business. In North America, the Company has been recognized
for more than a decade as an innovator and highly efficient, low-cost manufacturer in several product niches. Company believes
that its insight into the needs of retail programming and its proven execution track record with noted retailers globally positions
it well for future growth.
The
Companys former chief executive officer, and current Chairman of the Board, Stewart Wallach, has over three decades of
consumer product experience and has successfully built and managed other consumer product companies.
In
the past, the operating managements experience in hardline product manufacturing has prepared the Company for successful
entries into various consumer product markets, especially its experience in using foreign OEMs to provide capabilities not possessed
internally by our company.
**Consumer
Product Quality***:*With prior product lines, the Company demonstrated a high quality in products design and
utility through a combination of sourcing quality components, stringent manufacturing quality control and conducting rigorous
third-party testing. The Companys history of developing cost-competitive products without compromising quality standards
is a competitive strength of the Companys consumer products.
**Perceived
Weaknesses**
As
of the filing of this Form 10-K report, the Companys working capital constraints hinder full implementation of the HFS
business development and hindered a more expansive promotion of the Connected Chef product licensing program in 2025. The lack
of adequate working capital prevents any sustained, effective development effort for product development as of the date of the
filing of this Form 10-K report and caused the Company to pursue the licensing program in 2025.
With
respect to the Connected Chef, and in the past with any new product line, the Companys consumer products face the risk
of new technologies or functionalities shifting consumer demand away from the products produced by the Company. The Company lacks
and may lack the financial resources or ability to license or acquire new technologies or functionalities in demand by consumers,
which failure may undermine the commercial viability of Connected Chef. Further, the Companys business model in consumer
products was to focus on bulk sales to Big Box retailers. While this strategy worked well for the Company in the
past, with a small number of employees and reliance on competent foreign OEMs for product production, the strategy was dependent
on meeting the purchasing preferences and predicting consumer preferences for products that the Company could economically, efficiently
produce. Without bulk orders from traditional retailers, the Company did not have alternative, at-hand distribution channels to
replace the sales to Big Box retailers. The development of alternative distribution channels takes prolonged sustained
effort, adequate working capital and sustained investment and adequate, experienced personnel. These alternative distribution
channels were beyond the available capabilities and resources of the Company to develop in 2025 or 2024.
As
a smaller reporting company, Company lacks the staff, money, internal capabilities and resources and operational experience to
significantly or timely respond to significant challenges and adverse changes in business and financial requirements.
9
*Strategic
Reviews*. Like many companies, the Company conducts periodic strategic reviews where the feasibility of significant corporate
transactions is considered, including mergers, asset purchases or sales and diversification or change in business lines. The Company
lacks the financial resources of larger companies to withstand adverse, significant and sustained changes in business and financial
condition. This vulnerability necessitates an ongoing consideration of alternatives to current operations. Due to the decline
in financial performance of the Company since 2021, with no current product line, as well as the Company having its shares of
Common Stock quoted on The OTC Markets Group, Inc. QB Venture Market and being a penny stock, the Company may be
unable to fully implement the HFS business and aggressively pursue Connected Chef licensing.
**Products
and Customers**
Current
product lines available for potential development as of this Form 10-K report are as follows:
|
|
- |
Connected
Chef, a purpose-built kitchen appliance tablet, which is a unique form factor with Google GMS operating system, with an integrated
platform for cooking accessories, i.e.: cutting board.The development effort for the Connected Chef has been suspended
in the first fiscal quarter of 2026 due to failure of 2025 licensing arrangement and focus on business development efforts
under the eBliss Note and its no shop provision. | |
The
following product lines that are discontinued for manufacturing, but are available for sale as of the date of this Form 10-K report
are as follows:
|
|
- |
LED
Lighting | |
10
*2025
Tariffs*. President Trump imposed aggregate tariffs of 20% on Chinese imports. These tariffs produced retaliatory tariffs from
China on certain U.S. imports. This trade dispute adversely impacted the Connected Chef product licensing business by hindering
possible Chinese contract manufacturers from producing products for licensees or licensors, or those products being competitively
priced after the seller or distributor adds any costs from tariffs. The Company may be able to find other contract manufacturers
to replace Chinese contract manufacturers, The Companys experience in consumer product development and production has primarily
been with Chinese contract or OEM manufacturers. The Company lacks sufficient operational history as of the filing of this Form
10-K report to estimate or project the impact of the current trade dispute and tariff hikes on the Connected Chef licensing business.
Tariffs
and trade restrictions imposed by the previous U.S. administration provoked trade and tariff retaliation by other countries. A
trade dispute of this nature or other governmental action related to tariffs or international trade agreements or
policies has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy
or certain sectors thereof and, thus, to adversely impact our businesses.
**Sales
and Marketing Consumer Products**
The
Company had no sales during 2025. With respect to the sale of consumer products in 2024, the Company relied on direct promotion
by Companys Chair of the Board, Stewart Wallach.
*Direct
Import Sales.*We historically ship finished consumer products directly to buyers from Thailand and China contract manufacturers.
Under the Connected Chef licensing business, product will be shipped from contract manufacturer to third party licensee or licensor.
The sales transaction and title of goods are completed by delivering products to the customers overseas shipping point. The customer
takes title of the goods at that point and is responsible for inbound ocean freight and import duties. Sales in 2024 consisted
of liquidation of Smart Mirror inventory and sales of LED lighting products from existing inventory. Due to the poor performance
of the Smart Mirrors, the Company wrote off all inventory on hand as of December 31, 2023, and liquidated the remaining stock
in April 2024.
11
We
used social media platforms and online advertising campaigns to further grow the Companys online presence. In addition
to Facebook, Instagram, Pinterest and LinkedIn, The Company has launched a YouTube channel to host videos and established a X
(formerly, Twitter) account. Our Social Media marketing has not resulted in any significant sales of products. We have not been
and may not be able to effectively compete in e-commerce and Social Media marketing and sales. The Company has a Social Media
presence on the following Social Media platforms, (however the Company did not emphasize or actively utilize Social Media marketing
in 2025 or into 2026:
FACEBOOK1:
https://www.facebook.com/capstoneconnected
INSTAGRAM2:
https://www.instagram.com/capstoneconnected
PINTEREST3:
https://www.pinterest.com/capstoneconnected/
X4:
https://x.com/CAPC_Capstone
YOUTUBE5https://www.youtube.com/channel/UCMX5W8PV0Q59qoAdMxKcAig
1Facebook
is a registered trademark of Facebook, Inc.
2Instagram
is a registered trademark of Instagram.
3Pinterest
is a registered trademark of Pinterest.
4X
is a registered trademark of X Corp.
5YouTube
is a registered trademark of YouTube Corporation.
**Competitive
Conditions**
*Consumer
Products*. In terms of the consumer product industry, the Company operated in a highly competitive environment, both in the
United States and internationally, in the former LED lighting product segment and in the Connected Chef internet of things product
segments. The Companys previous consumer products competed with products made by large multinationals with global operations
as well as numerous other smaller, specialized national or regional competitors who generally focus on narrower markets, products,
or particular categories. Competitors included Gentex Corporation, Seura Solutions, Inc., Magna International, Inc, Amazon and
Samsung Electronics Co. Ltd.
Other
competitive factors include rapid technological changes, product availability, credit availability, speed of delivery, ability
to tailor solutions to customer needs, quality and depth of product lines and training. The Connected Chef product is an emerging
industry. The Connected Chef received GMS approval from Google third party testing labs, which allows the Connected Chef to utilize
the Google operating system in the tablet. The Company may be unable to develop or license emerging new technologies that are
dominant and demanded by consumers, retailers, distributors and resellers. Consumer tastes and preferences change and timing the
product line with consumer demand is important in establishing a market for the product line.
**Consumer
Product Research, Product Development, and Manufacturing Activities**
With
respect to past production of consumer products, the Companys research and development operations based in Florida and
Thailand have designed and engineered many of the Companys consumer products, with collaboration from its third-party manufacturing
partners, software developers and Capstone U.S. engineering advisers. The Company outsources the manufacture and assembly of our
products to a select group of OEM manufacturers overseas.
During
periods when the Company was producing consumer products, the Company established strict engineering specifications and product
testing protocols with the Companys contract manufacturers and ensured that their factories adhere to all Regional Labor
and Social Compliance Laws. These contract manufacturers purchased components that we specify and provide the necessary facilities
and labor to manufacture our products. We leveraged the strength of the contract manufacturers and allocated the manufacturing
of specific products to the contract manufacturer best suited to the task. Quality control and product testing was conducted at
the contract manufacturers facility and at their 3rd party testing laboratories overseas.
With
respect to consumer products, Company used its proprietary manufacturing expertise by maintaining control over all outsourced
production and critical production molds. To ensure the quality and consistency of the Companys products manufactured overseas,
Company used globally recognized certified testing laboratories such as United Laboratories (UL) or Intertek (ETL) to ensure all
products were designed and tested to adhere to each countrys individual regulatory standards.
Investments
in technical and product development are expensed when incurred and are included in the operating expenses.
12
**Information
Technology**
The
efficient operation of our business development efforts and operations are dependent on our information technology systems. We
rely on those systems to manage our daily operations and maintain our financial and accounting records. Since we do not collect
significant amounts of valuable personal data or sensitive business data from others, our internal computer systems are under
a light to moderate level of risk from hackers or other individuals with malicious intent to gain unauthorized access to our computer
systems. Cyberattacks are growing in number and sophistication and are an ongoing threat to business computer systems, which are
used to operate the business on a day-to-day basis. Our computer systems could be vulnerable to security breaches, computer viruses,
or other events. The failure of our information technology systems, our inability to successfully maintain our information or
any compromise of the integrity or security of the data we generate from our systems or an event resulting in the unauthorized
disclosure of confidential information or degradation of services provided by critical business systems, whether by us directly
or our third-party service providers, could adversely affect our business operations, sales, reputation with funding sources or
lenders, current and potential customers for any products, associates or vendors, results of operations, product development and
make us unable or limit our ability to respond to demands of any customers who own our products.
We
have incorporated into our data network various on and off-site data backup processes which should allow us to mitigate any data
loss events, however our information technology systems are vulnerable to damage or interruption from:
|
|
|
hurricanes,
fire, flood and other natural disasters | |
|
|
|
power
outage | |
|
|
|
internet,
computer system, telecommunications or data network failure hacking as well as malware, computer viruses, ransomware and similar
malicious software code | |
13
**Environmental
Regulations**
The
Company was not engaged in production or manufacturing activities in 2025. We believe that the Company is in compliance with environmental
protection regulations and will not have a material impact on our financial position and results of operations. The Company is
not aware of any national, state or local environmental laws or regulations that will materially affect our earnings or competitive
position or result in material capital expenditures. However, the Company cannot predict the effect on our operations due to possible
future environmental legislation or regulations. During 2025, there were no capital expenditures for environmental control facilities
and no such material expenditures are anticipated.
*Climate
Change*. With no product line in 2025, the Company did not experience any direct, material impact on business and financial
condition in 2025 from pending or existing climate-change related legislation, regulations, and international accords in the U.S.,
the physical impacts of climate change, or perceived indirect material impact from business trends. On March 27, 2025, the Commission
voted to end its defense of its climate related risk and greenhouse gas emissions rule (The Enhancement and Standardization of
Climate-Related Disclosures for Investors, SEC Release Nos. 33-11275; 34-99678). On April 4, 2024, the SEC had imposed an administrative
stay on enforcement of the rule due to pending challenges in federal courts. The Eighth Circuit ordered
that the litigation would be held in abeyance until such time as the SEC reconsider or renews it defense of the Rules. In
its order, the Eighth Circuit emphasized that the SEC has the responsibility to determine whether its Final Rules will
be rescinded, repealed, modified, or defended in litigation.
**Employees**
As
of December 31, 2025, we had 1 employee, our CEO, and worked with three consultants, all based in the United States.
**Corporate
Information**
Our
principal executive offices are located at #144-V, 10 Fairway Drive Suite 100, Deerfield Beach, Florida USA 33441. Our telephone
number is (954)570-8889 and our website is at URL: www.capstonecompaniesinc.com. Our U.S. subsidiaries operate out of our principal
executive offices.
We
file our financial information and other materials required under the Exchange Act electronically with the SEC. These materials
can be accessed electronically via the Internet at www.sec.gov. Such materials and other information about the Company are also
available through our corporate website: https://www.capstonecompanies.com. Any URL referenced in this Form 10-K report does not
incorporate by reference or otherwise the contents of the website pages accessed through the referenced URL.
**Government
Regulation**
Our
operations are subject to regulation by federal and state securities authorities as well as various federal, state, foreign and
local laws and regulations governing a consumer products company and a for-profit business. We are not subject to any U.S. federal,
state or local regulation that poses, in our opinion, any special or unusual burden or obstacle to conducting our business.
Since
the Company did not have any active product production in China in 2024 and 2025, regulatory and trade restrictions in China and
Hong Kong SAR was not a factor affecting our 2024 operations.
The
Companys Hong Kong SAR subsidiary has been dissolved, and the Company does not have a corporate presence in Hong Kong or
China.
14
**Working
Capital Requirements and Financing**
The
Company has historically received working capital funding from related parties. Below is a summary of the most recent funding
transactions.
On
January 16, 2024, the Company negotiated a working capital funding agreement with former Director Jeffrey Postal to provide $50,000
in funding for daily operations. Principal accrues simple interest at a rate of 5 percent per annum, amended to matureNovember
30, 2024. See cancellation agreement below.
On
October 31, 2024, the Company executed an unsecured promissory note with a then unrelated party, Coppermine Ventures, LLC (Coppermine),
to provide $125,914 in working capital funding for daily operations. Principal accrues simple interest at a rate of 7 percent
per annum, maturing July 31, 2025. On November 26, 2024, Coppermine provided an additional $53,018 in working capital funding
for daily operations.
On
December 18, 2024, the Companys Board of Directors approved the cancellation of all the Companys related notes payable,
with the exception of the Coppermine Ventures promissory note, in exchange for shares of Series B-1 Convertible Preferred Stock
(B-1 Stock) of the Company, calculated at a price of $0.07 per share (the Exchange Price). Each related
party note holder executed the cancellation agreement and received their pro-rata B-1 Stock in accordance with the Exchange Price.
A total of 750,075 B-1 Stock was issued for cancellation of $3,665,303 in principal and accrued interest, inclusive of deferred
salary and consulting wages for Stewart Wallach and George Wolf, respectively.
On
January 27, 2025, the Company executed an amended and restated promissory note with Coppermine for $306,231 in working capital
proceeds and amended the promissory note for $485,163 in total principle and a maturity date of December 31, 2025.
On
January 5, 2026, the Company executed a second amended and restated promissory note with Coppermine for an additional $73,028
in working capital proceeds, for an amended promissory note total of $558,191 and a maturity date of December 31, 2026.
On
March 3, 2026, the Company entered into a promissory note with eBliss Global, Inc. (eBliss Note), a private early-stage
Delaware corporation engaged in the developing and production of e-mobility solutions (including and initially making e-bikes
as transportation vehicles at a Utica, New York factory). The interest rate under the eBliss Note is seven percent simple annual
interest. Principal and accrued interest are due in a single lump sum payment due on March 4, 2027. The eBliss Note is unsecured
and does not provide for a conversion of debt-to-equity securities.
The
Companys ability to maintain sufficient working capital is highly dependent upon funding from related parties. Failure
to achieve future operating revenue could have a material adverse effect on the Companys working capital, ability to obtain
financing, and its operations in the future.
In
addition, the Company intends to seek alternative sources of liquidity, including but not limited to accessing capital markets,
strategic partnerships, other alternative financing measures, or a business combination. However, instability in, or tightening
of capital markets, could adversely affect our ability to access the capital markets on terms acceptable to us.
The
Companys liquidity and cash requirements are discussed more fully in Part II, Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations, below.
**Item
1A. Risk Factors.**
*Described
below and throughout this Form 10-K report are certain factors and risks that the Companys management believes are applicable
to the Companys business and the industries in which it operates. If any of the described events occur, the Companys
business, results of operations, financial condition, liquidity, or access to funding could be materially adversely affected.
When stated below that a risk or factor may have a material adverse effect on the Company business, it means that such risk may
have one or more of these effects. There may be additional risks that are not presently material or known. There are also risks
within the economy, the industry, and the capital markets that could have a material adverse effect on the Company, including
those associated with an economic recession, inflation, a global economic slowdown, political instability, government regulation
(including tax regulation), employee attraction and retention, and customers inability or refusal to pay for the products
and services provided by the company. There are also risks associated with the occurrence of extraordinary events, such as war,
terrorist attacks or natural disasters (such as tsunamis, hurricanes, tornadoes, and floods) and pandemics or epidemics. These
risks and factors affect businesses generally, including the Company, its customers and suppliers and, as a result, are not discussed
in detail below, but are applicable to the Company. As a penny stock without primary market maker support, and our
public auditors expressing substantial doubt about our ability to continue as a going concern any investment in our Common Stock
is highly risky and should only be considered by investors who can afford to lose their entire investment. These risk factors
are not the only risks that we may face. Additional risks and uncertainties not presently known to us or not currently believed
to be important also may adversely affect our business.*
15
**Business
and Operational Risks**
**Our
auditors have issued a going concern opinion, and we will not be able to achieve our objectives and will have to cease operations
if we cannot adequately fund our operations.**
Our
public auditors issued a going concern opinion in connection with the audit of our annual financial statements for the fiscal
year ended December 31, 2025. A going concern opinion means that there is substantial doubt that the company can continue as an
ongoing business for the next 12 months. If we are unable to continue as a going concern, we might have to liquidate our assets
and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected
in our financial statements. In addition, the inclusion of an explanatory paragraph regarding substantial doubt about our ability
to continue as a going concern and our lack of cash resources may materially adversely affect our share price and our ability
to raise new capital or to enter into critical contractual relations with third parties. There is no assurance that we will be
able to adequately fund our operations in the future.
**The
declining revenues in 2024 of our business line of LED lighting products and the lack of a sufficient revenue generating operation
in 2025 have resulted in significant operating losses and imposed a need to sustain operations with outside funding of working
capital. If the Company cannot obtain adequate, affordable funding, whether equity or debt, as needed, the Company will have difficulty
sustaining the Company as a going concern.**
Cash
flow from operations was and is not sufficient to sustain operations and fully fund its HFS business and Connected Chef licensing
program. In order to attempt to secure adequate working capital in 2025, we took the actions detailed below. These actions are
not deemed sufficient to meet all expected working capital needs for 2026 or to license the Connected Chef or complete a business
combination or purchase a new revenue generating product line. We anticipate the need to raise working capital funding to meet
our funding needs in 2026 as we do not have any cash flow from operations. Because of the low market price and liquidity of our
Common Stock, our declining financial performance, lack of hard assets required for asset based loans, and our transition from
a declining product line and primary source to a new, unproven product line, we may be unable to raise necessary, affordable and
timely working capital in 2026 and that failure could be fatal to our ability to sustain the Company as an operating company.
During
the year ended December 31, 2025, the Company used cash in operations of $282,959 and generated net operating losses of $1,070,894.
As of December 31, 2025, the Company has working capital deficit of $459,069 and an accumulated deficit of $12,679,768. The Companys
cash balance increased approximately $23,000 from $15,850 as of December 31, 2024, to $39,122 as of December 31, 2025. Although
we have cash on hand, 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 we will need to seek additional capital through debt and/or equity financing to fully fund
operational overhead and fully fund the efforts for a possible business combination. While certain related parties have provided
working capital funding to the Company in the past, there is no guarantee, and none can be given that these related parties will
do so when and as required by the Company in 2026.
**The
Company will need additional third-party funding to sustain operations and fund any further business development efforts. The
Company has no consumer products in active production and has no revenue generating operations as of the date of the filing of
this Form 10-K report.**
In 2025, the Company did not generate revenue
from the Connected Chef product line. The Company has not raised the working capital to acquire or launch an HFS operation as of
the date of the filing of this Form 10-K report. Absent adequate working capital funding in 2026, the financial condition of the Company
may at some point force the Company to seek to effect an extraordinary corporate transaction to protect shareholder value and sustain
the Company as an operating company. An extraordinary corporate transaction could include a merger or sale of the Company or reorganization
of the Company under bankruptcy protection. The Company may be unable to effect, if necessary, an extraordinary corporate transaction
or obtain significant funding for a new product line in 2026 to sustain the Company as an operating company. Reorganization under the
protection of the bankruptcy code is one possible extraordinary corporate transaction. The funding provided under the March 3, 2026 promissory
note issued to eBliss will be devoted to basic corporate overhead and is not sufficient or intended to fund development of a new business
line or product line.
**Our
operating results and sustainability as an operating company in the future are substantially dependent on the success of HFS development
program in 2026.**
There
can be no assurance the HFS development program will generate sufficient or any revenues, or any continued revenues to fund ongoing
operations of the Company.
16
**Our
operations depend on a small number of personnel and consultants and the loss of key personnel and consultants or the inability
to replace or add key personnel and consultants could have a significant impact on our ability to grow or sustain operations.**
We
operate executive operations with a relatively small number of personnel and consultants. The Company has not developed personnel
to readily replace key personnel. The loss of key personnel, being Stewart Wallach, Chairman of the Board of Directors, would
severely harm the business. The Company hired Dana Eschenburg Perez, as an external consultant as of January 1, 2023, to perform
the functions of Chief Financial Officer. The loss of Alexander Jacobs, Chief Executive Officer, would be adverse in terms of
any efforts to develop a HFS industry business. Mr. Jacobs devotes time to Chief Executive Officer duties deemed sufficient to
perform those duties. We do not have key man life insurance.
Our
personnel are focused on executive management. If our operations grow, we will have to increase the number of our personnel in
the future to handle any growth or expansion. Our ability to find and retain qualified personnel when needed by our growth or
existing operations will be an important factor in determining our success in coping with any growth of or efficiently handling
existing operational burdens.
**The
markets in which we operate are highly competitive and have evolving technical or consumer requirements.**
In
the HFS industry markets and consumer products markets, we historically competed with companies that have greater financial and
funding resources, personnel resources, market share, name recognition and technical resources than we do. Competitors may and
do offer new products or services with aggressive pricing. Aggressive pricing actions by our competitors could reduce margins
if we are not able to reduce costs at an equal or greater rate than the sales price decline. Our Company may lack the financial
resources to be able to withstand predatory pricing from competitors.
Adequate,
affordable and available funding is a key factor in our ability to maintain operations.
17
**With
the end of the licensing arrangement for the Connected Chef in late 2025 and the absence of current revenue-generating operations,
the Company is in a transitional stage as it evaluates and pursues new business opportunities. During this period, the Companys
activities are primarily focused on corporate compliance, maintaining public company infrastructure and business development efforts,
including identifying and evaluating potential acquisitions, strategic partnerships, or new business lines.**
**As
a result of these conditions, there is a risk that market participants, regulators, or other stakeholders could perceive the Company
as having limited operations. Under SEC Rule 12b-2 under the Exchange Act, a Company may be considered a shell company
if it has no or nominal assets (other than cash) and no or nominal operations. The determination of whether a company meets this
definition is based on specific facts and circumstances and involved judgement.**
**While
the Company continues to maintain organizational infrastructure, management oversight, and active efforts to develop or acquire
a new business line, there can be no assurance that these activities will be sufficient to avoid any characterization as a shell
company under applicable SEC rules.**
**If
the Company were to be deemed a shell company, it could have significant consequences, including limitations on the availability
of Rule 144 for the resale of securities, restrictions on the use of certain registration statements, and increased difficulty
in accessing capital markets or completing strategic transactions. In addition, such a characterization could negatively impact
investor perception and the market liquidity of the Companys common stock.**
The
Company lack of sustained revenue generating operations and tangible assets has hampered efforts to raise working capital for
basic corporate overhead and for business development efforts, including funding of any potential acquisitions. Being designated
as a shell company may further complicate or hinder the ability of the Company to secure working capital funding
for basic corporate operations, business development efforts, funding for any potential acquisitions or launch of a new business
line.
**Regulatory
and Legal Risks**
**Our
financial results and ability to fund basic corporate overhead and fund business development efforts may be negatively impacted
by economic, regulatory and political risks beyond our control.**
We
are subject to risks associated with securing necessary funding for our basic corporate overhead and business development efforts
which risks include:
|
|
|
political
or labor unrest, terrorism, public health crises, disease epidemics and economic instability resulting in reduction in potential
funding sources for companies like the Company, especially in terms of investors or lenders adopting stricter risk and lending
requirements. | |
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|
the
imposition of new laws and regulations that increase the cost of compliance with applicable laws.The cost of compliance
represents a significant burden for the Company and increased compliance costs increases the risk of the Company being unable
to fund basic, necessary compliance costs from available funding or to secure additional funding for any increased compliance
costs.Those compliance costs consist primarily of accounting and audit fees, annual fees owed to The OTC Market
Group, legal fees and other third party expenses incurred and necessary to fund basic compliance costs or costs associated
with business development. | |
18
**Additional
Financial Risk Factors**
**Our
inadequate or expensive funding and financing alternatives.**
Our
current short-term debt level as of December 31, 2025, and 2024 was $514,320 and $180,760, respectively.
The
Company will need additional outside working capital funding in fiscal year 2026 to support the Companys operations.
Other
adverse consequences could include:
|
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a
significant portion of our cash from operations could be dedicated to the payment of interest and principal on future debt,
which could reduce the funds available for operations. | |
|
|
|
the
level of our future debt could leave us vulnerable in a period of significant economic downturn; and | |
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we
may not be financially able to withstand significant and sustained competitive pressures. | |
As
we currently do not have an operating product line, past financial performance is not indicative of any future growth or future
financial performance.
**If
we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately
or timely report our financial condition or results of operations. If our internal control over financial reporting is not effective,
it may adversely affect investor confidence in us and the price of our common stock.**
As
a public company we are required to maintain internal control over financial reporting and to report any material weaknesses in
such internal control. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our
internal control over financial reporting and provide a management report on our internal control over financial reporting. If
we identify material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal
control over financial reporting is effective. If we are unable to assert that our internal control over financial reporting is
effective, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our
internal control over financial reporting, or if we are unable to comply with the requirements of the Sarbanes-Oxley Act in a
timely manner, then, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and
completeness of our financial reports and the market price of our common stock could be negatively affected.
**Risk
Factors for our Common Stock**
**Penny
Stock and Volatile Market Price.**
The
Companys Common Stock is subject to possible volatile trading, including rapid increases and decreases in market price
due to trading in the open market. Companys declining business and financial condition has depressed the already low market
price and trading of the Companys Common Stock in 2025. The Companys Common Stock lacks the primary market makers
and institutional investors who can protect the market price from volatility in trading and market price. Company does not have
any research analyst issuing recommendations. The Common Stock is also a penny stock under SEC rules and suffers
the limitations and burdens in trading of penny stocks. This lack of market support and penny stock status means that trading,
especially by day traders, can cause a rapid increase or decrease in market price of the Common Stock and makes any investment
in the Common Stock extremely risky and unsuitable for investors who cannot withstand the loss of their entire investment and
requires on demand liquidity in the investment. An investment in the Common Stock remains an extremely risky investment that is
not suitable for investors who cannot afford the loss of investment and can withstand or tolerate a possible lack of liquidity.
19
We were deemed a former shell company (under
current SEC rules and interpretations thereof) because the lack of operations at the time of our initial public offering of shares of
Common Stock and during the early 1990s. As such, our stock transfer agent required a legal opinion as well as other paperwork
to lift restrictive legends from stock certificates for non-affiliated as well as affiliated shareholders. As a former shell company
during the period when the Company was an operating company, the restrictive legends could only be lifted for at most a 90-day period
for sales under Rule 144 for affiliated and non-affiliated shareholders. Further, our stock transfer agent would not permanently remove
restrictive legends on stock certificates held by shareholders. absent registration of the shareholders shares of common stock
under the Securities Act.This status made our common stock even more unappealing to investors and potential purchasers and more
difficult to sell or trade.
The
Companys financial and business condition and corporate status, lack of revenue generating operations, Common Stock status
as a penny stock, low liquidity and market price of the Common Stock make any investment in the Companys
Common Stock a highly risky investment unsuitable for investors who require liquidity in an investment and cannot afford the total
loss of investment.
Further,
our Common Stock is quoted on The OTC Markets Group, Inc. QB venture market. Many brokerage houses will not accept OTC stocks
for deposit or for trading due to the compliance burdens and reduced financial benefits of trading in OTC stocks. Some shareholders
may hold paper stock certificates and experience difficulty in finding a broker who will accept such stock or experience difficulty
in meeting the requirements for deposit of such stock in a brokerage account. These difficulties further decrease the appeal of
our Common Stock to investors.
**No
Dividends.**
We
have not paid, and we do not intend to pay dividends on our Common Stock in the foreseeable future. We currently intend to retain
all future earnings, if any, to finance our current and proposed business activities. We may also incur indebtedness in the future
that may further prohibit or effectively restrict the payment of cash dividends on our Common Stock.
**Our
controlling stockholders may take actions that conflict with your interests.**
A
current director and a former director of the Company beneficially own approximately 40% of our outstanding common stock as of
the date hereof. Assuming support from public shareholders with a sufficient voting power, and the if the current director and
former director vote the same, then they will be able to exercise control over all matters requiring stockholder approval, including
the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions, and
they will, if the vote as a group, have significant control over our management and policies. The directors elected by these stockholders
may be able to influence decisions affecting our capital structure significantly. This potential control may have the effect of
delaying or preventing changes in control or changes in management or limiting the ability of our other stockholders to approve
transactions that they may deem to be in their best interest. For example, if the director and former director vote the same and
are joined by public shareholders to the extent necessary to control more than 50% of the vote, then these shareholders could
block a sale or other disposition of the Company to another entity. As of the date of the filing of this Form 10-K report, four
of the five directors are not deemed to be affiliates of the director and former director and the Company is not aware of any
agreement by the director and former director to vote a group.
20
**General
Risk Factors**
**The
Companys operations could be disrupted by natural or human causes beyond its control.**
The
Companys corporate operations, even though reduced to minimal staffing focused on corporate compliance and business development,
are subject to disruption from natural or human causes beyond its control, including physical risks from hurricanes, severe storms,
floods and other forms of severe weather, accidents, fires, earthquakes, terrorist acts and epidemic or pandemic diseases such
as the COVID-19 or variants of that virus, any of which could result in suspension of operations and business development efforts,
or harm to people or the environment. Natural or human causes could hinder or prevent the acquisition of or launch of or effective
management or funding of any new business line.
**We
may not successfully execute our long-term strategies, which may negatively impact our results of operations.**
Our
ability to execute on our long-term business development strategies depends, in part, on locating, consummating the acquisition
or development of a new business line, which is in turn dependent on securing adequate and affordable funding. If we acquire or
develop a new business, and no assurances is given that we can acquire or develop a new business, then our long-term strategy
depends on obtaining adequate, affordable working capital, our ability to successfully drive expansion of our gross margins, manage
our cost structure and drive return on our investments. If we cannot effectively execute our long-term growth strategies while
managing costs effectively, our business could be negatively impacted, and we may not achieve our expected results of operations.
**Our
results of operations and financial condition could be seriously impacted by security breaches, including cybersecurity incidents.**
Failure
to effectively prevent, detect and recover from security breaches, including attacks on information technology and infrastructure
by hackers; viruses; breaches due to employee error or actions; or other disruptions could result in misuse of our assets, business
disruptions, loss of property, and confidential business information. Such attacks could result in unauthorized parties gaining
access to at least certain confidential business information. However, to date, we have not experienced any financial impact,
changes in the competitive environment or business operations that we attribute to such attacks. Although management does not
believe that we have experienced any security breaches or cybersecurity incidents, there can be no assurance that we will not
suffer such attacks in the future. We actively manage the risks within our control that could lead to business disruptions and
security breaches and have expended significant resources to enhance our control environment, processes, practices and other protective
measures. Despite these efforts, as these threats continue to evolve, particularly around cybersecurity, such events could adversely
affect our business, financial condition or results of operations.
**Item
1B. Unresolved SEC Staff Letters.**
None
for the fiscal year ended December 31, 2025.
**Item
2. Properties.**
On
July 1, 2023, the Company commenced an office space license to use designated office space at #144-V, 10 Fairway Drive, Suite
1000, Deerfield Beach, Florida 33441. The short-term lease is a month-to-month agreement for professional office space for a monthly
fee of $75 with a security deposit of $75. The agreement may be terminated by the Company or the licensor of the office space
upon a written notice provided thirty (30) days in advance.
21
**Item
1C. Cybersecurity.**
**Risk
Management and Strategy**
Our information systems consist of computer
systems used by the Companys Chief Executive Officer and Chief Financial Officer. They actively monitor our threat environment
for cybersecurity threats using various methods, including automated detection tools, scans of the threat environment, investigations
of potential threats they discover or that are reported to them, and reports and services that identify threats. They monitor our information
systems for vulnerabilities using internal and third-party penetration testing, intelligence feeds, and vulnerability databases.
Companys computer
systems involve the use of third-party technology or service providers, or vendors, such as hosting platforms, open-source software, and
application providers. Employees are provided specific guidance to mitigate the risk of a cybersecurity attack. This guidance includes
safeguards over confidential data, being aware of suspicious emails, choosing passwords, protection of Company issued and use of personal
devices, managing large data transfers. Employees are directed to immediately contact the Chief Executive Officer if they encounter any
suspicious activity.
If a cybersecurity risk is identified,
Companys policy is to use vendors to assist the Company to identify, assess, and manage material risks from cybersecurity threats
to corporate systems, which consulting firms may include consulting firms, external legal counsel, incident response vendors, auditors,
monitoring technology, and cybersecurity data providers.
The
Companys Chairman of the Board of Directors is tasked with reporting on
cybersecurity measures and issues to the entire board of directors. In the event of a
cybersecurity incident, Company policy is for the Company Chairman of the Board of
Directors to report the cybersecurity incident to the Companys Board
of Directors and take remedial actions to mitigate and remediate cybersecurity
incidents.
As of and for the year endedDecember 31, 2025,
there have been nocybersecurity incidents that have materially affected the Companys business strategy, results of operations,
or financial condition.
**Item
3. Legal Proceedings.**
We
are not a party to any material pending legal proceedings and, to the best our knowledge, no such action by or against us has
been threatened. From time to time, we may be subject to legal proceedings and claims that arise in the ordinary course of business.
Although occasional adverse decisions or settlements may occur in such routine lawsuits, we believe that the final disposition
of such routine lawsuits will not have material adverse effect on our financial position, results of operations or cash flows.
**Other
Legal Matters**
To
the best of our knowledge, none of our directors, officers or owner of record of more than five percent (5%) of the securities
of the Company, or any associate of any such director, officer or security holder is a party adverse to us or has a material interest
adverse to us in reference to pending litigation.
**Item
4. Mine Safety Disclosures (Not Applicable).**
**PART
II**
**Item
5. Market for Registrants Common Equity and Related Stockholder Matters.**
The
Companys Common Stock is quoted on The OTC Markets Group, Inc.s QB Venture Market Tier under the trading symbol
CAPC.
As
of March 31, 2026, there were approximately 212 holders of record (excluding OBO/Street Name accounts) of our Common Stock and
48,826,864 outstanding shares of our Common Stock.
22
**Dividend
Policy**
We
have not declared or paid any cash or other dividends on shares of our Common Stock in the last seven years, and we presently
have no intention of paying any cash dividends on shares of our Common Stock. We do not currently anticipate, based on existing
financial performance, to be declaring or paying dividends on any series of our preferred stock in the foreseeable future. Our
current policy is to retain earnings, if any, to finance the expansion and development of our business. The future payment of
dividends on shares of our Common Stock are at the sole discretion of our board of directors.
**Recent
Sales of Unregistered Securities**
On
December 18, 2024, the Company entered into a cancellation agreement with related party promissory note holders for cancellation
of $3,665,303 in outstanding principal and interest in exchange for issuance of 750,075 shares of the Companys B-1 Preferred
Stock. The B-1 Preferred Stock issuances were issued in reliance upon an exemption from registration under Section 4(a)(2) of
the Securities Act and Rule 506(b) of Regulation D under the Securities Act. The B-1 Preferred Stock is not registered under the
Exchange Act. It is convertible into shares of the Companys Common Stock.
**Unregistered
Sales of Equity Securities and Use of Proceeds.**
**Adoption
of Stock Repurchase Plan**
On
August 23, 2016, the Companys Board of Directors authorized the Company to implement a stock repurchase plan for up outstanding
common stock. The repurchase plan may be discontinued at any time at the Companys discretion.
On
December 19, 2018, Company entered a Purchase Plan pursuant to Rule 10b5-1 under the Exchange Act, with Wilson Davis & Co.,
Inc., a registered broker-dealer. Under the Purchase Plan, Wilson Davis & Co., Inc will make periodic purchases of shares
at prevailing market prices, subject to the terms of the Purchase Plan.
On
May 31, 2019, the Companys Board of Directors the maximum amount of aggregate funding available for possible stock repurchases
under the stock repurchase program remained at $1,000,000 during the renewal period.
During
May and June 2022, the Company repurchased 66,167 shares of the Companys outstanding common stock in the open market. The
total purchase cost was $11,662.
On
July 7, 2022, the Board of Directors resolved to discontinue the stock purchase agreement. As of December 31, 2023, a total of
816,167 of the Companys common stock was repurchased since the plan was incepted at a total cost of 119,402. The cost of
the repurchased shares was recorded as a reduction of additional paid-in capital.
23
**Item
6. Reserved.**
**Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operations**
*This
Item 7, Managements 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 Companys 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 Companys fiscal year 2025 results. Unless otherwise stated, references to
particular years or quarters refer to the Companys 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.*
**Executive
Summary**
In
late 2024 and in 2025, the Company turned its focus to a second, newly developed Connected Surface product, the Connected Chef,
but the lack of adequate working capital to produce, purchase inventory and market the Connected Chef forced the Company to pursue
third party licensing, production and marketing of the Connected Chef. The Company was able to find a licensor to produce and
market the Connected Chef product line in 2025, but due to the licensees inability to reach acceptable terms for production
of the Connected Chef product line with suitable OEMs in China, the licensing arrangement was terminated in late 2025.
In
2025, we preserved cash but we continued to invest where needed to support the relaunch of the Connected Surfaces program. For
fiscal year ended 2025, our business efforts were focused on finding a third party to license, produce and market the Connected
Surface product and developing a new business line as the Companys primary business line. The effort to develop a new business
line was focused on the HFS industry, but the company also explored and considered other potential opportunities in other industries.
The ultimate goal was development of a business line that would provide potential revenues and revenue growth and sustained profitability
in order to eliminate the need for third party funding of basic corporate overhead and provide appreciation of shareholders
investment in the Company.
On
March 4, 2026, the Company issued a Lump Sum Payment Promissory Note (eBliss Note) for a $250,000 unsecured working
capital loan from eBliss Global, Inc., a private Delaware corporation (eBliss) that is gearing up for production
of e-bikes for personal transportation in Utica, New York in 2026. The Note contains a no shop provision under which Company and
eBliss will discuss during a 90-day period the possibility of a mutually beneficial relationship, which relationship could include
merger, other business combination, strategic relationship or joint venture to develop a product, or similar relationship (collectively,
Transactions). The no-shop provision grants exclusivity to eBliss for business development by the Company for the
first 60 days of the no-shop 90-day period. If no letter of intent or definitive agreement is signed with eBliss during the first
60 days of the 90-day no shop period, the Company may entertain and pursue any. Third party proposals deemed superior by the Company
to any pending proposal, if any, from eBliss. There is no existing legally binding agreement by the Company or eBliss as of the
date of the filing of this Form 10-K Report to consummate or enter into an agreement to consummate any Transaction. The Companys
focus is to acquire or start a new business line and during the no shop period, the Companys business development
efforts will be focused on exploring mutually beneficial relationships and transactions with eBliss in the e-bike industry. See
Note 3 - Notes Payable for further information about the eBliss Note and the no-shop provision.
24
Total
net revenue for the year ended December 31, 2025, decreased 100% from $143,269 to $0 as compared to the same period of last year
due to the Company not having an operating product line. The net operating loss was $1,070,894 for the year 2025 compared to $995,815
for the year 2024. The Company had an estimated net tax benefit provision in 2025 and 2024 of $195,958and $124,370, respectively.
The
following discussion is designed to provide a better understanding of our audited consolidated financial statements and notes
thereto, including a brief overview of our business and products, key factors that impacted our performance and a summary of operating
results.
**Principal
Factors Affecting Our Financial Performance**
There
are a number of industry factors that affect our financial performance which include, among others:
|
|
|
Overall Demand for Products and Applications. In terms of our efforts to pursue a business line based on Connected Chef, our potential for growth depends on the successful introduction and consumer acceptance of the Connected Surfaces portfolio by a third party licensee capable of production and marketing of the product. The necessity of a third party licensing effort results from the lack of adequate working capital to internally produce and market the product. We have been unable to establish a third party licensing arrangement for the Connected Chef in 2025.The Companys products are characterized as non-essential and economic conditions, especially consumer uncertainty or worries over economic conditions and growth, affect consumer demand. Uncertainty over global economic conditions that may affect the U.S. economy is not conducive to consumer purchases of our category of consumer products. Further, it is in general difficult to obtain third party licensing arrangements for a new product that has no established sales history, especially one that faces competition from other companies as well as technological changes, like AI, changing consumer purchasing preferences and demand. We lack the working capital to re-engineer the Connected Chef to respond to new technologies that may undermine the consumer appeal of the Connected Chef. These uncertainties make demand difficult to forecast demand or future viability of Connected Chef or any other consumer product for us and our customers.
| |
|
|
|
Strong and Constantly Evolving Competitive Environment. While we have demonstrated in the past our abilities to compete successfully in the retail channels since our inception, competition in the marketplace we serve is strong. Many companies have made significant investments in product development, production equipment and product marketing. Product pricing pressures exist as market participants often initiate pricing strategies to gain or protect market share. To remain competitive, market participants must continuously increase product performance or functionality, reduce costs and develop improved ways to support their customers. Further, new consumer products need to incorporate the utility and appeal of new technologies, especially generative AI.The Connected Chef does not have generative AI beyond Internet-connected applications not tailored to the Connected Chef.To address these competitive measures, we need to invest in research and development activities to support new product development (either internally or through third party contractors), sustain low product costs and deliver higher levels of performance and product functionality to differentiate our products in the market and attract third party licensees.We lack the capital to engage in this important product development, marketing and licensing efforts.
| |
|
|
|
Profit Margins. The Companys product planning strategies are driven by the need to deliver sustainable profit margins. This, in conjunction with close management of related marketing costs, are required to establish any Companys market presence in the consumer product industry or a new business line.In 2025 and into 2026, the Companys primary focus is the need to develop a new business line in an industry with greater growth and profit margin potential than the traditional niche consumer product industry.
| |
|
|
|
Technological
Innovation and Advancement. The significant impact of generative AI and other technological developments significantly
impact many industries, including consumer product industry.In 2025 and into 2026, the need to integrate new technologies
in consumer products to meet consumer and retailer expectations and preferences is beyond the current financial resources of the
Company, which has caused the Company to focus on developing a new business line in a new industry segment. | |
25
|
|
|
Affordable
Funding. The Company needs to secure affordable funding resources to support ongoing product development and new market
penetration or internally develop a new product line or business line. The Company was unable to secure working capital in 2025
that was sufficient to fund more than basic corporate overhead necessary to sustain the corporate existence of the Company. See
Note 3 Notes Payable eBliss Note. | |
|
| Intellectual
Property Issues. Market participants rely on patented and non-patented proprietary
information relating to product development and other core competencies of their business.
Protection of intellectual property is important. Therefore, steps such as patent applications,
confidentiality and non-disclosure agreements, as well as other security measures are
generally taken. The Company has not created a litigation reserve for intellectual property
rights litigation and lacks the available cash to do so. As a business judgment, the
Company does not patent or copyright or trademark all intellectual property due to a
combination of factors, including, in part, the cost of registration and maintenance
of registration, odds and cost of successful defense of the registration and commercial
value of the intellectual property rights. To enforce or protect intellectual property
rights, litigation or threatened litigation is common. The Company has not sued any third
parties over intellectual property rights. | |
**Results
of operations**
**Net
Revenues**
The
Company had no revenue for 2025 as it did not have an operating product line. 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 recognized 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 sales contractual arrangements.
Each contract on acceptance will have a fixed unit price. All of our sales were to the U.S. market in 2024. All of our revenue
is denominated in U.S. dollars.
26
**Cost
of Goods Sold**
In
2025, we had no cost of goods sold as we have no operating product line. For 2024, our cost of goods sold consisted primarily
of purchased products from contract manufacturers and when applicable associated duties and inbound freight. We sourced our manufactured
LED lighting products based on customer orders.
**Gross
Profit**
Our
gross profit has been affected by a variety of factors, including average sales price for our products, product mix, promotional
allowances, and our ability to reduce product cost fluctuations in the cost of our purchased components. See Risk Factors
above in Item 1A.
**Operating
Expenses**
In
2025, our operating expenses consisted of professional fees, consulting expenses, insurance and compliance expenses. For 2024,
operating expenses included sales and marketing expenses, costs related to employees compensation, product development,
professional fees, and insurance.
**CONSOLIDATED
RESULTS OF OPERATIONS AND OUTLOOK**
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
| |
Dollars | | |
% of Revenue | | |
Dollars | | |
% of Revenue | | |
|
Revenue, Net | |
$ | | | |
| | % | |
$ | 143,269 | | |
| 100.0 | % | |
|
Cost of sales | |
| | | |
| | % | |
| 38,019 | | |
| (26.5 | )% | |
|
Gross Profit (Loss) | |
| | | |
| | % | |
| 105,250 | | |
| (73.5 | )% | |
|
Operating Expenses: | |
| | | |
| | | |
| | | |
| | | |
|
Sales and marketing | |
| | | |
| | % | |
| 17,313 | | |
| 12.1 | % | |
|
Compensation | |
| | | |
| | % | |
| 139,078 | | |
| 97.1 | % | |
|
Professional fees | |
| 196,671 | | |
| | % | |
| 274,559 | | |
| 192.6 | % | |
|
Product development | |
| 2,190 | | |
| | % | |
| 6,233 | | |
| 4.4 | % | |
|
Other general and administrative | |
| 98,868 | | |
| | % | |
| 124,565 | | |
| 86.9 | % | |
|
Goodwill impairment | |
| 773,165 | | |
| | % | |
| 539,317 | | |
| 376.4 | % | |
|
Total Operating Expenses | |
| 1,070,894 | | |
| | % | |
| 1,101,065 | | |
| 768.53 | % | |
|
Operating Loss | |
| (1,070,894 | ) | |
| | % | |
| (995,815 | ) | |
| (695.1 | )% | |
|
Other Income (Expenses) | |
| | | |
| | | |
| | | |
| | | |
|
Miscellaneous Income, net | |
| | | |
| | % | |
| 4 | | |
| | % | |
|
Loss on disposal of equipment | |
| (17,904 | ) | |
| | % | |
| | | |
| | % | |
|
Interest expense, net | |
| (27,328 | ) | |
| | % | |
| (90,943 | ) | |
| (63.5 | )% | |
|
Total Other Expenses, net | |
| (45,232 | ) | |
| | % | |
| (90,939 | ) | |
| (63.5 | )% | |
|
Loss Before Tax Benefit | |
| (1,116,126 | ) | |
| | % | |
| (1,086,754 | ) | |
| (758.54 | )% | |
|
Income Tax Expense (Benefit) | |
| (195,958 | ) | |
| | % | |
| (124,370 | ) | |
| (86.8 | )% | |
|
Net Loss | |
$ | (920,168 | ) | |
| | % | |
$ | (962,384 | ) | |
| (671.70 | )% | |
27
**Net
Revenues**
The
Company had no revenue for 2025 as it did not have an operating product line. For 2024, revenue was derived from sales of our
residential lighting products and Connected Surfaces Smart Mirrors.
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.
All
sales were domestic for 2024.
The
following table disaggregates net revenue by major source:
|
| |
For the Year Ended December 31, 2025 | | |
| | |
For the Year Ended December 31, 2024 | | |
| | |
|
| |
Capstone Brand | | |
% of Revenue | | |
Capstone Brand | | |
% of Revenue | | |
|
Lighting Products- U.S. | |
$ | | | |
| | % | |
$ | 57,829 | | |
| 40 | % | |
|
Smart Mirror Products- U.S. | |
| | | |
| | % | |
| 85,440 | | |
| 60 | % | |
|
Total Revenue | |
$ | | | |
| | % | |
$ | 143,269 | | |
| 100 | % | |
**Gross
Profit and Cost of Sales**
The
Company did not have any gross profit or cost of sales for 2025. Gross profit for the year ended December 31, 2024, was approximately
$105,250, or 73.4% of net revenues. For the year ended December 31, 2024, cost of sales was approximately $38,000.
**Operating
Expenses**
**Sales
and Marketing Expenses**
In
2024, sales and marketing expenses were approximately $17,000. In 2025, the Company did not incur sales and marketing expenses
as the Company did not have an operating product line. As a percent to revenue, 2024 sales and marketing expenses were 12%.
28
**Compensation
Expenses**
For
the years ended December 31, 2025 and 2024, compensation expenses were approximately $0 and $139,000, respectively, a reduction
of $139,000 or 100%. The Company reduced the workforce and the CEO and Directors are not being compensated as a result of not
having an active product line during 2025.
**Professional
Fees**
For
2025, professional fees were approximately $197,000 compared to $275,000 in 2024, a decrease of $78,000 or 28%. As a percent of
net revenue, 2024 expenses were 192.6%. The decrease was driven by reduction of consulting fees down from $98,000 to zero for
2025 as the Company did not have an operating product line during 2025, offset by a slight increase in legal and accounting fees.
**Product
Development Expenses**
For
the years ended December 31, 2025, and 2024, product development expenses were approximately $2,000 and $6,000, respectively,
a decrease of $4,000 or 66%, as the Company did not have an operating product line during 2025.
**Other
General and Administrative Expenses**
For
2025 and 2024, other general and administration expenses were approximately $99,000 and $124,000, respectively, a decrease of
$25,000 or 21%. As a percent to revenue, other general and administrative expenses were 0% as compared to 86.9% in 2024. The directors
and officers insurance decreased $20,000 in 2025 to $49,000 and depreciation expense decreased $5,000 to $11,000 as the Company
disposed of the equipment.
**Goodwill
Impairment Expense**
The
Company recognized a goodwill impairment of approximately $773,000 and $539,000 during 2025 and 2024, respectively, as the fair
value of the Company was less than the carrying value of the Company.
**Total
Operating Expenses**
For
the years ended December 31, 2025, and 2024, total operating expenses were approximately $1,070,000 and $1,100,000, respectively.
This represents a $30,000 or 3% increase over fiscal year 2024. The primary driver for the year to year consistency is the impairment
expense recorded in both 2025 and 2024.
**Operating
Loss**
For
the years ended December 31, 2025, and 2024, total operating expenses were approximately $1,070,000 and $996,000, respectively.
This represents a $75,000 or 8% increase over fiscal year 2024, which is driven by no revenues in 2025 compared to $143,000 in
2024 and a $234,000 higher goodwill impairment loss in 2025 compared to 2024.
**Other
Income (Expense)**
Interest
expense for 2025 amounted to approximately $27,000 compared to $90,000 in 2024, a decrease of $63,000 or 70%, due to the cancellation
of debt and issuance of preferred B-1 stock during 2024. The Company also disposed of its last remaining equipment related to
the Connected Chef and recorded a loss on disposal of approximately $18,000.
29
For
the years ended December 31, 2025, the net tax benefit for income tax was estimated at $196,000compared to a net tax benefit
of $125,000 in the same period 2024.
The
effective tax rate for the years ended December 31, 2025, and 2024, respectively, was (17.56%) and (10.07%) and the statutory
tax rate was 25.5 in 2025 and 23.5% in 2024.
**Net
Loss Before Income Taxes**
For
fiscal 2025 and 2024 net loss before taxes was approximately $1,116,000 and $1,087,000, respectively, a net loss increase of approximately
$29,000 over the previous year due to the reasons summarized above.
**RESULTS
OF OPERATIONS AND BUSINESS OUTLOOK**
Our
goal is to find a strategic partner to assist with a possible business combination as well as to license the Connected Chef kitchen
utility device in 2026 through licensing arrangements with an appliance or other consumer product distributors, consumer product
manufacturers and possibly other commercial food or kitchen product companies.
The
Company will require additional working capital funding until such time as a strategic partner is found. The Company may also
require additional funding to cover the costs of manufacturing Connected Chef product if the Company is able to obtain a licensing
arrangement in 2026.
**Contractual
Obligations**
The
following table represents contractual obligations as of December 31, 2025.
|
| |
Payments Due by Period | | |
|
| |
Total | | |
2026 | | |
2027 | | |
2028 | | |
After 2029 | | |
|
| |
| | |
| | |
| | |
| | |
| | |
|
Accounts payable and accrued liabilities | |
$ | 3,854 | | |
$ | 3,854 | | |
$ | | | |
$ | | | |
$ | | | |
|
Short-Term Debt related parties | |
| 514,320 | | |
| 514,320 | | |
| | | |
| | | |
| | | |
|
Total Contractual Obligations | |
$ | 518,174 | | |
$ | 518,174 | | |
$ | | | |
$ | | | |
$ | | | |
**Notes
to Contractual Obligations Table**
Accounts
payable and accrued liabilities : Comprised of the Companys liability for goods and services in the normal
course of business.
Short
Term Debt notes payable with related parties : Related to working capital funding.
30
**LIQUIDITY
AND CAPITAL RESOURCES**
During
the year ended December 31, 2025, the Company used cash in operations of approximately $283,000 and generated net operating losses
of $1,071,000. As of December 31, 2025, the Company had working capital deficit of $459,069 and an accumulated deficit of $12,679,768.
The Companys cash balance increased by approximately $23,000 from $16,000 as of December 31, 2024, to $39,000 as of December
31, 2025, due to proceeds from related party notes payable for working capital needs. With the reduced revenues in 2024 and no
revenues in 2025, the Company reduced non-essential expenses, dissolved the Hong Kong operation, and fully impaired the goodwill
of $773,165 during 2025.
In
2025, the Company sought to penetrate the HFS industry that was and continues to enjoy rapid expansion nationwide with many existing
and new companies that have established operations and brand recognition. The inability of the Company to secure adequate business
development funding hampered efforts in 2025 to either acquire or internally develop a new HFS industry business line. The Company
believes that identification of a suitable acquisition target or a strategic alliance with an established HFS industry business
may potentially enhance the ability of the Company to attract funding for acquiring or establishing a new HFS business (either
internally or through an acquisition). Due to the no shop provision in the March 2026 eBliss Note, the HFS industry
business development efforts, are suspended for the 90-day no shop period.
With
the failure of the licensing effort for the Connected Chef product in November 2025, the Company is not actively pursuing product
development as of the first fiscal quarter of 2026, but the Company would resume the licensing effort if an alternative business
line or product opportunity is not developed by mid-2026. The Company is exploring such an arrangement with a limited number of
prospective distributors.
Chairman
of the Board, and former Chief Executive Officer, Stewart Wallach, funded working capital from 2022 through 2025 as the Company
navigated these challenges. Total working capital note proceeds received through 2024 were $672,500 and were settled for conversion
of debt into Preferred Stock, Series B-1. Coppermine has funding working capital since 2024. Total working capital
note proceeds received as of the date of this filing of the Form 10-K report from Coppermine are $530,000. Coppermine has committed
to lending a total of $558,191 in working capital funding through December 31, 2026. 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 2026.
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 Companys ability to continue as a going concern.
**Summary
of Cash Flows**
|
| |
Years ended December 31, | | |
|
| |
2024 | | |
2023 | | |
|
(In thousands) | |
| | |
| | |
|
Net cash provided by (used in): | |
| | | |
| | | |
|
Operating Activities | |
$ | (282,959 | ) | |
$ | (289,548 | ) | |
|
Investing Activities | |
| | | |
| | | |
|
Financing Activities | |
| 306,231 | | |
| 268,932 | | |
|
Net increase (decrease) in cash | |
$ | 23,272 | | |
$ | (20,616 | ) | |
As
of December 31, 2025, the Companys working capital deficit was approximately $459,000 of which $39,000 was cash. Current
liabilities were $518,000 and include:
|
|
Accounts
payable of approximately $3,854 for amounts due vendors and service providers. | |
|
|
Notes
payable related parties - current portion of debt included accrued interest of approximately $514,320. | |
31
**Cash
Flows provided by (used in) Operating Activities**
Cash
used in operating activities was approximately $283,000 in 2025 compared with approximately $290,000 in 2024. The cash used in
operating activities in 2025 were related to essential operating expenses as the Company reduced operating costs as much as possible
during 2025.
**Cash
Flows used in Investing Activities**
There
was no cash provided by investing activities for 2025 or 2024.
**Cash
Flows used in Financing Activities**
Cash
received by financing activities for the years ended December 31, 2025, and 2024, was approximately $306,000 and $269,000, respectively,
and related to working capital proceeds from related parties.
**Exchange
Rates**
We
have historically sold all of our products in U.S. dollars and pay for all of our manufacturing costs in U.S. dollars.
While
exchange rates have been stable for several years, we cannot assure you that the exchange rate between the United States, Chinese
and Thailand currencies will continue to be stable and exchange rate fluctuations may have a material effect on our business,
financial condition or results of operations.
**Off
Balance Sheet Arrangements**
We
do not have material off-balance sheet arrangements that have or are reasonably likely to have a material future effect on our
results of operations or financial condition.
**DIVIDENDS**
We
have not declared or paid any cash or other dividends on shares of our Common Stock, and we presently have no intention of paying
any cash dividends on shares of our Common Stock.
**RECENT
ACCOUNTING PRONOUNCEMENTS**
See
Note 1 of the Consolidated Financial Statements at Item 15 of this Report.
**CRITICAL
ACCOUNTING POLICIES**
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America (U.S. GAAP) requires management to make certain estimates and assumptions regarding matters that are
inherently uncertain and that ultimately affect the reported amounts of assets, liabilities, revenues and expense, and the disclosure
of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and judgments, including those related
to revenue recognition; depreciation; amortization and the recovery of long-lived assets; including goodwill and intangible assets;
shared base-based payment expense; and other reserves and assumptions based on managements experience and understanding
of current facts and circumstances, historical experience and other relevant factors. These estimates may differ from actual results.
Certain of our accounting policies are considered critical as they are both important to reflect our financial position and results
of operations and require significant or complex judgement on the part of management. The following is a summary of certain accounting
policies considered critical by management.
32
**Revenue
Recognition**
The
Company recognizes lighting product revenue when the Companys 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.
The
Company may enter into a licensing agreement with globally recognized companies, that allows the Company to market products under
a licensed brand to retailers for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage
of licensed product revenue to the licensor in order to market the licensed product.
The
Company may also enter into a private label agreement, whereby the Company produces and ships products to a customer that has
been packaged and will be marketed under the customers own private label.
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.
33
**Goodwill**
On
September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation
(Capstone). 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 Capstones 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.
In
January 2017, the FASB issued ASU 2017-04, *Simplifying the Test for Goodwill Impairment,*which requires an entity to perform
a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting units
carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). ASU 2017-04 was effective
for the Companys fiscal year ended December 31, 2019. The adoption of ASU 2017-04 did not have a material effect on the
Companys consolidated financial statements.
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 Companys market capitalization. There
was an impairment expense of $773,165 and $539,317, respectively, for the year ended December 31, 2025 and 2024, for a balance
of goodwill of $0 and $773,165, respectively as of December 31, 2025, and 2024.
**Accrued
Liabilities**
Accrued
liabilities contained in the accompanying consolidated balance sheets has historically included accruals for estimated amounts
of credits to be issued in future years based on operating expenses and other liabilities.
**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 Financial Accounting Standards Board (FASB) Accounting
Standard Codification (ASC) 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.
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.
34
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.
As
of December 31, 2025, the Company had federal and state net operating loss carry forwards of approximately $4,587,000 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, 2025, and 2024 was $0 and $320,000, respectively,
and is reflected in long-term liabilities in the accompanying consolidated balance sheets.
The
effective tax rate for the years ended December 31, 2025, and 2024, respectively, was 17.56% and 11.44% and the statutory tax
rate was 25.3% in 2025 and 23.5% in 2024.
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.
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 Companys 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, 2025, and 2024. 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 $0 and $320,000 is presented
on the companys balance sheet, respectively. The Companys valuation allowance decreased by $567,000 in 2025.
The
Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the
Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the
potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes.
**Item
7A. Quantitative and Qualitative Disclosures about Market Risk. (Not Applicable)**
**Item
8. Financial Statements and Supplementary Data.**
The
financial statements and financial statement schedules of CAPC as well as supplementary data are listed in Item 15 below and are
included after the signature page to this Form 10-K report.
**Item
9**. **Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**
None.
35
**Item
9A. Controls and Procedures.**
**Disclosure
Controls and Procedures**
**Evaluation
of Disclosure Controls and Procedures.**
Based
on an evaluation under the supervision and with the participation of the Companys management, the Companys principal
executive officer and principal financial officer have concluded that the Companys disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of December 31, 2025 to provide reasonable assurance
that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated
to the Companys management, including its principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
**Managements
Annual Report on Internal Control over Financial Reporting** The Companys management is responsible for establishing
and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management
conducted an assessment of the effectiveness of the Companys internal control over financial reporting based on the criteria
set forth in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework). Based on the Companys assessment, management has concluded that its internal control over
financial reporting was effective as of December 31, 2025, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance with GAAP and includes those policies and procedures that:
|
|
|
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 Companys
assets that could have a material effect on the financial statements. | |
**Changes
in Internal Control over Financial Reporting**
There
were no changes in the Companys internal control over financial reporting during the fourth quarter of 2025, which were
identified in connection with managements evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange
Act, that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial
reporting.
Because
the Company is a smaller reporting company, this For
@
must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance
that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls
in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
36
The
certifications of our Chief Executive Officer and Chief Financial Officer attached as Exhibits 31 and 32 and to this Form 10-K
report include information concerning our disclosure controls and procedures and internal control over financial reporting.
**Item
9B. Other Information.** None
**Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.**Not applicable.
**Part
III**
**Item
10. Directors, Executive Officers and Corporate Governance.**
Code
of Ethics. The board of directors has adopted a written Code of Ethics applicable to all officers, directors and employees, including
our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing
simila
@
February 24, 2025, the board of directors adopted a stand-alone insider trading policy to update and expand the scope of the insider
trading policy that was included in the Code of Ethics. The Company filed a Current Report on Form 8-K to report this change.
Insider
Trading Compliance Policy. The board of directors has adopted a written Insider Trading Policy applicable to all officers, directors,
employees and other covered persons, governing the purchase, sale and other disposition of our securities that we believe are
reasonably designed to promote compliance with insider trading laws, rules and regulations and any applicable OTC Markets Group
QB Venture Market standards. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Form 10-K.
**CURRENT
BOARD OF DIRECTORS**
The
incumbent and current members of the Board of Directors are:
|
1. |
Stewart Wallach. Mr. Wallach has been a Director since April 2007. | |
|
2. |
Alexander Jacobs became a Director on December 4, 2024. | |
|
3. |
Jeffrey Guzy. Mr. Guzy was appointed as a Director on May 3, 2007. Mr. Guzy is deemed an Independent Director under applicable standards. | |
|
4. |
Jeffrey Postal. Mr. Postal has been a Director since January 2004 and resigned December 6, 2024. | |
|
5. |
George Wolf was appointed as a Director on January 13, 2022, and resigned December 6, 2024. | |
Directors appointed in 2025:
|
1. |
Warner Session was appointed as a Director on January 9, 2025.He is deemed to be an independent director based on NASDAQ guidelines. | |
|
2. |
Brian Rosen was appointed as a Director on January 20, 2025 and on February 24, 2025, Mr. Rosen was appointed as a member of the Audit Committee.Mr. Rosen is a non-employee director but is not deemed to be independent due to a business relationship with a company controlled by Alexander Jacobs, Companys Chief Executive Officer and affiliated with Coppermine. | |
37
Each
Directors term is for one year. Company Directors have typically been elected in the past by written consent of stockholders
holding more than 50% of the current voting power. The Company uses the written consent because a small number of shareholders
have sufficient voting power to decide the election of Directors and approval or denial of any other corporate resolution and
the cost of conducting an annual stockholders meeting is significant for a small reporting company.
Further,
stockholders may make inquiries in writing by sending their inquiries to Secretary, Capstone Companies, Inc., #144-V 10 Fairway
Drive, Suite 100, Deerfield Beach, Florida 33441. The information required in Part III of this Form 10-K report is set forth in
the information statement filed for the written consent approval of nominee slates of Directors and the requirements for stockholders
to submit proposed resolutions and Director nominees is set forth in this Form 10-K report.
**DIRECTOR
PROFILES**
**Stewart
Wallach**, Age 74, former Chief Executive Officer and Chairman of the Board of Directors since April 23, 2007, a director of
the Company since September 22, 2006, and the founder and Chief Executive Officer and Chairman of the Board of Directors of Capstone
Industries, Inc., a wholly owned subsidiary, and principal operating subsidiary of the Company since September 20, 2006. Mr. Wallach
is an American entrepreneur and has founded and operated a number of successful businesses over his 35-year career. Over the past
17 years, Mr. Wallach has been focused on technology-based companies in addition to consumer product businesses, the field in
which he has spent most of his career. Prior to founding Capstone Industries, Inc., he sold Systematic Marketing, Inc., which
designed, manufactured, and marketed automotive consumer products to mass markets, to Sagaz Industries, Inc., a leader in these
categories. He served as President of Sagaz Industries, Inc. for 10 years before forming Capstone Industries, Inc. In 1998, Mr.
Wallach co-founded Examsoft Worldwide, Inc. (Examsoft), which developed and delivered software technology solving
security challenges of laptop-based examinations for major educational institutions and state bar examiners.
Mr.
Wallach remained chairman of Examsoft until it was acquired in late 2009. Mr. Wallach has designed and patented a number of innovations
over the span of his career and has been traveling to China establishing manufacturing and joint venture relationships since the
early 1980s.
38
**Alexander
Jacobs**, Age 53, Chief Executive Officer and Director appointed on December 4, 2025, Mr. Jacobs has spent 30+ years as a serial
entrepreneur starting and operating several companies across many different industries from apparel to sports complexes.
Over the past few decades, Alex has employed over 1,000 people and has sold over $100,000,000 of products and services in
the following companies he founded: Chesapeake Design Works Inc., Inkworks Inc., Brandmark Inc. and the Coppermine ecosystem.
www.gocoppermine.com
In
2011, Alex started Coppermine, a privately held sports complex in Baltimore, Maryland. Coppermine now serves 35,000 customers
per week in 20 locations in Carrol County, Harford County, Baltimore County, Baltimore City, and Anne Arundel County.
Coppermine has become one of the largest sports operators in the Mid-Atlantic region for the offering programs in karate, soccer,
lacrosse, dance, gymnastics, football, baseball, squash, tennis, pickleball, baseball, aquatics, health & fitness, summer
camps, birthday parties and more.
**Jeffrey
Guzy,**Age 73. Director. He was appointed to the Companys Board of Directors on May 3, 2007. He serves as Chairman and
Chief Executive Officer of CoJax Oil and Gas Corporation, an SEC reporting company. Mr. Guzy is an outside director of Leatt Corporation,
an SEC reporting company (OTCQB: LEAT). Mr. Guzy served, from October 2007 to August 2010 as President of Leatt Corporation. Mr.
Guzy has an MBA in Strategic Planning and Management from The Wharton School of the University of Pennsylvania; a M.S. in Systems
Engineering from the University of Pennsylvania; a B.S. in Electrical Engineering from Penn State University; and a Certificate
in Theology from Georgetown University. Mr. Guzy has served as an executive manager or consultant for business development, sales,
customer service and management in the telecommunications industry, specifically, with IBM Corp., Sprint International, Bell Atlantic
Video Services, Loral CyberStar and FaciliCom International. Mr. Guzy has also started his own telecommunications company providing
Internet services in Western Africa. He serves as an independent director and chairman of the audit committee of public company,
Purebase Corporation (OTC.PUBC), and as an independent director and chairman of the audit committee and the corporate governance
committee of Blue Star Foods Corporation (OTC.BSFC) a public company.
**Profiles
of Directors who resigned on December 6, 2024:**
**Dr.
Jeffrey Postal,**Age 68. Director. He has served as a director of the Company since January of 2004. Dr. Postal presently is
a businessman and entrepreneur in the Miami, Florida region. Dr. Postal owns, founded or funded numerous successful businesses
over the last few years, including but not limited to: Sportacular Art, a company that was licensed by the National Football League,
Major League Baseball and National Hockey League to design and manufacture sports memorabilia for retail distribution in the U.S;
Co-Owner of Natures Sleep, LLC, a major distributor of Visco Memory Foam mattresses, both nationally and internationally; Dr.
Postal is a Partner in Social Extract, LLC, a Social Media company offering consulting services to many major companies in the
U.S.; Dr. Postal is the principal investor of Postal Capital Funding, LLC, a private investment fund whose mission is to find
undervalued/under capitalized companies and extend funding to them in exchange for equity and/or capital consideration; and Dr.
Postal is the founder of Datastream Card Services, a company that provides innovative billing solutions to companies conducting
business on the internet.
**George
Wolf,** Age 75. Mr. Wolf has provided sales and business development consulting services to the Company since 2014. Prior to
Mr. Wolf providing these consulting services, he served as President and Chief Executive Officer of Systematic Development Group,
LLC from 2010 into 2014, President and Chief Executive Officer of ExamSoft Worldwide, Inc. (1998 2009) and as Executive
Vice President of Sagaz Industries, Inc. (1986 1997).
Set
forth below is a tabular disclosure summarizing some of the specific qualifications, attributes, skills and experiences of our
directors.
|
Name |
|
Title |
|
Qualifications | |
|
Stewart
Wallach |
|
Chairman
of the Board and former Chief Executive Officer |
|
He
has extensive experience in executive management of companies.
He has experience in growing operations and merger and acquisition transactions. He has extensive
experience in arranging the design, development and production of products in foreign nations for shipment and sale in the
U.S. and conducting business abroad.
His experience provides insight for the implementation of effective operational, financial and
strategic leadership of the Company. | |
|
Jeffrey
Postal |
|
Director
resigned December 6, 2024 |
|
He
has extensive experience in investing in companies.
He has extensive experience in management and business,
He has experience growing a company and mergers and acquisitions. | |
|
Alexander
Jacobs |
|
Director
and Chief Executive Officer |
|
He
is the founder, senior operations executive and the owner of Coppermine Ventures LLC (Coppermine) and affiliated
companies. Coppermine operates 20 facilities in Maryland that provide year-round social, athletic, and fitness programming
for children, adults and families. | |
|
Jeffrey
Guzy |
|
Director |
|
Through
his MBA in Strategic Planning & Management and his knowledge of U.S. capital markets, Mr. Guzy provides invaluable guidance
and perspective to the Board.
He serves and has served as an officer and director of public companies and worked for large
corporations in business development. He brings this experience to the Board. | |
|
George
Wolf |
|
Director
resigned December 6, 2024 |
|
He
has extensive experience in sales and business development and has prior management experience. He is familiar with the Companys
sales and business development strategies and operations and has worked closely with executive officers of the Company in
sales and business development. | |
39
**Profile
of Directors appointed in January 2025**
**Warner
Session, Age 70, Director.**He was appointed to the Companys Board of Directors on January 9, 2025.He owns the Session
Law Firm, P.C., specializing in real estate, corporate transactions, government procurement, and relations. He also owned Session
Title Services, LLC, a title insurance and settlement company.Mr. Warner has worked for the U.S. House of Representatives
as Staff Director and Counsel, overseeing airline safety, minority business participation, and drafting legislation and reports.
Mr. Warnerhas managed residential and commercial transactions, drafted condominium documents, and is affiliated with various
professional organizations including the DC Building Industry Association, DC Chamber of Commerce and DC Land Title Association.
Warner is a former Chairman of the Metropolitan Washington Airports Authority (Dulles and National Airports) and is current
a Trustee at the University of the District of Columbia.
**Brian
Rosen, Age 56, Director.** He was appointed to the Companys Board of Directors on January 20, 2025. He served as
Senior Vice President of Global Government Affairs, Market Access, and Advocacy for Novavax, Inc, an SEC reporting company.
Mr. Rosen received his juris doctorate from Hofstra University School of Law and a Bachelor of Arts degree from Tufts University.
Mr. Rosen previously served as Senior Vice President of commercial strategy for Novavax, and has more than 25 years of biotech,
legal, and patient advocacy experience with the vast majority engaged in government affairs, advocacy, reimbursement, and policy
work. Prior to Novavax, Mr. Rosen was most recently the Chief Policy, Advocacy and Patient Access Officer for the Leukemia &
Lymphoma Society, where he oversaw all legislative and regulatory efforts and the delivery of patient services nationwide. Previously,
he developed and ran the government affairs, policy, and alliance development functions for MedImmune, Inc, which was subsequently
acquired by AstraZeneca, a publiclyheld company. Mr. Rosen currently serves on the board of directors of Learning Undefeated,
a nonprofit organization that provides STEM education and workforce development to underserved communities.
**POLICY
REGARDING BOARD ATTENDANCE**
Company
Directors are expected to attend all annual and special board meetings per Company policy. An attendance rate of less than 75%
over any 12-month period is grounds for removal from the Board of Directors. In fiscal year 2025, all Directors attended the (5)
five board meetings.
**ROLE
OF THE BOARD OF DIRECTORS IN CORPORATE GOVERNANCE**
The
Board of Directors is responsible for overseeing the Chief Executive Officer and other senior management in order to assure that
such officers are competent and ethical in running the Company on a day-to-day basis and to assure that the long-term interests
of the stockholders are being served by such management. The Directors must take a pro-active focus and approach to their obligation
in order to set and enforce standards to ensure that the Company is committed to business success through maintenance of the highest
standards of responsibility and ethics. The Company has adopted a Code of Ethics, which is posted on http://capstonecompaniesinc.com.
The contents of the Company Website are not incorporated herein by reference and that Website provided in this Report is intended
to be an inactive textual reference only. Since appointment of Alexander Jacobs as Companys Chief Executive Officer, Chairman
of the Board of Director, Stewart Wallach, has assumed executive management responsibility for Connected Chef product licensing
as well as for cybersecurity oversight.
40
**AUDIT
COMMITTEE**
The
Audit Committee was established in accordance with Section 3(a)(58) (A) of the Exchange Act. It is primarily responsible for overseeing
the services performed by the Companys Independent Registered Public Accounting Firm, evaluating the Companys accounting
policies and its system of internal controls and reviewing significant financial transactions. The members of the Audit Committee
in fiscal year 2025 were Jeffrey Guzy and Brian Rosen. The Company believes that Mr. Guzy is an Independent Director under SEC
and NASDAQ standards.The Board of Directors has determined that Mr. Guzy qualifies as an Audit Committee Financial
Expert as defined under applicable SEC rules and also meets the additional criteria for independence of Audit Committee
members set forth in Rule 10A-3(b)(1) under the Exchange Act. Mr. Rosen is deemed to possess the skills and experience to perform
his duties as an Audit Committee member. Mr., Rosen is not deemed to be an Independent Director under SEC and NASDAQ
standards due to a business relationship with a company controlled by Companys Chief Executive Officer Alexander Jacobs
and affiliated with Coppermine.
**REPORT
OF THE AUDIT COMMITTEE**
The
Audit Committee is responsible for providing oversight to Companys accounting and financial reporting processes and the
audit of the Companys financial statements. The Audit Committee monitors the Companys external audit process, including
auditor independence matters, the scope and fees related to audits, and the extent to which the Independent Registered Public
Accounting Firm may be retained to perform non-audit services. The Audit Committee also reviews the results of the external audit
with regard to the adequacy and appropriateness of our financial, accounting and internal controls over financial reporting. It
also generally oversees the Companys internal compliance programs. The function of the Audit Committee is not intended
to duplicate or to certify the activities of the management and the Independent Registered Public Accounting Firm, nor can the
Audit Committee certify that the independent registered public accounting firm is independent under applicable rules.
The Audit Committee members are not professional accountants or auditors. Under its Charter, the Audit Committee has authority
to retain outside legal, accounting or other advisors as it deems necessary to carry out its duties and to require the Company
to pay for such expenditures.
The
Audit Committee provides counsel, advice and direction to management and the Independent Registered Public Accounting Firm on
matters for which it is responsible, based on the information it receives from management and the independent registered public
accounting firm and the experience of its members in business, financial and accounting matters.
41
The
Companys management is responsible for the preparation and integrity of its financial statements, accounting and financial
reporting principles, and internal controls and procedures designed to ensure compliance with accounting standards, applicable
laws and regulations.
In
this context, the Audit Committee hereby reports as follows:
|
|
1) |
Companys
management has represented to the Audit Committee that the 2025 audited financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America. The Audit Committee has reviewed and discussed the
audited financial statements for year 2025 with Companys management and the independent registered public accounting
firm. | |
|
|
2) |
The
Audit Committee has received written disclosures and a letter from the Independent Registered Public Accounting Firm, Stephano
Slack LLC, required by the PCAOB and has discussed with Assurance Dimensions, their independence. | |
|
|
3) |
Based
on the review and discussion referred to above, the Audit Committee recommended to the board, and the board has approved,
that the audited financial statements be included in Companys Annual Report on Form 10-K for the year ended December
31, 2024, as filed with the Commission on March 31, 2026. | |
The
foregoing report is provided by the undersigned Chairman of the Audit Committee.
/s/Jeffrey
Guzy
Jeffrey
Guzy, Chairman of Audit Committee
**COMPENSATION
AND NOMINATION COMMITTEE (Compensation and Nomination Committee)**
Companys
Compensation and Nomination Committee is currently composed of two members (both Company directors): Mr. Jeffrey Guzy and Mr.
Warner Session. Only Mr. Guzy, who serves as Chairman of the Compensation and Nomination Committee, is independent
within the meaning of the NASDAQ Marketplace Rules.
Companys
Compensation and Nomination Committee assists the Company Board of Directors in reviewing and approving the compensation structure
of executive officers, including all forms of compensation to be provided to the executive officers. The chief executive officer
and chief financial officer may not be present at any Compensation and Nomination Committee meeting during which the executives
compensation is discussed and deliberated.
The
Compensation and Nomination Committee is responsible for, among other customary duties, the following:
|
|
|
Reviewing,
overseeing and approving the compensation of Companys executive officers; and | |
|
|
|
Periodically
reviewing and making recommendations to the Company Board of Directors about incentive compensation, stock or equity compensation
plans, annual bonus programs and grants, any employee pension or welfare benefit plans and any similar forms of benefit plans;
and | |
|
|
|
Periodically
reviewing and approving corporate performance and corporate performance goals that are applicable to compensation of Companys
chief executive officer and chief financial officer, evaluating the performance of those executives in light of corporate
performance and corporate performance goals; and determining the compensation for the Companys chief executive officer
and chief financial officer. | |
42
**DIRECTOR
MEETINGS IN FISCAL YEAR 2024**
The
Board of Directors had (5) five official meetings in 2025. During 2025, all Directors attended 75% or more of the Board meeting,
which were held during the period of time that such person served on the Board or such committee.
**Board
Leadership Structure and Boards Role in Risk Oversight**
The
Companys Board of Directors endorses the view that one of its primary functions is to protect stockholders interests
by providing independent oversight of management, including the Chief Executive Officer. The Chief Financial Officer is allowed
and encouraged to address the Board of Directors on any issues affecting the Company or its stockholders. The Company also allows
outside counsel to participate in some of the board meetings in order to provide legal counsel and an outside perspective on corporate
governance and risk issues.
**Board
Structure.**With the appointment of Alexander Jacobs to Chief Executive Officer or CEO on December 4, 2024, the
former CEO, Stewart Wallach, maintained his role as Chairman of the Board of Directors for business knowledge and continuity purposes.
The
CEO is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company,
while the Chairman of the Board of Directors provides guidance to senior management and sets the agenda for Board of Directors
meetings and presides over meetings of the full Board of Directors. Mr. Jacobs is also responsible for executive leadership for
the HFS business development efforts.
Our
CEO serves on our Board of Directors, which we believe helps the CEO serve as a bridge between management and the Board of Directors,
ensuring that both groups act with a common purpose. We believe that the CEOs presence on the Board of Directors enhances
his ability to provide insight and direction on important strategic initiatives to both management and the independent directors
and, at the same time, ensures that the appropriate level of independent oversight is applied to all decisions by the Board of
Directors.
Stewart
Wallach, as Chairman of the Board and as former CEO, has managed the Connected Chef licensing program in 2025 and into 2026 and
handles cybersecurity oversight duties.
The
Chairman of the Board or Chair has no greater nor lesser vote on matters considered by the Board than any other
director, and neither the Chairman nor any other director votes on any related party transaction. All directors of the Company,
including the Chairman, are bound by fiduciary obligations, imposed by law, to serve the best interests of the stockholders. Accordingly,
separating the offices of Chairman and Chief Executive Officer would not serve to enhance or diminish the fiduciary duties of
any director of the Company.
**Board
of Director 2025 Compensation Table**
|
Name
(1) |
|
Audit
Committee |
|
Nomination
and Compensation Committees |
|
Total
Awards | |
|
Stewart
Wallach |
|
$ |
|
|
|
|
|
|
|
|
|
Jeff
Guzy |
|
$ |
|
|
|
|
|
|
|
|
|
Warner
Session |
|
$ |
|
|
|
|
|
|
|
|
|
Brian
Rosen |
|
$ |
|
|
|
|
|
|
|
|
|
Alexander
Jacobs (2) |
|
$ |
|
|
|
|
|
|
|
|
|
|
(1) |
The
individuals listed were appointed to the Board of Directors for 2025-2026. | |
|
|
(2) |
As a Company Employee, this Director did not receive compensation for participating as a Director on the Board. | |
On
July 5, 2022, the Company approved the suspension of cash compensation for services as a director and services as a member of
the Audit Committee, Compensation and Nomination Committee for independent directors until further notice.
43
**Independent
Directors.**The Board of the Company is typically comprised five directors, one of whom is an independent director under the
listing standards of quotation systems like The NASDAQ Stock Market in 2025. With the appointment of Warner Session to the Board
on January 9, 2025, the Company has two independent directors under the listing standards of quotation systems like The NASDAQ
Stock Market. Although we have D&O insurance, the Company was generally unsuccessful in recruiting independent directors in
the past, which we believe was caused by the financial condition of the Company, its status as a microcap and penny stock company.
This is a problem commonly faced by micro-cap, penny stock companies like our Company.
Brian
Rosen was appointed as a non-employee Director on January 20, 2025, but he is not deemed independent because of a business and
financial relationship with a company owned and managed by Alexander Jacobs, Companys CEO.
Our
senior officers are responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through
its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has
the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and
functioning as designed. To do this, the Chairman of the Board and other non-officer directors met quarterly on average with management
to discuss strategy and the risks facing the Company. Senior management, each member being also a director, attends the Board
meetings and is available to address any questions or concerns raised by the Board on risk management and any other matters. The
Chairman of the Board and members of the Board work together to provide strong, independent oversight of the Companys management
and affairs through its standing committees and, when necessary, special meetings of directors. Since most of the directors live
in the same area, informal meetings between directors and officers also occur to discuss business risk and appropriate responses.
**Director
- Minimum Qualifications**. The Compensation and Nominating Committee has adopted a set of criteria that it considers when it
selects individuals not currently on the Board of Directors to be nominated for election to the Board of Directors. A candidate
must meet the eligibility requirements set forth in the Companys Bylaws. A candidate must also meet any qualification requirements
set forth in any Board or committee governing documents. If the candidate is deemed eligible for election to the Board of Directors,
the Compensation and Nominating Committee will then evaluate the prospective nominee to determine if he or she possesses the following
qualifications, qualities or skills:
|
|
|
contributions
to the range of talent, skill and expertise appropriate for the Board. | |
|
|
|
financial,
regulatory and business experience, knowledge of the operations of public companies and ability to read and understand financial
statements. | |
|
|
|
familiarity
with the Companys market. | |
|
|
|
personal
and professional integrity, honesty and reputation. | |
|
|
|
the
ability to represent the best interests of the shareholders of the Company and the best interests of the institution. | |
|
|
|
the
ability to devote sufficient time and energy to the performance of his or her duties; and | |
|
|
|
independence
under applicable Commission and listing definitions. | |
44
The
Compensation and Nominating Committee will also consider any other factors it deems relevant. With respect to nominating an existing
director for re-election to the Board of Directors, the Compensation and Nominating Committee will consider and review an existing
directors Board and committee attendance and performance; length of Board service; experience, skills and contributions
that the existing director brings to the Board; and independence.
**Director
Nomination Process**. The process that the Compensation and Nominating Committee follows when it identifies and evaluates individuals
to be nominated for election to the Board of Directors is as follows:
For
purposes of identifying nominees for the Board of Directors, the Compensation and Nominating Committee relies on personal contacts
of the committee members and other members of the Board of Directors and will consider director candidates recommended by stockholders
in accordance with the policy and procedures set forth above. The Compensation and Nominating Committee has not used an independent
search firm to identify nominees.
In
evaluating potential nominees, the Compensation and Nominating Committee determines whether the candidate is eligible and qualified
for service on the Board of Directors by evaluating the candidate under the selection criteria, which are discussed in more detail
below. If such individual fulfills these criteria, the Compensation and Nominating Committee will conduct a check of the individuals
background and interview the candidate to further assess the qualities of the prospective nominee and the contributions he or
she would make to the Board of Directors.
**Consideration
of Recommendation by Stockholders.** It is the policy of the Compensation and Nomination Committee of the Board of Directors
of the Company to consider director candidates recommended by stockholders who appear to be qualified to serve on the Companys
Board of Directors. The Compensation and Nominating Committee may choose not to consider an unsolicited recommendation if no vacancy
exists on the Board of Directors and the Compensation and Nomination Committee does not perceive a need to increase the size of
the Board of Directors. To avoid the unnecessary use of the Compensation and Nominating Committees resources, the Compensation
and Nomination Committee will consider only those director candidates recommended in accordance with the procedures set forth
below.
**Stockholder
Proposal Procedures.**To submit a recommendation of a director candidate to the Compensation and Nomination Committee, a stockholder
should submit the following information in writing, addressed to the Chairperson of the Compensation and Nomination Committee,
care of the Corporate Secretary, at the main office of the Company:
|
|
1. |
The
name of the person recommended as a director candidate. | |
|
|
2. |
All
information relating to such person that is required to be disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of 1934. | |
|
|
3. |
The
written consent of the person being recommended as a director candidate to being named in the proxy statement as a nominee
and to serving as a director if elected. | |
|
|
4. |
The
name and address of the stockholder making the recommendation, as they appear on the Companys books; provided, however,
that if the stockholder is not a registered holder of the Companys common stock, the stockholder should submit his
or her name and address along with a current written statement from the record holder of the shares that reflects ownership
of the Companys common stock; and | |
|
|
5. |
A
statement disclosing whether such stockholder is acting with or on behalf of any other person and, if applicable, the identity
such person. | |
Shareholder
nominations of director candidates must satisfy the following notice requirements and deadlines: The nomination must be received
by the Company not later than (i) in the case of an annual meeting, one hundred twenty (120) days prior to the anniversary date
of the Companys proxy statement relating to the immediately preceding annual meeting or date of immediately preceding election
of directors by written consent, and (ii) in the case of a special meeting, the close of business on the tenth day following the
date on which the Company first makes public disclosure of the date of the special meeting. Each notice given by such shareholder
shall set forth: (A) the name and address of the shareholder who intends to make the nomination and of the person or persons to
be nominated; (B) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such
meeting (or if the record date for such meeting is subsequent to the date required for such shareholder notice, a representation
that the shareholder is a holder of record at the time of such notice and intends to be a holder of record on the record date
for such meeting), setting forth the number and class of shares so held, and intends to appear in person or by proxy at the meeting
to nominate the person or persons specified in the notice; (C) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination
or nominations are to be made by the shareholder; (D) such other information regarding each nominee proposed by such shareholder
as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had each nominee
been nominated, or intended to be nominated, by the Board and (E) the consent of each nominee to serve as a director of the Company
if so elected.
45
**MANAGEMENT
OF THE COMPANY**
CURRENT
OFFICERS. The current officers of the Company are:
|
|
1. |
Alexander
Jacobs, age 53, was appointed as Chief Executive Officer and President of the Company on December 4, 2024. | |
|
|
2. |
Dana
Eschenburg Perez, age 48, was engaged as a consultant to perform the duties of Chief Financial Officer on January 1, 2023.
She was appointed as Chief Financial Officer on March 27, 2023. | |
**FAMILY
RELATIONSHIP**: There is no family relationship between members of Company management.
**Delinquent
Section 16(a) Reports**.
Section
16(a) of the Securities Exchange Act of 1934 requires the Companys directors and executive officers, and owners of more
than ten percent of the Companys Common Shares (10% stockholders), to file with the Commission initial reports
of ownership and reports of changes in ownership of Common Shares of the Company. Executive officers, directors and 10% stockholders
are required by SEC regulations to furnish the Company with copies of all forms they file pursuant to Section 16(a).
For
fiscal year 2025, Dana Perez, an independent contractor filed a Form 3 on August 19, 2025, because she performs financial services
for the Company as a fractional chief financial officer and filed in the event that she is deemed to be obligated to make the
filing. Ms. Perez is not an employee and has not been appointed as an officer of the Company. The Form 3 filing was a pre-cautionary
filing.
The
Company adopted an EDGAR SEC Filing Code Policy in fiscal year 2024 to assist directors and officers in timely filing of Form
3, Form 4 and Form 5 filings.
**Item
11. Executive Compensation.**
**Role
of Management**
In
fiscal year 2025, the compensation of management was nominal or deferred. The Company believes that it is important to have our
Chief Executive Officers input in the design of compensation programs for his direct reports. The Chief Executive Officer
reviews his direct reports compensation programs annually with the Committee, evaluating the adequacy relative to the marketplace,
inflation, internal equity, external competitiveness, business and motivational challenges and opportunities facing the Company
and its executives. In particular, he considers base salary a critical component of compensation to remain competitive and retain
his executives. All final decisions regarding compensation for the Chief Executive Officers direct reports listed in the
Summary Compensation Table are made by the Compensation Committee. The Chief Executive Officer does not make recommendations with
regard to his own compensation.
**Role
of the Compensation Consultant**
While
we may consult industry sources on compensation for executives, we have not engaged a consultant to analyze our compensation levels.
**Compensation
Components**
For
2025, the principal components of compensation for each named executive officer (NEO(s)) were:
|
|
|
base
salary. | |
|
|
|
annual
incentive. | |
|
|
|
long-term
incentive compensation (restricted stock awards); and | |
|
|
|
perquisites
and other benefits. | |
Due
to the financial condition of the Company, cash compensation has been deferred since 2024 - *See*Salary Deferrals
below.
46
**EXECUTIVE
COMPENSATION**
|
Name
& Principal Position |
|
Year |
|
Salary
$ |
|
Bonus
$ |
|
Stock
Awards $ |
|
Non-Equity
Incentives $ |
|
All
Others $ |
|
TOTAL | |
|
Alexander
Jacobs |
|
|
2025 |
|
|
$ |
1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1 |
| |
|
Chief
Executive |
|
|
2024 |
|
|
|
1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1 |
| |
|
Officer
(2, 3, 4, 5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Stewart
Wallach, |
|
|
2025 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
| |
|
Chief
Executive |
|
|
2024 |
|
|
$ |
126,873 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
126,873 |
| |
|
Officer
(1, 2, 3, 4,) |
|
|
2023 |
|
|
$ |
301,521 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
301,521 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dana
Eschenburg Perez |
|
|
2025 |
|
|
$ |
57,193 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
57,193 |
| |
|
Chief
Financial Officer (2,3) |
|
|
2024 |
|
|
$ |
54,433 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
54,433 |
| |
|
|
|
|
2023 |
|
|
$ |
49,700 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
49,700 |
| |
Footnotes:
(1)On
February 5, 2023, the Company extended Stewart Wallachs Employment Agreement, whereby Mr. Wallach will be paid $301,521
per annum, however the salary was deferred indefinitely. On July 1, 2024, salary deferral for Stewart Wallach ceased, per the
Board of Directors resolution.
(2)The
Company has no non-equity incentive plans.
(3)The
Company has no established bonus plan.
(4)
On December 4, 2024, Alexander Jacobs was named the Companys CEO and Stewart Wallach resigned, with Mr. Wallach remaining
as Chairman of the Board.
(5)
Mr. Jacobs was agreeable to a base salary of one dollar per year, due to the financial constraints of the Company.
**Key
Developments Impacting Executive Compensation**
The
financial condition of the Company over the last few years has caused the Company to defer cash compensation of senior executives.
The Company did not replace the retired chief financial officer with a full-time chief financial officer. There were no grants
of incentive compensation to senior executives. *See* Salary Deferrals below.
**Compensation
Objectives**
The
overall objectives of the Companys compensation program for NEOs are as follows:
|
|
|
Motivate
executives to achieve and maintain a high level of performance and foster company performance that attains sustained profitability | |
|
|
|
align
the interests of our executives with the interests of our shareholders; | |
|
|
|
provide
for market-competitive levels of compensation to the extent that can be supported by our financial condition and performance;
and | |
|
|
|
Retain
key executives and employees of outstanding ability. | |
47
**CEO
Pay Ratio**
As
required by Section953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item402(u) of Regulation
S-K, we are providing the following information regarding the ratio of the annual total compensation of the Companys median
employee to the annual total compensation of Alexander Jacobs, the Companys Chief Executive Officer and President. We consider
the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements
of Item402(u) of RegulationS-K. For the fiscal year ended December31, 2025:
|
|
|
The
median of the annual total compensation of all employees of the Company, except the Chief Executive Officer and President,
was $57,193; | |
|
|
|
| |
|
|
|
The
annual total compensation of the Companys Chief Executive Officer and President was $1; | |
|
|
|
| |
|
|
|
The
ratio of the median of the annual total compensation of all Company employees, other than the Companys President and
former Chief Executive Officer, to the annual total compensation of the Companys President and Chief Executive Officer
was skewed due to the Chief Executive Officer compensation at $1 due to the financial condition of the Company. | |
Pay
versus Performance Table
|
Name | |
Year | | |
Summary Compensation Table Total for Principle Executive Officer (PEO) | | |
Compensation Actually Paid to PEO | | |
Average Compensation actually paid to Non-PEO named executive officers | | |
Total Shareholder Return | | |
Net Loss | | |
|
Alexander Jacobs, Chief Executive Officer | |
| 2025 | | |
$ | 1 | | |
$ | 1 | | |
$ | 57,193 | | |
| -1 | % | |
$ | (920,168 | ) | |
|
Alexander Jacobs, Chief Executive Officer | |
| 2024 | | |
$ | 1 | | |
$ | 1 | | |
$ | 54,432 | | |
| -1 | % | |
$ | (962,384 | ) | |
|
Stewart Wallach, former Chief Executive Officer | |
| 2024 | | |
$ | 126,873 | | |
$ | 126,873 | | |
$ | 54,432 | | |
| -1 | % | |
$ | (962,384 | ) | |
The
Company chose December31, 2025, as the date for determining the employee population used to identify the median employee.
The Company used amounts paid to the Chief Financial Officer to identify the median employee because the Company does not widely
distribute annual equity awards to employees and because this measure approximately reflects the total annual compensation paid
in 2025 as the Company reduced the workforce significantly in 2024 and 2025. The Company calculated the median employees
and the Chief Executive Officers annual total compensation consistent with the disclosure requirements for the Summary
Compensation Table. For purposes of this calculation, the median employees annual total compensation consisted of wages,
premium pay (including overtime and holiday pay), paid time off, non-equity incentive plan compensation, change in pension value
and retirement plan contributions.
**Compensation
Peer Review**
To
better review the compensation practices of similar companies (peer group companies), the Company has from time
to time in the past reviewed the median compensation levels of companies of peer group companies as a reference point for determining
the competitiveness of the Companys compensation of its principal executive officers. No peer group companies review was
conducted in 2025 due to the financial condition of the Company.
48
**Executive
Compensation Best Practices the Company Follows**
|
What
we will provide |
What
we do not provide | |
|
Provide
limited executive perquisites |
No
grants of Stock Appreciation Rights | |
|
Align
total executive compensation with shareholders interests |
No
repricing of granted stock options | |
|
Bonuses
based on performance |
No
agreements guaranteeing employment | |
**Compensation
Philosophy**
The
Companys guiding philosophy in setting executive compensation is that the compensation of executive officers should reflect
the scope of their job responsibilities, and the level of individual and corporate performance achieved. With the declining financial
condition of the Company in 2024 and into the first fiscal quarter of 2025, the compensation of senior executives ceased, per
the Board of Directors resolution, as of July 1, 2024.
**EMPLOYMENT
AGREEMENTS**
**Alexander
Jacobs, Chief Executive Officer**
Due
to the financial condition of the Company, Mr. Jacobs agreed to a base salary of $1 per year with his appointment to Chief Executive
Officer in December 2024.
**Dana
Eschenburg Perez, Chief Financial Officer**
The
February 5, 2020, Consulting Agreement with Ms. Perez, was filed by the Company as an exhibit to Report Form 8-K on March 28,
2023.The Consulting Agreement was extended in 2026 and filed by the Company as an exhibit to Report Form 8-K on January
12, 2026.
**Salary
Deferrals**
Effective
September 1, 2020, through June 30 2024, Mr. Wallachs salary, as former CEO, was deferred. Accrual of salary ceased July
1, 2024.
Total
salary deferral for Mr. Wallach amounted to $608,840 through December 31, 2024.
On
December 18, 2024, the Companys Board of Directors approved the cancellation of related party notes payable, inclusive
of the deferred salary noted above, in exchange for shares of Series B-1 Convertible Preferred Stock (B-1 Stock)
of the Company, calculated at a price of $0.07 per share (the Exchange Price). Mr. Wallach received a total of 284,978
shares of B-1 Stock for the cancellation of his working capital advances to the Company and his deferred salary through June 30,
2024.
49
**Employment
Agreement:**
On
December 4, 2024, Stewart Wallach resigned, and Alexander Jacobs became the Chief Executive Officer of the Company. Mr. Jacobs
does not have an employment agreement as of the date of the filing of this Form 10-K.
**SUMMARY
TABLE OF OPTION GRANTS TO OFFICERS OF COMPANY(1)**
**As
of December 31, 2025**
|
Name |
|
No.
of Shares Underlying |
|
%
of Total Options GrantedEmployees
in 2025 |
|
Expiration
Date |
|
Restricted
Stock Grants |
|
No.
Shares underlying Options Granted
in 2025 |
| |
|
Alexander
Jacobs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dana
Eschenburg Perez |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**OTHER
COMPENSATION (1)**
|
NAME/POSITION |
|
YEAR |
|
SEVERANCE
PACKAGE |
|
CAR
ALLOWANCE |
|
CO.
PAID SERVICES |
|
TRAVEL
LODGING |
|
TOTAL
($) |
| |
|
Stewart
Wallach |
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former
Chief Executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexander
Jacobs |
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive |
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dana
Eschenburg Perez |
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer |
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes:
|
|
(1) |
There
were no equity awards, no 401(k) matching contributions by the Company and no medical supplemental payments by the Company
in any of the years specified. | |
50
**OUTSTANDING EQUITY AWARDS FOR YEAR END 2025 TABLE**
**OPTIONS (1)**
|
NAME |
|
Securities Underlying Unexercised Options |
|
Option Exercise
Price |
|
Option
Expiration Date |
| |
|
Alexander Jacobs |
|
|
|
|
|
|
|
|
|
| |
|
Dana Eschenburg Perez |
|
|
|
|
|
|
|
|
|
| |
Footnotes:
|
|
(1) |
The Company does not have any stock awards for the years specified for the above-named senior officers. | |
**2025 OPTION EXERCISES AND VESTED OPTIONS**
|
Name |
|
Number of Shares
Acquired on Exercise |
|
Value Realized on
Exercise |
| |
|
Alexander Jacobs |
|
|
|
|
|
|
| |
|
Dana Eschenburg Perez |
|
|
|
|
|
|
| |
**Indemnification.**
The Company maintains directors and officers
liability insurance or D&O insurance coverage to reduce its exposure to such obligations, and payments made under these
agreements historically have not been material. Further, the Companys articles of incorporation and bylaws provide for indemnification
of directors and officers.
51
**Item
12. Security of Certain Beneficial Owners and Management and Related Stockholder Matters.**
VOTING
RIGHTS AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
The
sole class of voting Common Stock of the Company as of March 31, 2025, that are issued and outstanding is the Common Stock, $0.0001
par value per share, or Common Stock. The table below sets forth, as of March 31, 2025, (Record Date),
certain information $0.0001 par value per share, or Common Stock information with respect to the Common Stock beneficially
owned by (i) each Director, nominee and executive officer of the Company; (ii) each person who owns beneficially more than 5%
of the Common Stock; and (iii) all Directors, nominees and executive officers as a group. There were 48,826,864 shares of Common
Stock outstanding as of March 31, 2025.
|
NAME,
ADDRESS & TITLE |
|
STOCK
OWNERSHIP |
|
%
OF STOCK OWNERSHIP |
|
SHARES
- COMMON STOCK ISSUABLE UPON CONVERSION |
|
STOCK
OWNERSHIP AFTER CONVERSION -ALL OPTIONS, WARRANTS & THOSE EXERCISEABLE WITHIN NEXT 60 DAYS |
|
%
OF STOCK OWNED AFTER CONVERSION OPTIONS, WARRANTS INCLUDES EXERCISEABLE WITHIN THE 60 DAYS |
|
OPTIONS
& WARRANTS VESTED |
|
OPTIONS
& WARRANTS EXPIRED |
|
OPTIONS,
WARRANTS NOT VESTED | |
|
Stewart Wallach, CEO, 144-V
10 Fairway Drive, Suite 100, Deerfield Beach, FL 33441 |
|
|
9,831,745 |
|
|
|
20.1 |
% |
|
|
19,096,623 |
|
|
|
28,928,368 |
|
|
|
42.1 |
% |
|
|
|
|
|
|
1,515,556 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Dana Eschenburg Perez, CFO, 144-V 10 Fairway
Drive, Suite 100, Deerfield Beach, FL 33441 |
|
|
|
|
|
|
|
% |
|
|
133,320 |
|
|
|
133,320 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Jeff Guzy, Director, 3130 19th Street North,
Arlington, VA 22201 |
|
|
52,800 |
|
|
|
0.01 |
% |
|
|
133,320 |
|
|
|
186,120 |
|
|
|
0.3 |
% |
|
|
4,144 |
|
|
|
900,000 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
ALL OFFICERS & DIRECTORS AS A GROUP |
|
|
9,884,545 |
|
|
|
20.2 |
% |
|
|
19,363,263 |
|
|
|
29,247,808 |
|
|
|
42.9 |
% |
|
|
4,144 |
|
|
|
2,415,556 |
|
|
|
|
| |
|
| |
53
Notes
to Table.
|
|
(1) |
Unless otherwise
indicated, the persons named in the table have sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them. | |
|
|
(2) |
Mr. Wallachs
ownership of common stock in the table does not include 19,496,583 shares issuable upon conversion of Series B-1 Convertible
Preferred Stock. | |
**Item 13. Certain Relationships and Related Transactions,
and Director Independence.**
Controlling
Stockholders. As of the date of the filing of this Form 10-K report, no stockholder owns or controls more than 50% of the voting
power of the Company. Chairman of the Board Stewart Wallach and former Director Jeffrey Postal own in the aggregate approximately
38.6% of the issued Common Stock.
Mr.
Postal and Mr. Wallach own shares of Series B-1 Preferred Stock. If Stewart Wallach and Group Nexus, LLC, which is controlled
by Mr. Wallach, convert all of the shares of Series B-1 Preferred Stock received under their cancellation agreements of debts
owed to them, and after the expiration of a lock-up restriction imposed on the Series B-1 Preferred Stock, and assuming no sales
or transfers of shares of Common Stock or shares of Series B-1 Preferred Stock, then Mr. Wallach would control a total of 28,928,368
shares of Common Stock.
If
Jeffrey Postal converts all of the shares of Series B-1 Preferred Stock received under his cancellation agreement after the lock-up
period imposed on the Series B-1 Preferred Stock, and assuming no sales or transfers of shares of Common Stock, then Mr. Postal
would own or control a total of approximately 21,748,603 shares of Common Stock.
The
aggregate ownership of Common Stock, including shares issued upon conversion of the Series B-1 Preferred Stock, would result in
Mr. Wallach with approximately 42% of the issued shares of Common Stock and Mr. Postal with approximately 26% of the issued shares
of Common Stock.
The
Company is not aware of any agreement or understanding between Mr. Wallach and Mr. Postal to act as a group (as
defined in Section 13(d)(3) of the Exchange Act) or to vote the same on any proposed corporate actions, the issuance of shares
of Series B-1 Preferred Stock under the cancellations agreements and subsequent conversion of those shares in to shares of Company
Common Stock by Jeffrey Postal, Stewart Wallach and Group Nexus, LLC, could possibly provide them, if acting jointly or in concert,
with sufficient voting control to approve or disapprove corporate actions requiring a vote of Company Common Stock shareholders.
The voting power of Mr. Wallach and affiliates and Mr. Postal would depend on the number of shares of Company Common Stock issued
upon conversion of shares of Series B-1 Preferred Stock by other parties under debt cancellation agreements and issuance of additional
shares of Company Common Stock by the Company in transactions other than a conversion of shares of Series B-1 Preferred Stock
under the cancellation agreements, which additional issuances are not readily ascertainable as of the date of the filing of this
Form 10-K.
*Director
Independence*. Currently, only Jeffrey Guzy and Warner Session qualify as an independent director under the listing
standards of most stock exchanges or quotation systems. No other directors qualify as an independent director under
those rules because they are officers of the Company or have business relationships with the Company. The CAPC Board adopted a
written policy for approval of transactions between the Company and its directors, director nominees, executive officers, greater
than 5% beneficial owners and their respective immediate family members. The policy governs transactions in which the value exceeds
or is expected to exceed $120,000 in a single calendar year.
A
related-person transaction will be a transaction, arrangement or relationship (or any series of similar transactions,
arrangements or relationships) in which we and any related person are participants involving an amount that exceeds
$120,000. Transactions involving compensation for services provided to us as an employee, director, consultant or similar capacity
by a related person will not be covered by this policy. A related person will be any executive officer, director or a holder of
more than five percent of our common stock, including any of their immediate family members and any entity owned or controlled
by such persons.
The
policy provides that the Audit Committee reviews transactions subject to the policy and determines whether to approve or ratify
those transactions. The Audit Committee considers, among other factors it deems appropriate, the following factors:
|
|
|
Benefits derived
by the related person from the transaction versus the benefits derived by the Company. | |
|
|
|
Total value of the
transaction. | |
|
|
|
Whether the transaction
was undertaken in the ordinary course of business of the Company; and | |
|
|
|
Were the terms and
conditions of the transaction usual and customary and commercially reasonable. | |
|
| |
54
The
Audit Committee does not have any policies on expedited or pre-approval of certain routine related person transactions.
From
time to time, the Company borrows working capital on a short-term basis, usually with maturity dates of less than a year, from
Company directors and officers. The Company believes that these working capital loans are commercially reasonable, especially
in light of the inability of the Company to obtain such short-term financing from traditional funding sources.
During
2023 and 2024, the Company negotiated working capital funding agreements with Directors S. Wallach and J. Postal for $632,500
and $50,000 of proceeds to provide funding for daily operations, respectively. The agreements were cancelled in exchange for shares
of Series B-1 Convertible Preferred Stock of the Company, calculated at a price of $0.07 per share. As the cancellation of debt
was agreed upon by existing equity holders and related parties, the Company recorded the cancellation as a capital transaction
and recorded in the statement of stockholders equity as of December 31, 2024.
During
2024 through 2026, the Company has borrowed working capital from Coppermine, of which, Alexander Jacobs is also the Chief Executive
Officer. Total borrowings from Coppermine total $530,000 as of the date of this Form 10-K.
**Process
for Identifying Related Person Transactions.**
To
identify related-person transactions in advance, we are expected to rely on information supplied by our executive officers, directors
and certain significant stockholders. In considering related-person transactions, our board of directors will take into account
the relevant available facts and circumstances including, but not limited to:
|
|
|
the risks, costs
and benefits to us. | |
|
|
|
the impact on a
directors independence in the event the related person is a director, immediate family member of a director or an entity
with which a director is affiliated. | |
|
|
|
the terms of the
transaction. | |
|
|
|
the availability
of other sources for comparable services or products; and | |
|
|
|
the terms available
to or from, as the case may be, unrelated third parties or to or from our employees generally. | |
**Promoters
and Certain Control Persons**
We
did not have any promoters at any time during the past five fiscal years.
**Director
Independence**
Our
Board of Directors has determined that our director, Mr. Jeffery Guzy and Mr. Warner Session, are independent directors, as the
term independent is defined by the rules of the Nasdaq Stock Market.
55
**Item 14. Principal Accountant Fees & Services**
The
following is a summary of the fees billed to date by Stephano Slack, LLC for professional services rendered for the year ended
December 31, 2025:
|
| |
2025 | | |
2024 | | |
|
Audit Fees | |
$ | 25,647 | | |
$ | | | |
|
Tax Fees | |
| | | |
| | | |
|
Total | |
$ | 25,647 | | |
$ | | | |
The
following is a summary of the fees billed to date by Assurance Dimensions CPA, for professional services rendered for the years
ended December 31, 2025 and 2024:
|
| |
2025 | | |
2024 | | |
|
Audit Fees | |
$ | 30,900 | | |
$ | 47,378 | | |
|
Other Fees | |
| | | |
| | | |
|
Total | |
$ | 30,900 | | |
$ | 47,378 | | |
|
| |
56
**Audit
Fees.** Consists of fees billed for professional services rendered for the audits of our consolidated financial statements,
reviews of our interim consolidated financial statements included in quarterly reports, services performed in connection with
filings with the Commission and related comfort letters and other services that are normally provided by the Independent Registered
firm in connection with statutory and regulatory filings or engagements.
**Tax
Fees.** Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include
assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.
**AUDIT
COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS**
The
Audit Committee is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include
audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally
provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally
subject to a specifically approved amount. The independent auditors and management are required to periodically report to the
Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval and
the fees incurred to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.
The
Audit Committee pre-approved 100% of the Companys 2025 audit fees, audit-related fees, tax fees, and all other fees to
the extent the services occurred after the effective date of the SECs final pre-approval rules.
**Part IV**
**Item 15. Exhibits, and Financial Statement Schedules
Reports**
(a)
The following documents are filed as part of this Report.
57
**1.
FINANCIAL STATEMENTS**
|
Report of Independent Registered Public Accountants for
the Years Ended December 31, 2025, and 2024 (PCAOB Firm ID: 3523 and 5036) |
F-1 | |
|
Consolidated Balance Sheets as of December 31, 2025, and 2024 |
F-3 | |
|
Consolidated Statements of Operations for the Years Ended December 31, 2025,
and 2024 |
F-4 | |
|
Consolidated Statements of Stockholders Equity (Deficit) for the Years
Ended December 31, 2025, and 2024 |
F-5 | |
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025,
and 2024 |
F-6 | |
|
Notes to Consolidated Financial Statements |
F-7 | |
**2.
FINANCIAL STATEMENT SCHEDULES**
All
schedules are omitted because they are not applicable, or the required information is shown in the financial statements or notes
thereto.
**3.
EXHIBITS**
Exhibits
Required by Item 601 of Regulation S-K. Pursuant to the Instructions to Exhibits, certain instruments defining the rights of holders
of long-term debt securities of the Company and its consolidated subsidiaries are not filed because the total amount of securities
authorized under any such instrument does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated
basis. A copy of such instrument will be furnished to the Securities and Exchange Commission upon request.
|
3.1 |
Articles of Incorporation of CHDT Corp. Incorporated by reference to Annex G to the Special Meeting Proxy Statement, Dated April 15, 2004, filed by CHDT Corporation with the Commission on April 20, 2004. | |
|
|
| |
|
3.1.1 |
Amended and Restated Articles of Incorporation of Capstone Companies, Inc. Incorporated by reference to Exhibit 3.1 to Form 8-K filed by Capstone Companies, Inc. with the Commission on July 14, 2009. | |
|
|
| |
|
3.1.1.1 |
Amendment to Amended and Restated Articles of Incorporation of Capstone Companies, Inc., as filed with Florida Secretary of State on June 8, 2016. Incorporated by reference to Exhibit 3.1 to the Form 8-K filed by Capstone Companies, Inc. with the Commission on June 8, 2016. | |
|
|
| |
|
3.2 |
By-laws of Capstone Companies, Inc. Incorporated by reference to Annex H the Special Meeting Proxy Statement, Dated April 15, 2004, filed by CHDT Corporation with the Commission on April 20, 2004. | |
|
|
| |
|
4.6 |
Description of Capstone Companies, Inc. Securities as of December 31, 2021 | |
|
|
| |
|
10.01 |
Employment Agreement by Capstone Companies, Inc. and Stewart Wallach, dated February 5, 2020, filed by Capstone Companies, Inc with the Commission on March 30, 2020. | |
|
|
| |
|
10.02 |
Consulting Agreement by Capstone Companies, Inc. and Eschenburg Perez CPA, LLC, dated January 12, 2026. | |
|
|
| |
|
10.03 |
Financial Services Agreement dated March 1, 2017, by Capstone Companies, Inc. and Wilmington Capital Securities, LLC. Incorporated by reference to Exhibit 10.18 to Form 10-K filed by Capstone Companies, Inc with the Commission on March 28, 2018. | |
|
14 |
Code of Ethics Policy. Exhibit 14 of the Capstone Companies, Inc. Form 8-K, as filed with the Commission on March 22, 2018. | |
|
|
| |
|
19 |
Insider Trading Policy, dated February 25, 2025 | |
|
|
| |
|
21.1 |
Subsidiaries of Capstone Companies, Inc. ^ | |
|
|
| |
|
31.1 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Alexander Jacobs, Chief Executive Officer^ | |
|
|
| |
|
31.2 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Dana Eschenburg Perez, Chief Financial Officer^ | |
|
|
| |
|
32.1 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Alexander Jacobs, Chief Executive Officer. ^ | |
|
|
| |
|
32.2 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Dana Eschenburg Perez, Chief Financial Officer^ | |
|
|
| |
|
101.INS |
XBRL Instance Document | |
|
101.SCH |
XBRL Taxonomy Extension Schema Document | |
|
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document | |
|
101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document | |
|
101.LAB |
XBRL Taxonomy Extension Label Linkbase Document | |
|
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document | |
Note:
CHDT Corp. is a prior name of Capstone Companies, Inc.
^
Filed Herein.
58
**Item 16. Form 10-K Summary. Not Applicable.**
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, Capstone Companies, Inc. has caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in Broward County, Florida on this 31st
day of March 2026.
CAPSTONE
COMPANIES, INC.
Dated:
March 31, 2026
|
By: | /s/
Alex Jacobs |
|
|
Alex
Jacobs
Chief
Executive Officer and Director
In
accordance with the Exchange Act, this report has been signed below by the following persons on behalf of Capstone Companies,
Inc. and in the capacities and on the dates indicated.
|
/s/
Stewart Wallach |
|
|
Stewart
Wallach
Chairman
March
31, 2026
|
/s/
Jeffrey Guzy |
|
|
Jeffrey
Guzy
Director
March
31, 2026
|
/s/
Warner Session |
|
|
Warner
Session
Director
March
31, 2026
|
/s/
Brian Rosen |
|
|
Brian
Rosen
Director
March
31, 2026
59
**INDEX
TO FINANCIAL STATEMENTS**
|
Contents |
Page
No. | |
|
|
| |
|
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 3523 and 5036) |
F-1 | |
|
|
| |
|
Consolidated Balance Sheets as of December 31, 2025, and 2024 |
F-4 | |
|
|
| |
|
Consolidated Statements of Operations for the Years Ended December 31, 2025, and 2024 |
F-5 | |
|
|
| |
|
Consolidated Statements of Stockholders Equity (Deficit) for the Years Ended December 31, 2025, and 2024 |
F-6 | |
|
|
| |
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, and 2024 |
F-7 | |
|
|
| |
|
Notes to the Consolidated Financial Statements |
F-8 | |
60
**REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To
the Board of Directors and Stockholders of
Capstone
Companies, Inc.
**Opinion
on the Consolidated Financial Statements**
We
have audited the accompanying consolidated balance sheet of Capstone Companies, Inc. and subsidiary (the Company) as of
December 31, 2025 and the related consolidated statements of operations, changes in stockholders equity (deficit), and cash flows
for the year ended December 31, 2025, and the related notes (collectively referred to as the consolidated financial statements). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
**Substantial
Doubt About the Companys Ability to Continue as a Going Concern**
****
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has experienced a net loss and negative cash flows from operations for
the year ended December 31, 2025, which raises substantial doubt about their ability to continue as a going concern. Managements
plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
**Basis
for Opinion**
These
consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion
on the Companys consolidated financial statements based on our audit. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As
part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express
no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audit provides a reasonable basis for our opinion.
**Critical
Audit Matters**
Critical
audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required
to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit
matters.
/s/
Stephano Slack LLC
We
have served as the Companys auditor since 2025.
Wayne,
Pennsylvania
March
31, 2026
F-1
*
**REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
To
the Board of Directors and
Stockholders of Capstone Companies, Inc.
**Opinion
on the Consolidated Financial Statements**
We
have audited the accompanying consolidated balance sheet of Capstone Companies, Inc. (the Company)
as of December 31, 2024 and the related consolidated statements of operations, stockholders equity (deficit), and cash flows for
the year ended December 31, 2024 and the related notes (collectively referred to as the consolidated financial statements). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2024 and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles
generally accepted in the United States of America.
**Explanatory
Paragraph Going Concern**
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has incurred recurring operating losses, has incurred negative cash flows
from operations and has an accumulated deficit. These and other factors raise substantial doubt about the Companys ability to
continue as a going concern. Managements plan regarding these matters is also described in Note 1 to the consolidated financial
statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
**Basis
for Opinion**
These
consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion
on the Companys consolidated financial statements based on our audit. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audit provide a reasonable basis for our opinion.
**Critical
Audit Matters**
The
critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
**ASSURANCE
DIMENSIONS, LLC**
**also
d/b/a McNAMARA and ASSOCIATES, LLC**
**TAMPA
BAY:**4920 W Cypress Street, Suite 102 | Tampa, FL 33607 | Office: 813.443.5048 | Fax: 813.443.5053
**JACKSONVILLE:**7800 Belfort Parkway, Suite 290 | Jacksonville, FL 32256 | Office: 888.410.2323 | Fax: 813.443.5053
**ORLANDO:**1800 Pembrook Drive, Suite 300 | Orlando, FL 32810 | Office: 888.410.2323 | Fax: 813.443.5053
**SOUTH
FLORIDA:**3111 N. University Drive, Suite 621 | Coral Springs, FL 33065 | Office: 754.800.3400 | Fax: 813.443.5053
www.assurancedimensions.com
Assurance
Dimensions is the brand name under which Assurance Dimensions, LLC including
its subsidiary McNamara and Associates, LLC (referred together as AD LLC) and
AbitOs Advisors, LLC (AbitOs Advisors), provide professional services.
AD LLC and AbitOs Advisors practice
as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations,
and professional standards. AD LLC is a licensed independent CPA firm that provides
attest services to its clients, and AbitOs Advisors provide tax and business consulting
services to their clients. AbitOs Advisors, and its subsidiary entities are not licensed
CPA firms.
F-2
Description
of the Matter*
The
Company is required to test the carrying amount of goodwill at least annually, or more frequently upon the occurrence of certain events.
The Company is also required to assess if certain events occur or circumstances change that may be indicators of impairment. We identified
this area as a critical audit matter because the annual goodwill impairment test requires significant judgment regarding the evaluation
of qualitative factors. Additionally, these assessments also require appropriate determination of reporting units.
*How
we addressed the matter in our audit*
Our
audit procedures to address the risk of material misstatement relating to goodwill included, among others, evaluating the appropriateness
of the reporting unit level. Our audit procedures
focused on evaluating the appropriateness of management's assumptions and methodologies used in assessing goodwill impairment and have
addressed the matter by evaluating managements quantitative analysis. We also tested the
Companys calculation for mathematical accuracy; testing the estimated fair value of the reporting unit; testing the carrying
value of the reporting unit; validating the appropriateness and reliability of inputs and amounts
used; and evaluating the adequacy of the financial statement disclosures relating to goodwill, including key assumptions and judgments.
As a result of our testing we did not take exception to managements evaluation, which resulted in an impairment expense of goodwill
for the year ended December 31, 2024.
Based
on our audit procedures and evaluations, we concluded that the assumptions and methodologies applied by management in assessing goodwill
impairment were reasonable and in accordance with generally accepted accounting principles.
Assurance
Dimensions, LLC.
*
We have served as the Companys auditor since 2023.
Coral Springs, Florida
March 17, 2025
**ASSURANCE
DIMENSIONS, LLC**
**also
d/b/a McNAMARA and ASSOCIATES, LLC**
**TAMPA
BAY:**4920 W Cypress Street, Suite 102 | Tampa, FL 33607 | Office: 813.443.5048 | Fax: 813.443.5053
**JACKSONVILLE:**7800 Belfort Parkway, Suite 290 | Jacksonville, FL 32256 | Office: 888.410.2323 | Fax: 813.443.5053
**ORLANDO:**1800 Pembrook Drive, Suite 300 | Orlando, FL 32810 | Office: 888.410.2323 | Fax: 813.443.5053
**SOUTH
FLORIDA:**3111 N. University Drive, Suite 621 | Coral Springs, FL 33065 | Office: 754.800.3400 | Fax: 813.443.5053
www.assurancedimensions.com
Assurance
Dimensions is the brand name under which Assurance Dimensions, LLC including
its subsidiary McNamara and Associates, LLC (referred together as AD LLC) and
AbitOs Advisors, LLC (AbitOs Advisors), provide professional services.
AD LLC and AbitOs Advisors practice
as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations,
and professional standards. AD LLC is a licensed independent CPA firm that provides
attest services to its clients, and AbitOs Advisors provide tax and business consulting
services to their clients. AbitOs Advisors, and its subsidiary entities are not licensed
CPA firms.
F-3
|
| |
|
CAPSTONE COMPANIES,
INC. AND SUBSIDIARIES | |
|
CONSOLIDATED BALANCE SHEETS | |
|
| |
| | |
| | |
|
| |
December 31, | | |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Assets: | |
| | | |
| | | |
|
Current Assets: | |
| | | |
| | | |
|
Cash | |
$ | 39,122 | | |
$ | 15,850 | | |
|
Prepaid expenses | |
| 19,983 | | |
| 20,455 | | |
|
Total Current Assets | |
| 59,105 | | |
| 36,305 | | |
|
| |
| | | |
| | | |
|
Property and equipment, net | |
| | | |
| 28,647 | | |
|
Goodwill | |
| | | |
| 773,165 | | |
|
Total Assets | |
$ | 59,105 | | |
$ | 838,117 | | |
|
| |
| | | |
| | | |
|
Liabilities and Stockholders Equity
(Deficit): | |
| | | |
| | | |
|
Current Liabilities: | |
| | | |
| | | |
|
Accounts payable and accrued liabilities | |
$ | 3,854 | | |
$ | 300 | | |
|
Notes payable related parties and accrued interest | |
| 514,320 | | |
| 180,760 | | |
|
Total Current Liabilities | |
| 518,174 | | |
| 181,060 | | |
|
| |
| | | |
| | | |
|
Long-Term Liabilities: | |
| | | |
| | | |
|
Deferred tax liabilities -long-term | |
| | | |
| 195,958 | | |
|
Total Liabilities | |
| 518,174 | | |
| 377,018 | | |
|
| |
| | | |
| | | |
|
Commitments and Contingencies ( Note 4) | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Stockholders Equity (Deficit): | |
| | | |
| | | |
|
Preferred Stock, Series B-1, par value $.0001 per share, authorized 5,000,000 shares, issued and outstanding 765,075 Shares at December 31, 2025, and December 31, 2024 (Liquidation Preference $767,075) | |
| 77 | | |
| 77 | | |
|
Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued and outstanding -0- shares | |
| | | |
| | | |
|
Common Stock, par value $.0001
per share, authorized 295,000,000 shares,
49,643,031 shares issued and 48,826,864
shares outstanding at December 31, 2025 and December 31, 2024. | |
| 4,884 | | |
| 4,884 | | |
|
Treasury stock, 816,167 shares of common stock at cost | (119,402 | ) | |
| (119,402 | ) | |
|
Additional paid-in capital | |
| 12,335,140 | | |
| 12,335,140 | | |
|
Accumulated deficit | |
| (12,679,768 | ) | |
| (11,759,600 | ) | |
|
Total Stockholders Equity (Deficit) | |
| (459,069 | ) | |
| 461,099 | | |
|
Total Liabilities
and Stockholders Equity (Deficit) | |
$ | 59,105 | | |
$ | 838,117 | | |
The
accompanying notes are an integral part of these consolidated financial statements.
F-4
|
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES | |
|
CONSOLIDATED
STATEMENTS OF OPERATIONS | |
|
| |
| | |
| | |
|
| |
For the Years Ended | | |
|
| |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Revenues, net | |
$ | | | |
$ | 143,269 | | |
|
Cost of sales | |
| | | |
| (38,019 | ) | |
|
Gross Income | |
| | | |
| 105,250 | | |
|
| |
| | | |
| | | |
|
Operating Expenses: | |
| | | |
| | | |
|
Sales and marketing | |
| | | |
| 17,313 | | |
|
Compensation | |
| | | |
| 139,078 | | |
|
Professional fees | |
| 196,671 | | |
| 274,559 | | |
|
Product development | |
| 2,190 | | |
| 6,233 | | |
|
Other general and administrative | |
| 98,868 | | |
| 124,565 | | |
|
Goodwill impairment | |
| 773,165 | | |
| 539,317 | | |
|
Total Operating Expenses | |
| 1,070,894 | | |
| 1,101,065 | | |
|
| |
| | | |
| | | |
|
Operating Loss | |
| (1,070,894 | ) | |
| (995,815 | ) | |
|
| |
| | | |
| | | |
|
Other Income (Expense): | |
| | | |
| | | |
|
Other income, net | |
| | | |
| 4 | | |
|
Loss on disposal of equipment | |
| (17,904 | ) | |
| | | |
|
Interest expense, net | |
| (27,328 | ) | |
| (90,943 | ) | |
|
Total Other Income (Expense), net | |
| (45,232 | ) | |
| (90,939 | ) | |
|
| |
| | | |
| | | |
|
Loss Before Income Taxes | |
| (1,116,126 | ) | |
| (1,086,754 | ) | |
|
| |
| | | |
| | | |
|
Income Tax Benefit | |
| (195,958 | ) | |
| (124,370 | ) | |
|
| |
| | | |
| | | |
|
Net Loss | |
$ | (920,168 | ) | |
$ | (962,384 | ) | |
|
| |
| | | |
| | | |
|
Net Loss per Common Share | |
| | | |
| | | |
|
Basic and Diluted | |
$ | (0.02 | ) | |
$ | (0.02 | ) | |
|
| |
| | | |
| | | |
|
Weighted Average Shares Outstanding | |
| | | |
| | | |
|
Basic and Diluted | |
| 48,826,864 | | |
| 48,826,864 | | |
The
accompanying notes are an integral part of these consolidated financial statements.
F-5
|
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES | |
|
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS EQUITY (DEFICIT) | |
|
YEARS ENDED DECEMBER
31, 2025, AND 2024 | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
|
| |
|
|
|
|
| |
| | |
| | |
|
| |
Preferred Stock | | |
Preferred Stock | | |
| | |
Additional |
| |
Treasury |
| |
| | |
| | |
|
| |
Series B | | |
Series C | | |
Common Stock | | |
Paid-In |
| |
Stock |
| |
Accumulated | | |
Total | | |
|
| |
Shares | | |
Par Value | | |
Shares | | |
Par Value | | |
Shares | | |
Par Value | | |
Capital |
| |
Shares |
| Par
value |
|
| Deficit | |
| Equity
(Deficit) | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
|
| |
|
|
|
|
| |
| | |
| | |
|
Balance at December 31, 2023 | |
15,000 | | |
$ | 2 | | |
| | |
$ | | | |
48,826,864 | | |
$ | 4,884 | | |
$ |
| 8,669,912 |
| |
816,167 |
$ |
(119,402 |
| ) |
$ | (10,797,216 | ) | |
$ | (2,241,820 | ) | |
|
Issuance of Preferred Stock Series B-1 for cancellation of debt | |
750,075 | | |
| 75 | | |
| | |
| | | |
| | |
| | | |
|
| 3,665,228 |
| |
|
|
|
| |
| | | |
| 3,665,303 | | |
|
Net Loss | |
| | |
| | | |
| | |
| | | |
| | |
| | | |
|
| |
| |
|
|
|
|
| |
| (962,384 | ) | |
| (962,384 | ) | |
|
Balance
at December 31, 2024 | |
765,075 | | |
$ | 77 | | |
| | |
$ | | | |
48,826,864 | | |
$ | 4,884 | | |
$ |
| 12,335,140 |
| |
816,167 |
|
|
(119,402 |
| ) |
$ | (11,759,600 | ) | |
$ | 461,099 | | |
|
Net
Loss | |
| | |
| | | |
| | |
| | | |
| | |
| | | |
|
| |
| |
|
|
|
|
| |
| (920,168 | ) | |
| (920,168 | ) | |
|
Balance
at December 31, 2025 | |
765,075 | | |
$ | 77 | | |
| | |
$ | | | |
48,826,864 | | |
$ | 4,884 | | |
$ |
| 12,335,140 |
| |
816,167 |
|
$ |
(119,402 |
| ) |
$ | (12,679,768 | ) | |
$ | (459,069 | ) | |
The
accompanying notes are an int1e111gra11l part of these consolida$ted finan$cial statement
The
accompanying notes are an integral part of these consolidated financial statements.
F-6
|
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES | |
|
CONSOLIDATED STATEMENTS
OF CASH FLOWS | |
|
| |
| | |
| | |
|
| |
For the Twelve Months Ended | | |
|
| |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Net Loss | |
$ | (920,168 | ) | |
$ | (962,384 | ) | |
|
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | | |
|
Depreciation | |
| 10,742 | | |
| 14,323 | | |
|
Deferred tax expense (benefit) | |
| (195,958 | ) | |
| (124,370 | ) | |
|
Loss on disposal of equipment | |
| (17,905 | ) | |
| | | |
|
Accrued interest added to note payable related parties | |
| 27,329 | | |
| 90,943 | | |
|
Impairment of goodwill | |
| 773,165 | | |
| 539,317 | | |
|
Decreasein prepaid expenses | |
| 472 | | |
| 1,665 | | |
|
(Increase) decrease in due from related party | |
| | | |
| 9,570 | | |
|
(Decrease) increase in accounts payable and accrued liabilities | |
| 3,554 | | |
| 141,388 | | |
|
Net cash used in operating activities | |
| (282,959 | ) | |
| (289,548 | ) | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | | |
|
Net cash used in investing activities | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | | |
|
Proceeds from notes payable related parties | |
| 306,231 | | |
| 268,932 | | |
|
Net cash provided by financing activities | |
| 306,231 | | |
| 268,932 | | |
|
| |
| | | |
| | | |
|
Net Increase (Decrease) in Cash | |
| 23,272 | | |
| (20,616 | ) | |
|
Cash at Beginning of Year | |
| 15,850 | | |
| 36,466 | | |
|
Cash at End of Year | |
$ | 39,122 | | |
$ | 15,850 | | |
|
| |
| | | |
| | | |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | | |
|
Interest cash paid | |
$ | | | |
$ | | | |
|
Income taxes paid | |
$ | | | |
$ | | | |
|
| |
| | | |
| | | |
|
NON-CASH FINANCING ACTIVITIES: | |
| | | |
| | | |
|
Issuance of Preferred Stock B-1 for cancellation for debt | |
$ | | | |
$ | 3,665,303 | | |
The
accompanying notes are an integral part of these consolidated financial statements.
F-7
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
**Principles
of Consolidation**
The
consolidated financial statements for the years ended December 31, 2025, and 2024, 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 Companys 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 Companys other subsidiaries.
With the shift of manufacturing to Thailand from China, the CIHK operation was downsized and dormant as of March 2022 and dissolved
as of the date of this Form 10-K.
LED
Lighting Product Line.*The Companys focus through 2017 was the integration of LEDs into most commonly used consumer
lighting products in todays home. The LED category has matured and is no longer the innovative must have
consumer product as in previous years and, as such, revenues for the LED product line have declined significantly from previous
years. From time to time, the Company receives orders from one distributor which the Company will fulfill., but in 2023 the Company
ceased to promote the LED Lighting product line as its primary business line.
*Smart
Mirror Product Line.*The Connected Surfaces was the Companys effort to establish a business line in an emerging
segment and was intended for future revenue growth.The Connected Surfaces Smart Mirror products did not achieve significant
sales, therefore all inventory was expensed as of December 31, 2023 and the remaining inventory on hand was liquidated as of June
30, 2024. The Company ended the Smart Mirror Product business line in 2024.
*Connected
Chef Product Line.*During 2023, the Company developed the Connected Chef (Connected Chef), a purpose-built
kitchen tablet with an accessory platform to accommodate food prep accessories such as a cutting board. The Connected Chef hasGoogle
mobile service allowing for pre-installation of specific Google applications including Playstore, voice assistant, and YouTube.
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, which the Company was unsuccessful in obtaining since 2023. On
March 21, 2025, the Company executed a license agreement (the License Agreement ) with a company (Licensee)
based in the United Kingdom. The Licensee received a limited, exclusive, non-transferable, worldwide license to promote, market,
sell, distribute, produce and manufacture Connected Chef. Under the License, the Company would receive a license fee of $15 for
each Connected Chef sold and received by a buyer. Promotion, marketing and sale of the Connected Chef is subject to finalizing
production arrangements with the contract manufacturer of the Connected Chef. The term of the License Agreement was 5 years plus
one (1) year, post-termination extension was to permit sell off of any inventory. During the first week of November 2025, the
Company was advised by the Licensee that the prospective Chinese OEM would not produce the Connected Chef because it was developed
by an American company. Consequently, the Company and Licensee ended the License Agreement in the first week of November 2025.
The Company is not considering further efforts to license the Connected Chef as of the date of the fling of this Form 10-K, but
the Company may reconsider efforts to license. The Company received no license revenue during 2025.
F-8
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
*Health,
Fitness and Social Business Development*. The following section discusses Companys efforts to develop a business line
in the HFS industry in 2025, which efforts have not produced a new business line or operation in fiscal year 2025 or in the first
fiscal quarter of 2026. These efforts have been suspended in March 2026 for the 90-day no shop period as described
in eBliss Note, See Note 8 Subsequent Events.
During
2024, the Company commenced its business development efforts focused on year-round health, fitness and social activities business
at facilities that would be owned, leased or operated by the Company (this business line being referred to as HFS
or HFS business). The Company started this initiative due to the popularity of sports like pickle ball and flag
football, health, fitness and social activities at dedicated facilities are being developed nationwide and interactions with Coppermine
Ventures, LLC, a private Maryland limited liability company that operates through its subsidiaries HFS operations in Maryland,
(Coppermine). Coppermine provided working capital to the Company beginning in 2024 and through 2025 and 2026 under
an unsecured promissory note and amendments thereto with the managing member of Coppermine, Alexander Jacobs, becoming Chief Executive
Officer and a director of the Company in December 2024. The expertise of Mr. Jacobs in HFS industry enhanced the ability of the
Company to identify and evaluate any HFS industry opportunities. While the possibility of cooperative business activities by Coppermine
and the Company were discussed from time to time in 2024 and 2025, and may be revisited in fiscal year 2026, if circumstances
warrant such discussions, no legally binding agreements or actual cooperative efforts developed (other than an initial proposal
for the Company developing a customer management software system for Coppermine operations), the only transactions between Coppermine
and the Company to date have been working capital funding by Coppermine of the Company and the Management Transition Agreement,
dated October 31, 2024, between Coppermine and the Company.
The
Companys business concept in its HFS business development concept has been to feature indoor and outdoor pickle ball courts
as a primary attraction, but also to offer other sports and entertainment-social events in order to attract customers year-round
and morning-to-evening and also to attract league, tournament and corporate events. The Company was unable in 2025 to locate a
suitable HFS industry opportunity or to secure working capital funding to enable consummating a HFS industry opportunity.
In
furtherance of the HFS business development efforts, the Company entered into a Management Transition Agreement, dated October
31, 2024, with Coppermine to identify and nominate a chief executive officer and two board members for the Company as a management
team to focus on development of the health, fitness and social business line. Coppermine operates a successful and growing health,
fitness and sports business in the State of Maryland. On December 4, 2024, the Company employed Alexander Jacobs as Companys
Chief Executive Officer, in order to assist the HFS business development. Mr. Jacobs is the founder, senior executive and owner
of Coppermine. On January 20, 2025, the Companys Board of Directors (Board) appointed Brian Rosen, a nominee
of Coppermine, as a non-employee director of the Company. Mr. Rosen has a business relationship with Coppermine. The Company also
appointed Warner Session, a Washington, D.C. real estate lawyer and lobbyist, as an independent director to the Board on January
9, 2025, in order to assist in the Companys efforts to develop the health, fitness and social business line. Mr. Sessions
experience and skills in real estate transaction and funding and lobbying are deemed as important skill sets for the HFS business.
These appointments were intended to assist in evaluation of potential business development opportunities and to expand the potential
network for locating opportunities.
On
March 13, 2025, the Company entered into a Memorandum of Understanding (MOU) with Coppermine whereby the Company
would produce a development plan (Plan) for an online customer registration and management application (CRM
Application) for Coppermines owned, affiliated or managed HFS business facilities in the State of Maryland (Facilities).
Work under the MOU was suspended in 2025 due to Coppermine re-evaluating its customer management program management.
F-9
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
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 2026. 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 Companys
ability to acquire or fund a new business line.
The
Companys operations consist of one reportable segment for financial reporting purposes: Consumer Home Goods.
**Substantial
Doubt About the Companys Ability to Continue as a 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, 2025, the Company used cash in operations of $282,959
and generated net operating losses of $1,070,894.
As of December 31, 2025, the Company had a working capital deficit of $459,069
and an accumulated deficit of $12,679,768.
Management believes that the existing cash as of December 31, 2025, will not be sufficient to fund operations for at least
the next twelve months following the issuance of these consolidated financial statements. These factors raise substantial doubt about
the Companys ability to continue as a going concern for a period of one year from the issuance of these consolidated financial
statements. The Company will need to source additional capital through further debt and/or equity financing. These factors raise
substantial doubt about the Companys 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 Companys 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 has concluded that there is substantial doubt about the Companys
ability to continue as a going concern for a period of one year after the date of the financial statements. The Companys consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
**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 Companys financial condition, results of operations and cash flows.
**Prepaid
Expenses**
The
Companys prepaid expenses consist primarily of prepaid insurance, public company listing fees and investor relation services.
As of December 31, 2025 and 2024, prepaid expenses were $19,983 and $20,455, respectively.
F-10
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
**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:
|
Schedule of property and equipment | |
| |
| | |
| | |
|
| |
Useful Life | |
December 31, 2025 | | |
December 31, 2024 | | |
|
Machinery and equipment | |
3 years | |
| | | |
| 42,970 | | |
|
Less: Accumulated depreciation | |
| |
| | | |
| (14,323 | ) | |
|
Property and Equipment, Net | |
| |
$ | | | |
$ | 28,647 | | |
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. In 2025, the Company disposed of the manufacturing
mold and recorded a loss of $17,904 on disposal of equipment, as represented in the consolidated statement of operations.
Depreciation
and amortization expense was $10,742 and $14,323 for the years ended December 31, 2025 and 2024, 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.
**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 CAPIs 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 units 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 Companys market capitalization. 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 wrote-off the remaining goodwill and
recognized an impairment charge of $773,165. As of December 31, 2024, management had recorded an impairment charge of $ $539,317.
F-11
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
**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.
The carrying amounts of cash, prepaid expenses,
accounts payable and accrued expenses, a approximate their fair value due to their short-term nature.
The carrying amounts of the Companys debt
approximates fair value as the stated interest rates are consistent with current market rates for similar instruments.
**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, 2025, and 2024. 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, 2025 and 2024, the total number of
potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 8,288 options and 199,733
warrants for 2025, and 208,288 options and 199,733 warrants for 2024.
**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
customers purchase order. The stated unit price in the customers order has already been determined and is fixed
at the time of invoicing.
F-12
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
**Revenue
Recognition, continued**
The
Company recognizes lighting product revenue when the Companys 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.
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:
|
Schedule of net revenue by major source | |
| | | |
| | | |
| | | |
| | | |
|
| |
For the Year Ended December 31, 2025 | | |
For the Year Ended December 31, 2024 | | |
|
| |
Capstone Brand | | |
% of Revenue | | |
Capstone Brand | | |
% of Revenue | | |
|
Lighting Products- U.S. | |
$ | | | |
| | % | |
$ | 57,829 | | |
| 40 | % | |
|
Smart Mirror Products- U.S. | |
| | | |
| | % | |
| 85,440 | | |
| 60 | % | |
|
Total Revenue | |
$ | | | |
| | % | |
$ | 143,269 | | |
| 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 December 31, 2025 and 2024.
F-13
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
**Revenue,
continued**
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 customers 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 $0 and $850 for the years ended December 31, 2025 and 2024, 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 Company did not record a warranty liability as of December 31, 2025 and 2024.
F-14
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
**Advertising
and Promotion**
Advertising
and promotion costs are expensed as incurred and included in sales and marketing expenses. Advertising and promotion expenses
were $0 and $120 for the years ended December 31, 2025, and 2024, 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, 2025 and 2024, product development expenses were $2,190 and $6,233, respectively. Product development
expenses for 2024 and 2025 were related to the maintenance of the Connected Chef.
**Shipping
and Handling**
The
Companys 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 $77 and $13,193 for the years ended December 31, 2025 and 2024, respectively.
F-15
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
**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 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 Companys 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, 2025 and 2024 was $0, respectively.
**Other
Expense**
Other
expense was $45,232 in 2025 compared to $90,943 in 2024, a decrease of $45,707. Other expense consisted of accrued interest of
$27,329 and $90,939 as of December 31, 2025 and 2024, respectively, and $17,904 of loss on disposal of equipment.
**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 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 Companys consolidated financial statements. However, circumstances could change, and actual results
could differ materially from those estimates.
**Reclassification**
****
During the year ended December 31, 2025, the Company
identified that shares of its common stock previously repurchased and held by the Company met the definition of treasury stock but had
not been separately presented within stockholders equity in prior periods.
Accordingly, the Company has reclassified these
amounts to treasury stock within stockholders equity on the consolidated balance sheets and statements of stockholders
equity for all periods presented. This reclassification resulted in a reduction of additional paid-in capital and a corresponding increase
in treasury stock, with no impact on total stockholders equity, net loss, or cash flows for the years ended December 31, 2025
and 2024.
The reclassification has been applied retrospectively
to the prior period to conform to the current period presentation.
F-16
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
**Recently
Issued Accounting Pronouncements**
In November 2023, the
FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities
to disclose significant segment expenses and other segment items on an interim and annual basis, and provide in interim periods all disclosures
about a reportable segments profit or loss and assets that are currently required annually. The ASU does not change how a public
entity identifies its operating segments, aggregates them, or applies the quantitative threshold to determine its reportable segments.
The new disclosure requirements are also applicable to entities that account and report as a single operating segment entity. ASU 2023-07
is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December
15, 2024. The Company adopted the guidance for the annual reporting period ended December 31, 2024. There was no impact on the Companys
reportable segments identified and additional required disclosures have been included in Note 12, Segment Reporting in the Notes to Consolidated
Financial Statements.
Effective
January 1, 2025, the Company adopted ASU 2023-09,*Improvements to Income Tax Disclosures*, which requires expanded
disaggregation of income tax information to enhance transparency and comparability. As a result, the Company now presents a more
detailed reconciliation of the U.S. federal statutory income tax rate to the Companys effective tax rate, including separate
disclosure of state and local income taxes, foreign tax effects, tax credits, valuation allowance changes, nondeductible items,
and changes in unrecognized tax benefits. The Company also discloses income taxes paid (net of refunds) disaggregated by federal,
state, and significant foreign jurisdictions, including any individual jurisdiction that represents 5% or more of total income
taxes paid. In addition, the Company now presents pretax income (loss) and income tax expense (benefit) disaggregated between
domestic and foreign operations, with separate disclosure for any significant individual foreign jurisdictions. The Company adopted
ASU 2023-09 on a prospective basis; therefore the December 31, 2024 income tax disclosure was notretrospectively adjusted
for ASU 2023-09.
**Recently
Issued Accounting Pronouncements Not Yet Adopted**
In November
2024,the FASB, issued Accounting Standards Update 2024-04,Debt-Debt with Conversions and Other Option, (ASU2024-04).ASU2024-04is
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 arenotcurrently convertible, should
be accounted for as an induced conversion. This ASU is effective for all entities for annual reporting periods beginning afterDecember
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.
InNovember
2024,the FASB issued Accounting Standards UpdateNo.2024-03,Income Statement - Reporting Comprehensive
Income - Expense Disaggregation Disclosures (Subtopic220-40):Disaggregation of Income Statement Expenses("ASU2024-03"),
and inJanuary 2025,the FASB issued Accounting Standards UpdateNo.2025-01,Income Statement - Reporting
Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220-40): Clarifying the Effective Date("ASU2025-01").
ASU2024-03requires 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. ASU2024-03,as
clarified byASU2025-01,is effective for us for our annual reporting for fiscal2028and for interim
period reporting beginning in fiscal2029on 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 Companys 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 Companys financials properly reflect the change.
**NOTE
2 - CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE**
Financial
instruments that potentially subject the Company to credit risk consist principally of cash and accounts receivable. The Company
has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
**Cash**
The
Company at times has cash with its financial institution in excess of Federal Deposit Insurance Corporation (FDIC)
insurance limits. The Company places its cash with high credit quality financial institutions which minimize the risk of loss.
To date, the Company has not experienced any such losses. As of December 31, 2025, the Company did not have cash balances in excess
of FDIC insurance limits.
F-17
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
2 - CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (continued)**
**Accounts
Receivable**
Historically,
the Company granted credit to its established retail customers. The Company typically did not require collateral from these customers.
Credit risk was limited due to the financial strength of the customers comprising the Companys customer base and their
dispersion across different geographical regions. The Company monitored exposure of credit losses and maintained allowances for
anticipated losses considered necessary under the circumstances. With ecommerce revenue, the Company utilized Stripe as the company
that processed online payments for our website. Revenue was received from Stripe within 3 days of the product shipment. If the
product was shipped through Amazon it would take between 20 and 30 days for collection.
**Major
Vendors**
The
Company had one vendor from which it purchased 100% merchandise sold during the year ended December 31, 2024.
As
of December 31, 2025, and 2024, there were no payables owed to this vendor.
F-18
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
3 NOTES PAYABLE TO RELATED PARTIES**
On
October 31, 2024, the Company executed a unsecured promissory note with related party, Coppermine Ventures, LLC (Coppermine),
to provide $125,914
in working capital funding for daily operations. Coppermine
and Capstone share the same CEO, Alex Jacobs. Principal accrues simple interest at a rate of 7
percent per annum, maturing July
31, 2025. The note was amended on January 27,
2025 to increase the principal amounts to $485,163,
maturing December
31, 2025 with simple interest of 7 percent per annum.
On January 9, 2026 the note was amended for a second time to increase the principle amounts to $558,191, maturing December 31, 2026,
maintaining the original interest rate of 7 percent per annum.
As
of December 31, 2025 and 2024, the Company had a total of $514,320and $180,760, of outstanding balance respectively,
on the Coppermine promissory note which includes accrued interest of $29,157 and $1,829, respectively. The outstanding principal
balances and accrued interest has been presented on the consolidated balance sheet as follows:
**NOTE
4 COMMITMENTS AND CONTINGENCIES**
**Operating
Leases**
On
July 1, 2023, the Company commenced an office space license to use designated office space at #144-V, 10 Fairway Drive, Suite
1000, Deerfield Beach, Florida 33441. The short-term lease is a month-to-month agreement for professional office space for a monthly
fee of $75 with a security deposit of $75. The agreement may be terminated by the Company or the licensor of the office space
upon a written notice provided thirty (30) days in advance.
Leases with a lease term of 12 months or less
are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. The Company currently
has no finance leases.
The rent expense for the year ended December
31, 2025 and 2024, amounted to $900 and $2,485,
respectively.
F-19
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
4 COMMITMENTS AND CONTINGENCIES (continued)**
**Directors
Compensation**
On
July 5, 2022, The Board of Directors voted to suspend compensation to the independent directors indefinitely.
**Legal
Matters**
The
Company is not a party to any other pending or threatened legal proceedings and, to the best our knowledge, no such action by
or against us has been threatened. From time to time, we are subject to legal proceedings and claims that arise in the ordinary
course of our business. Although occasional adverse decisions or settlements may occur in such routine lawsuits, we believe that
the final disposition of such routine lawsuits will not have material adverse effect on its financial position, results of operations
or status as a going concern.
**NOTE
5 -EQUITY**
**Warrants**
During
the years ended December 31, 2025 and 2024, the Company did not issue any warrants.
As of December 31, 2025, and 2024, the Company had 199,733
warrants outstanding.
**Series
B-1 Preferred Stock**
F-20
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
5 -EQUITY, continued**
On
June 15, 2023, the Company amended the Articles of Incorporation to authorized5,000,000shares of the B-1 Stock (B-1
shares). The B-1 shares are convertible into common shares, at a rate of 66.66 of common stock for each share of B-1 shares.
The par value of the B-1 shares is $0.0001. The B-1 shares shall not be entitled to any dividends and have no voting rights. In
the event of a liquidation, the B-1 Stockholders are entitled to distribution prior to common stockholders but not before any
other preferred stockholders.
On
December 18, 2024, the Company entered into a cancellation agreement with related party promissory note holders for cancellation
of $3,665,303 in outstanding principal and interest in exchange for issuance of 750,075 shares of the Companys B-1 Stock.
The
Series B-1 Preferred Shares and any shares of common stock issued under the aforementioned agreements are restricted
securities under Rule 144 of the Securities Act of 1933, as amended.
The
B-1 Shares have a liquidation preference of $1.00 per share or $767,075 as of December 31, 2025 and 2024, respectively.
**Options**
In
2005, the Company authorized the 2005 Equity Plan that made available shares of common stock for issuance through awards of options,
restricted stock, stock bonuses, stock appreciation rights and restricted stock units.
Stock
options were issued under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933.
For
the years ended December 31, 2025 and 2024, the Company did not recognized any stock-based compensation expense related to stock
options.
F-21
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
5 -EQUITY, (continued)**
The
following table sets forth the Companys stock options outstanding as of December 31, 2025, and 2024 and activity for the
years then ended.
|
Schedule
of stock options outstanding and activity | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| | |
Shares | | |
Weighted Average Exercise Price | | |
Weighted Average Fair Value | | |
Weighted Average Remaining Contractual Term (Years) | | |
Intrinsic Value | | |
|
Outstanding, January 1, 2024 | | |
| 408,288 | | |
| 0.456 | | |
| 0.15 | | |
| 1.13 | | |
| | | |
|
Granted | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Exercised | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Forfeited/expired | | |
| (200,000 | ) | |
| 0.475 | | |
| 0.17 | | |
| | | |
| | | |
|
Outstanding, December 31, 2024 | | |
| 208,288 | | |
| 0.475 | | |
| 0.14 | | |
| 0.63 | | |
| | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Granted | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Exercised | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Forfeited/expired | | |
| (200,000 | ) | |
| 0.435 | | |
| 0.04 | | |
| | | |
| | | |
|
Outstanding, December 31, 2025 | | |
| 8,288 | | |
| 1.448 | | |
| 1.62 | | |
| 0.60 | | |
| | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Vested/exercisable at December 31, 2025 | | |
| 8,288 | | |
| 1.448 | | |
| 1.62 | | |
| 0.60 | | |
| | | |
The aggregate intrinsic value at December 31, 2025
and 2024, is calculated as the difference between the exercise price of the underlying options and the closing stock price of $0.01
and $0.03 from the Companys common stock as of December 31, 2025 and 2024, respectively.
The
following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 Plan:
|
Schedule
of options granted, outstanding and exercisable | | |
| | |
| | |
| | |
|
Exercise Price | | |
Options Outstanding | | |
Remaining Contractual Life in Years | | |
Number of Options Currently Exercisable | | |
|
$ | 1.448 | | |
| 8,288 | | |
| 1.60 | | |
| 8,288 | | |
|
| |
| | | |
| | | |
| | | |
**Adoption
of Stock Repurchase Plan**
On
August 23, 2016, the Companys Board of Directors authorized the Company to implement a stock repurchase plan for up outstanding
common stock. The repurchase plan may be discontinued at any time at the Companys discretion.
On
December 19, 2018, Company entered a Purchase Plan pursuant to Rule 10b5-1 under the Exchange Act, with Wilson Davis & Co.,
Inc., a registered broker-dealer. Under the Purchase Plan, Wilson Davis & Co., Inc will make periodic purchases of shares
at prevailing market prices, subject to the terms of the Purchase Plan.
On
May 31, 2019, the Companys Board of Directors the maximum amount of aggregate funding available for possible stock repurchases
under the stock repurchase program remained at $1,000,000 during the renewal period.
F-22
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
5 - STOCK EQUITY (continued)**
During
May and June 2022, the Company repurchased 66,167 shares of the Companys outstanding common stock in the open market. The
total purchase cost was $11,662.
On
July 7, 2022, the Board of Directors resolved to discontinue the stock purchase agreement.
As
of December 31, 2025, a total of 816,167 of the Companys common stock was repurchased since the plan was incepted at a
total cost of $119,402. The cost of the repurchased shares was recorded as a reduction of additional paid-in capital.
**NOTE
6 - INCOME TAXES**
Effective
January 1, 2025, the Company adopted ASU 2023-09, *Income Taxes: Improvements to Income Tax Disclosures*. The amendments
in ASU 2023-09 enhance the transparency and decision usefulness of income tax disclosures by requiring, among other things, (i)
expanded rate reconciliation disclosures with specified categories presented both in dollar amounts and as a percentage of pretax
loss, and (ii) disaggregation of income taxes paid (net of refunds) by federal, state and foreign jurisdictions, including separate
disclosure of material jurisdictions.
The
disclosures for the year ended December 31, 2024 were prepared in accordance with theincome tax disclosure requirements
of ASC 740-50 prior to the adoption of ASU 2023-09, and are presented in the format previously required. Accordingly, the
2024 rate reconciliation and related disclosures reflect the previously required categories and disclosure objectives under the
prior guidance and are not required to be reformatted under the new standard.
The components of income tax benefit from operations consisted of the
following:
|
Schedule of components of income tax benefit | |
December 31, 2025 | |
December 31, 2024 | |
|
Current income tax benefit: | |
| | | |
| | | |
|
U.S. Federal | |
$ | (162,365 | ) | |
$ | (113,256 | ) | |
|
State | |
| (33,594 | ) | |
| (11,114 | ) | |
|
Foreign | |
| | | |
| | | |
|
Total current tax provision from operations | |
$ | (195,959 | ) | |
$ | (124,370 | ) | |
|
Deferred income tax benefit: | |
| | | |
| | | |
|
U.S Federal | |
| 288,725 | | |
| 19,646 | | |
|
State | |
| 81,912 | | |
| (31,231 | ) | |
|
Foreign | |
| | | |
| | | |
|
Total deferred income taxes | |
| 370,637 | | |
| (11,585 | ) | |
|
Change in valuation allowance | |
| (566,596 | ) | |
| (112,785 | ) | |
|
Income tax benefit | |
| (195,959 | ) | |
| (124,370 | ) | |
F-23
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
6 - INCOME TAXES (continued)**
The
effective income tax rate reconciliationfor the year endedDecember 31, 2025 is presented in accordance with ASU 2023-09
and includes reconciling items required to be separately disclosed if they meet a quantitative threshold of 5% or more of the
amount computed by multiplying pretax loss by the applicable U.S. federal statutory income tax rate. Reconciling items below the
disclosure threshold are aggregated within Other. The Companys effective tax rate for the year ended
December 31, 2025 differs from U.S. federal statutory rate primarily due to changes in valuationallowances recorded against
deferred tax assets and non-deductible expenses. The Company continues to maintain a full valuation allowance against certain
deferred tax assets as realization is more likely than not based on current evidence.
|
Schedule of effective income tax rate reconciliation | |
| | |
| | |
|
| |
December 31, 2025 | | |
|
| |
Amount | | |
% of Pretax Loss | | |
|
U.S. Federal Statutory Tax Rate | |
$ | (234,386 | ) | |
| (21.0 | )% | |
|
Domestic State and Local Income Expense, Net of Federal Income Tax Effect | |
| (48,496 | ) | |
| (4.4 | )% | |
|
Change in valuation allowance | |
| (562,158 | ) | |
| (50.4 | )% | |
|
Reduction in tax attribute in net operating loss for cancellation of debt | |
| 665,979 | | |
| (59.7 | )% | |
|
Expired non-qualified stock option | |
| 3,360 | | |
| 0.3 | % | |
|
Other | |
| (20,258 | ) | |
| (1.8 | )% | |
|
Total income tax benefit | |
$ | (195,959 | ) | |
| (17.6 | )% | |
A
reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows for
December 31, 2024:
|
| |
| | | |
|
| |
December 31, 2024 | | |
|
U.S Federal Statutory Tax Rate | |
$ | (228,218 | ) | |
|
Domestic State and Local Income Taxes, Net of Federal Income Tax Effect | |
| 3,962 | | |
|
State rate impact of goodwill impairment | |
| (67,819 | ) | |
|
Non-deductible items | |
| 241,457 | | |
|
Change in valuation allowance | |
| (112,785 | ) | |
|
Adjustment to net operating loss | |
| 32,522 | | |
|
Other | |
| 6,511 | | |
|
Total income tax benefit | |
$ | (124,370 | ) | |
F-24
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
6 - INCOME TAXES (continued)**
The effective tax rate for the years ended
December 31, 2025 and 2024, respectively, was 17.56% and 11.44% for Federal tax and State tax rate was 5.5% in 2025 and in 2024.
*Cash Taxes Paid (Net of Refunds Received) in the Current Period*
|
Schedule of cash taxes paid | |
| | | |
|
| |
| December
31, 2025 | | |
|
U.S. Federal | |
$ | | | |
|
States * | |
| | | |
|
Foreign | |
| | | |
|
Total Taxes Paid | |
$ | | | |
* There are no single
states that meet the 5% disaggregation threshold.
Pretax loss from continuing operations is disaggregated between U.S.
domestic and foreign jurisdictions in accordance with ASU 2023-09 and is presented in the table below for the year ended December 31,
2025.
*Income Taxes*
|
Schedule of pretax loss from continuing operation | |
| | | |
|
Components of pre-tax income: | |
December 31, 2025 | |
|
U.S. Domestic | |
$ | (1,116,123 | ) | |
|
Foreign | |
| | | |
|
Total | |
$ | (1,116,123 | ) | |
Deferred tax assets
and liabilities as ofDecember 31, 2025 and 2024consisted of the following:
|
Schedule of deferred tax assets
and liabilities | |
| |
| |
|
| |
Years Ended December 31, | |
|
Deferred tax assets: | |
2025 | |
2024 | |
|
Accruals and allowances | |
$ | | | |
$ | (545 | ) | |
|
Capitalized research and development | |
| 5,535 | | |
| 20,742 | | |
|
Stock based compensation | |
| 3,408 | | |
| 7,464 | | |
|
Net operating allowances | |
| 1,156,322 | | |
| 1,707,978 | | |
|
Deferred tax assets | |
| 1,165,265 | | |
| 1,735,639 | | |
|
Deferred tax liabilities: | |
| | | |
| | | |
|
Intangible assets | |
| | | |
| (199,658 | ) | |
|
Valuation allowance | |
| (1,165,343 | ) | |
| (1,731,939 | ) | |
|
Net deferred tax assets and liabilities | |
$ | | | |
$ | (195,958 | ) | |
Deferred tax assets are recognized for deductible
temporary differences and net operating loss carryforwards, while deferred tax liabilities are recognized for taxable temporary differences.
Deferred tax asset and liabilities are measured using enacted tax rates expected to apply in periods in which those temporary differences
are expected to be realized or settled. The Company evaluates the realizability of its deferred tax assets and establishes a valuation
allowance when it is more likely than not that some portion or all of the deferred assets will not be realized. In making this determination,
management considers all available positive and negative evidence, including cumulative losses in recent years, the lack of current-revenue
generating operations, and uncertainty regarding the timing and level of future taxable income. Based on this evaluation, the Company
has concluded that it is more likely than not that its deferred tax assets will not be realized and has therefore recorded a full valuation
allowance against its gross deferred tax assets as of December 31, 2025 and 2024.
Deferred tax assets and liabilities are presented
on a net basis by jurisdiction. As of December 31, 2024, the Company had a net deferred tax liability of $195,958, primarily related
to taxable temporary differences associated with intangible assets. This net deferred tax liability represented a naked credit as the
Companys deferred tax assets were fully offset by a valuation allowance.
During the year ended December 31, 2025, the deferred
tax liability associated with intangible assets was eliminated. As a result, the Company recognized an income tax benefit of $195,958
related to the reversal of this liability. This benefit was recorded notwithstanding the full valuation allowance against deferred tax
assets, as the valuation allowance does not apply to deferred tax liabilities.
As of December 31, 2025, after netting deferred
tax assets and liabilities and considering the full valuation allowance, the Company reports no deferred tax assets or liabilities on
its consolidated balance sheet. The Companys valuation allowance decreased by $566,596 during the year ended December 31, 2025,
primarily due to changes in deductible temporary differences and net operating loss carryforwards.
As of December 31, 2025 and 2024, the Company
had federal net operating loss carry forwards of $4,586,580 and $6,672,056 and state operating loss carry forwards of $4,445,104 and
$7,062,042, respectively. Federal net operating losses generated in tax years beginning before January 1, 2018 generally expire 20
years from the year generated, while federal net operating losses generated in tax years beginning after December 31, 2017 generally
may be carried forward indefinitely. The use of post-2017 federal net operating losses is generally limited to 80% of taxable income
in any one year.
Income taxes paid are disaggregated by federal,
state, and foreign jurisdictions. Individual jurisdictions are separately disclosed if net payments exceed 5% of total income taxes
paid during the period. No individual state or foreign jurisdiction met this threshold for the year ended December 31, 2025.
The Companys policy is to record interest
and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2025,
the Company hadnounrecognized tax benefits and no charge during 2025, and accordingly, the Company did not recognize any
interest or penalties during 2025 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December
31, 2025.
F-25
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
7 OPERATING SEGMENTS**
The Companys Chief Executive Officer serves
as the Chief Operating Decision Maker (CODM). The CODM reviews financial information, allocates resources, and assesses
performance on a consolidated basis. Accordingly, the Company has determined that it operates in one reportable segment, which is identified
as Consumer Home Goods.
The CODM evaluates segment performance primarily based
on segment net loss. The measure of segment net loss includes net revenue and significant operating expenses that are regularly provided
to the CODM. The Companys operations, including sales and marketing, product design and development, and research and development
consulting, are managed on a centralized basis.
The following table presents net revenue, significant
segment expenses, and segment net loss for the Companys single reportable segment for the years ended December 31, 2025 and 2024:
|
Schedule of significant segment expenses | |
| | |
| | |
|
| |
Consumer Home Goods | | |
|
| |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Revenue, net | |
$ | | | |
$ | 143,269 | | |
|
Less: Cost of goods sold | |
| | | |
| 38,019 | | |
|
Less: | |
| | | |
| | | |
|
Sales and marketing | |
| | | |
| 17,313 | | |
|
Product development | |
| 2,190 | | |
| 6,233 | | |
|
Consultancy fees | |
| | | |
| 96,850 | | |
|
Professional fees | |
| 196,668 | | |
| 274,559 | | |
|
Other segment expenses | |
| 872,036 | | |
| 706,110 | | |
|
Segment net loss | |
| (1,070,894 | ) | |
| (995,815 | ) | |
|
| |
| | | |
| | | |
|
Other segment items include operating expenses regularly provided to the CODM that are separately
disclosed above | |
| | | |
| | | |
|
Reconciliation of loss: | |
| | | |
| | | |
|
Other income | |
| | | |
| 4 | | |
|
Loss on disposal of equipment | |
| (17,904 | ) | |
| | | |
|
Interest expense | |
| (27,328 | ) | |
| (90,943 | ) | |
|
Loss before income taxes | |
| (1,116,126 | ) | |
| (1,086,754 | ) | |
Other segment expenses include goodwill impairment
and other general and administrative expenses. Because the Company has one reportable segment, total segment assets are the same
as total consolidated assets as presented in the consolidated balance sheets.
F-26
CAPSTONE
COMPANIES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
8 - SUBSEQUENT EVENTS**
**Amended
Related Party Note Payable**
On
January 9, 2026, the Company entered into an amendedand revised unsecured promissory note (New Note) with
Coppermine. The new note revised the January 25, 2025 note for a commitment of additional working capital of $73,191 during the
first quarter of 2026 and an amended principal balance of $558,191 and amended the maturity date to December 31, 2026. The new
note is to provide for projected funding needs of the Company to pay for essential corporate maintenance expenses due in the first
three fiscal quarters of 2026, necessary to meet the reporting and filing requirements under federal and state securities laws
and regulations, maintenance of the quotation of the Companys Common Stock on the OTC Markets Group QB Venture Market and
maintenance of directors and officers insurance and basic management and accounting operations. The amended principal
amount is intended to provide sufficient working capital to maintain the corporate existence of the Company while the executive
management continues efforts to develop or acquire a new business line or revenue generating operation. The Company has received
$45,000 of the 2026 working capital funding as of the date of filing this Form 10-K.
**Renewal
of CFO Agreement**
On
January 9, 2026, the Company renewed Ms. Perezs contracting agreement for Chief Financial Officer services, commencing January
1, 2026, with services billed at an hourly rate of $275, and ending upon mutual termination by either party, upon a 14-day
notice.
**Lump
Sum Promissory Note**
On
March 3, 2026, the Company entered into and issued an unsecured Lump Sum Payment Promissory Note (Note), which Note
provided a working capital loan in the principal amount of $250,000 (Loan) from eBliss Global, Inc., a private,
early stage Delaware corporation engaged in the developing and producing e-mobility solutions (including and initially making
e-bikes as transportation vehicles at a Utica, New York factory), (eBliss). Funding occurred on March 4, 2026. The
interest rate under the Note is seven percent (7%) simple annual interest. Principal and accrued interest are due in a single
lump sum payment due on March 4, 2027 (Maturity Date). The Company has a fifteen-day cure period if it fails to
pay the Principal and accrued interest on the Maturity Date. The Note is unsecured and does not provide for a conversion of debt-to-equity
securities.
*Purpose
of No Shop Provision*. The Loan is being made to supply working capital to the Company and as partial consideration
for a 90-day no shop provision in the Note. During the 90 days following the funding of the principal of the Note
(No Shop Period), the Company will not entertain third party proposals for a merger, business combination, stock
or asset acquisition, strategic alliance or joint venture for product development or similar transactions (collectively, Transactions)
and will cease any third party discussions for any Transactions for the No Shop Period, except that the Company may entertain
third party proposals during the last 30 days of the No Shop Period if the Company and eBliss have not signed a definitive agreement
or letter of intent for a Transaction during the first 60 days of the No Shop Period and the third party proposal is deemed superior
to any existing proposal for a Transaction from eBliss, if any. The purpose of the no shop provision is to afford
the Company and eBliss an opportunity to discuss the possibility and feasibility of a mutually beneficial Transaction by eBliss
and the Company and conduct any desired due diligence.
*Special
Board Committee*. In order to conduct and as part of discussions between the Company and eBliss during the No Shop Period,
the Company will form a special committee of independent, disinterested Company directors, which committee will consist of Company
directors Jeffrey Guzy and Warner Session.
F-27