CAPSTONE COMPANIES, INC.

Previous wording

Total net revenue for the year ended December 31, 2024, decreased 25% to $143,269 as compared to $192,176 in the same period of last year. The net operating loss was $995,815 for the year 2024 compared to $1,634,854 for the year 2023. The Company had an estimated net tax (benefit) expense provision in 2024 and 2023 of approximately ($100,000) and $35,000, respectively.

Current wording

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 $195,958 and $124,370, respectively.

Previous wording

For 2024, revenue was derived from sales of our residential lighting products and Connected Surfaces Smart Mirrors. The residential products were directed towards consumer home LED lighting for both indoor and outdoor applications while the Smart Mirrors were sold directly to consumers and liquidators via e-commerce efforts. We recognize revenue upon shipment of the order to the customer when all performance obligations have been completed, and title has transferred to the customer and in accordance with the respective sale’s contractual arrangements. Each contract on acceptance will have a fixed unit price. All of our sales were to the U.S. market in 2024. Net revenue also includes the cost of instant rebate coupons, promotional coupons, and product support allowances provided to retailers to promote certain products. All of our revenue is denominated in U.S. dollars.

Current wording

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 sale’s contractual arrangements. Each contract on acceptance will have a fixed unit price. All of our sales were to the U.S. market in 2024. All of our revenue is denominated in U.S. dollars.

Previous wording

Our cost of goods sold consists primarily of purchased products from contract manufacturers and when applicable associated duties and inbound freight. In addition, our cost of goods sold also includes reserves for potential warranty claims and freight allowances. We source our manufactured LED lighting products based on customer orders. Beginning in 2021 with the launch of our Connected Surfaces Smart Mirror, we maintained inventory on hand for direct-to-consumer shipment to fulfill sales orders. As the Smart Mirror product line had limited sales for 2023, and all inventory was expensed as of December 31, 2023.

Current wording

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.

Previous wording

Our gross profit has and will continue to be affected by a variety of factors, including average sales price for our products, product mix, promotional allowances, our ability to reduce product cost fluctuations in the cost of our purchased components.See “Risk Factors” above in Item 1A.

Current wording

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.

Previous wording

All sales were domestic for 2024 and 2023.

Current wording

All sales were domestic for 2024.

Previous wording

Gross profit (loss) for the year ended December 31, 2024, was approximately $105,250, or 73.4% of net revenues and ($265,640), or (138.2%) of net revenues, for fiscal 2023. For the years ended December 31, 2024, and 2023, cost of sales was approximately $0 and $458,000, respectively. The gross profit increase is the result of the write off of the Smart Mirror inventory in 2023 and the final liquidation sales of the remaining inventory on hand during 2024. Management is currently reviewing licensing opportunities for the Connected Chef, a purpose-built kitchen tablet with an accessory platform to accommodate food prep accessories such as a cutting board. The Connected Chef has Google mobile services allowing for pre-installation of specific Google applications including Playstore, voice assistant, YouTube, to name those highly recognized.

Current wording

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.

Previous wording

In fiscal 2024 and 2023, sales and marketing expenses were approximately $17,000 and $76,000 respectively, a reduction of $59,000 or 77%. As a percent to revenue, 2024 sales and marketing expenses were 12% as compared to 40% in 2023. The Company did not have an active product line for the last half of 2024 and therefore marketing expenses decreased accordingly.

Current wording

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%.

Previous wording

For the years ended December 31, 2024, and 2023 compensation expenses were approximately $139,000 and $469,600, respectively, a reduction of $330,000 or 70%. As a percent of net revenues, 2024 expenses were 97.2% as compared to 244.4% in 2023. The Company continued to reduce the workforce as a result of not having an active product line during 2024.

Current wording

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.

Previous wording

For fiscal 2024, professional fees were approximately $275,000 compared to $426,200 in 2023, a reduction of $151,200 or 36%. As a percent of net revenue 2024 expenses were 192.6% as compared to 221.8% in 2023. In 2024, consulting fees were approximately $97,000, a decrease of $93,000, compared to $190,000 for 2023. Accounting, legal and other expenses were $178,000, a decrease of $197,600 from $235,700 in the prior year.

Current wording

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.

Previous wording

The Company recognized a goodwill impairment of approximately $539,000 during 2024, as the fair value of the Company was less than the carrying value of the Company.

Current wording

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.

Previous wording

For the years ended December 31, 2024, and 2023, total operating expenses were approximately $1,000,000 and $1,370,000, respectively. This represents a $370,000 or 27.0% decrease over fiscal year 2023.

Current wording

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.

Previous wording

Interest expense for 2024 amounted to approximately $90,000 compared to $104,000 in 2023, a decrease of $14,000 or 13%, due to the cancellation of debt and issuance of preferred B-1 stock.

Current wording

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.

Previous wording

For the years ended December 31, 2024, the net tax expense for income tax was estimated at $100,000 compared to a net tax expense of $35,000 in the same period 2023.

Current wording

For the years ended December 31, 2025, the net tax benefit for income tax was estimated at $196,000 compared to a net tax benefit of $125,000 in the same period 2024.

Previous wording

The effective tax rate for the years ended December 31, 2024, and 2023, respectively, was (10.07%) and (2.10%) and the statutory tax rate was 23.5% in 2024 and 23.82% in 2023.

Current wording

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.

Previous wording

For fiscal 2024 and 2023 net loss before taxes was approximately $1,087,000 and $1,661,000, respectively, a net loss decrease of approximately $578,000 over the previous year due to the reasons summarized above.

Current wording

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.

Previous wording

Our goal is to license the Connected Chef kitchen utility device in 2025 through licensing arrangements with an appliance or other condumer product distributors, consumer product manufacturers and possibly other commercial food or kitchen product companies.

Current wording

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.

Previous wording

The Company will require additional working capital funding until such time as its Connected Chef licensing business and/or HFS business establish revenue generating operations. The Company may also require additional funding to cover the costs of manufacturing Connected Chef product under certain licensing arrangements.

Current wording

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.

Previous wording

Accounts payable and accrued liabilities — Comprised of the Company’s liability for goods and services in the normal course of business as well as deferred compensation for management.

Current wording

Accounts payable and accrued liabilities : Comprised of the Company’s liability for goods and services in the normal course of business.

Previous wording

During the year ended December 31, 2024, the Company used cash in operations of approximately $290,000 and generated net operating losses of $996,000. As of December 31, 2024, the Company had working capital deficit of $144,755 and an accumulated deficit of $11,784,360. The Company’s cash balance decreased by approximately $20,000 from $36,000 as of December 31, 2023, to $16,000 as of December 31, 2024. With the reduced revenues in 2024 and 2023 the Company initiated an expense mitigation plan that reduced discretionary spending including travel, and trade show expenses, deferred executive management compensation, and closed the Hong Kong operation.

Current wording

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 Company’s 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.

Previous wording

Director and former Chief Executive Officer, Stewart Wallach, has funded working capital since 2022 as the Company navigates these challenges. Total working capital note proceeds received as of the date of this filing are $672,500. Coppermine has funding working capital beginning in 2024. Total working capital note proceeds received as of the date of this filing of the Form 10-K report from Coppermine are $292,295. Coppermine has committed to lending a total of $485,163 in working capital funding through September 30, 2025. However, there is no assurance that level of funding provided by Coppermine will be adequate to meet the operating needs, licensing expenses and operating expenses of a potential business combination during 2025.

Current wording

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.

Previous wording

As of December 31, 2024, the Company’s working capital deficit was approximately $145,000 of which $16,000 was cash. Current liabilities were $181,000 and include:

Current wording

As of December 31, 2025, the Company’s working capital deficit was approximately $459,000 of which $39,000 was cash. Current liabilities were $518,000 and include:

Previous wording

Cash used in operating activities was approximately $290,000 in 2024 compared with approximately $614,000 in 2023. The cash used in operating activities in 2024 included the negative cash impact of the net loss, which was approximately $962,000, offset by the goodwill impairment of $539,000, a decrease in accounts payable and accrued expenses of $141,000.

Current wording

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.

Previous wording

Cash received and used in financing activities for the years ended December 31, 2024, and 2023, was approximately $269,000 and $632,000, respectively. During 2023, the Company received $632,000 in working capital. In 2024, the Company received $269,000 in working capital funding from related parties.

Current wording

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.

Previous wording

We sell all of our products in U.S. dollars and pay for all of our manufacturing costs in U.S. dollars.

Current wording

We have historically sold all of our products in U.S. dollars and pay for all of our manufacturing costs in U.S. dollars.

Previous wording

We have not declared or paid any cash or other dividends on shares of our Common Stock in the last eight years, and we presently have no intention of paying any cash dividends on shares of our Common Stock.

Current wording

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.

Previous wording

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; inventory valuation; depreciation; amortization and the recovery of long-lived assets; including goodwill and intangible assets; shared base-based payment expense; product warranty; and other reserves and assumptions based on management’s 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.

Current wording

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 management’s 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.

Previous wording

Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds its fair value, an impairment loss is recognized. Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company’s market capitalization. There was an impairment expense of $539,317 and $0, respectively, for the year ended December 31, 2024 and 2023, for a balance of goodwill of $773,165 and $1,312,482, respectively as of December 31, 2024, and 2023.

Current wording

Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds its fair value, an impairment loss is recognized. Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company’s market capitalization. There was an impairment expense of $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.

Previous wording

Accrued liabilities contained in the accompanying consolidated balance sheets include accruals for estimated amounts of credits to be issued in future years based on potential product warranties, compensation, benefits, marketing allowances and other liabilities.

Current wording

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.

Previous wording

As of December 31, 2024, the Company had federal and state net operating loss carry forwards of approximately $6,672,000 and $6,540,000 respectively. The federal net operating loss is available to the Company indefinitely and available to offset up to 80% of future taxable income each year. The net deferred tax liability as of December 31, 2024, and 2023 was $196,000 and $320,000, respectively, and is reflected in long-term liabilities in the accompanying consolidated balance sheets.

Current wording

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.

Previous wording

The effective tax rate for the years ended December 31, 2024, and 2023, respectively, was 11.44% and (2.10%) and the statutory tax rate was 23.5% in 2024 and 23.82% in 2023.

Current wording

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.

Previous wording

Deferred tax assets are to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2024, and 2023. Since indefinite-lived assets cannot be used as a source of taxable income to support the realization of deferred tax asset, a valuation allowance was recorded against the deferred tax assets, and a net deferred tax liability or naked credit of approximately $196,000 and $320,000 is presented on the company’s balance sheet, respectively. The Company’s valuation allowance decreased by $112,000 in 2024.

Current wording

Deferred tax assets are to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 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 company’s balance sheet, respectively. The Company’s valuation allowance decreased by $567,000 in 2025.