CAPC 10-K & 10-Q changes, risk factors and insider trading
Capstone Companies, Inc. · OTC · Electric Lighting & Wiring Equipment · CIK 814926 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “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.”
New heading “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 Company’s 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.”
New heading “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.”
New heading “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.”
New heading “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 Company’s common stock.”
Removed heading “During a downturn in the economy, or periods of increased inflation, consumer purchases of discretionary items are usually affected, which could materially harm the prospects and performance of the Connected Chef licensing business. Historic inflation in 2022 through 2024 has created uncertainty about consumer confidence and its impact on demand for our products in 2024. Inflation remains a concern in 2025 due to U.S. imposition of tariffs on China and major trading partners of the U.S.”
Removed heading “If our products or services fail to perform or fail to meet customer requirements or expectations, we could incur significant additional costs, including costs associated with the recall of those items.”
Removed heading “Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products or, for offerings of any HFS operation, demand for services.”
Removed heading “Fluctuations in the cost of Connected Chef products could negatively affect our operating results.”
Removed heading “Our business may be impaired by claims that we infringe the intellectual property rights of others.”
Removed heading “For HFS operations, we will face potential liabilities common to health, fitness and social activities facilities servicing the general public.”
Removed heading “For HFS operations, the high level of competition in the health, fitness and social industry may materially and adversely affect our business.”
Removed heading “Our Connected Chef licensing program may result in our conducting business in foreign countries and that would expose us to certain risks inherent in doing business internationally, which may adversely affect our business, results of operations or financial condition.”
Removed heading “Currency fluctuations may significantly increase our expenses and affect the results of operations, especially where the currency is subject to intense political and other outside pressure.”
Removed heading “If we fail to adequately protect intellectual property rights, competitors may manufacture and market similar products, which could adversely affect our market share and results of operations.”
Removed heading “We expect our results of operations to fluctuate on a quarterly and annual basis.”
Largest changes
“During a downturn in the economy, or periods of increased inflation, consumer purchases of discretionary items are usually affected, which could materially harm the prospects and performance of the Connected Chef licensing business. Historic inflation in 2022 through 2024 has created uncertainty about consumer confidence and its impact on demand for our products in 2024. Inflation remains a concern in 2025 due to U.S. imposition of tariffs on China and major trading partners of the U.S.”see in full comparison
“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 Company’s common stock.”see in full comparison
“If our products or services fail to perform or fail to meet customer requirements or expectations, we could incur significant additional costs, including costs associated with the recall of those items.”see in full comparison
“For HFS operations, the high level of competition in the health, fitness and social industry may materially and adversely affect our business.”see in full comparison
“Operating a HFS operation exposes the operator to potential litigation or liabilities resulting customers, visitors or personnel suffering personal injuries, illness, or death on company premises or as a result of company’s services or activities. …”see in full comparison
“For any products being sold and purchased by consumers, a significant product recall could also result in possible adverse publicity, damage to our reputation and a loss of customer or consumer confidence in our products and could substantially undermine or delay any success in the Connected Chef product licensing. …”see in full comparison
Full comparison: every changed paragraph (63)
The
declining revenues in 2024
and 2023 of our business line of LED lighting products and the lack of a sufficient revenue generating operation
in in
20242025 have resulted in significant operating losses and imposed a need to sustain operations with outside funding of working
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.
During
the year ended December 31, 2024,
2025, the Company used cash in operations of $289,548$282,959 and generated net operating losses of $995,815. $1,070,894.
As of December 31, 2024,2025, the Company
has working capital deficit of $144,755$459,069 and an accumulated deficit of $11,784,360.$12,679,768. The Company’s
cash balance decreased
increased approximately $20,000$23,000 from $36,466 as of December 31, 2023, to $15,850 as of December 31, 2024.2024, 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 effortefforts tofor licensea the Connected Chef product line or establish the HFSpossible business as the primary revenue
source in 2025.combination. While certain directorsrelated parties have provided
working capital funding to the Company in the past, includingthere 2024, there
is no guarantee, and none can be given that these insidersrelated parties will
do so when and as required by the Company in 2025.2026.
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.
If the HFS business does not produce
revenues in 2025, and if the Connected Chef licensing program does not become a viable revenue source in 2025, the Company
will need additional third-party funding to sustain operations and efforts to establish the HFS program and the Connected
Chef licensing program as a viable revenue sources. The Company has not yet received pre-production orders for the Connected Chef
product line under its licensing program and has not yet acquired or internally developed a HFS operation. The Company
currently lacks the working capital to extensively market the Connected Chef licensing program or fully implement the HFS
program. Company has no consumer products in active production as of the date of the filing of this Form 10-K report.
In 2024,2025, the Company did
not havegenerate an alternative consumer product line torevenue
from the Connected Chef product line and would be unable to develop an alternative
in 2025 due to a lack of adequate working capital.line. The Company has not raised the working capital to acquire or launch
a an HFS operation as of
the date of the filing of this Form 10-K report. Absent adequate working capital funding in 2025, and
a lack of revenue from the Connected Chef licensing program,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 20252026 to sustain the Company as an operating company. Reorganization under the
the protection of the bankruptcy code is one possible extraordinary corporate transactiontransaction. ifThe funding provided under the ConnectedMarch Chef3, licensing2026 programpromissory
note issued to eBliss will be devoted to basic corporate overhead and HFS business dois not becomesufficient a viable revenue sources and other extraordinary corporate transactions are not possible.
While the Connected Chef licensing program isor intended to removefund the burdendevelopment of funding production of products for licensees
or licensors, if the Company has to fund a pre-productionnew bulk order for the Connected Chef underbusiness
the licensing program, the Company will have to raise working capital to fund production and the Company may be unable to raise
that funding on affordable termsline or atproduct all.line.
Our
operating results and sustainability
as an operating company in the future are substantially dependent on the success of the Connected Chef licensing program
and HFS development
program in 2025.2026.
There
can be no assurance that the
Connected Chef licensing program or HFS development program will generate sufficient or any revenues, or any continued revenues to
fund ongoing
operations of the Company.
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 the executive operations with a relatively
small number of personnel.personnel and consultants. The Company has not developed personnel
to readily replace key personnel. The loss of key personnel, being Alexander
Jacobs,Stewart Wallach, Chairman of the Company’sBoard newlyof appointed Chief Executive Officer,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 or marketing. Our marketing is supplemented from time to time by contractor sales agencies, and we have a relatively
small research and development capability overseas. We rely on original equipment or contract manufacturers (“OEMs”)
for certain technical development and design, and we have no current plans to develop an in-house technical development staff.
The loss of an OEM would disrupt our Connected Chef licensing program if we or the licensee could not find a suitable replacement
in short order. Company evaluates potential OEM’s from time to time to identify possible alternative production and technical
development resources.management. If our operations grow, we maywill 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.
During a downturn in the economy,
or periods of increased inflation, consumer purchases of discretionary items are usually affected, which could materially harm
the prospects and performance of the Connected Chef licensing business. Historic inflation in 2022 through 2024 has created
uncertainty about consumer confidence and its impact on demand for our products in 2024. Inflation remains a concern in 2025
due to U.S. imposition of tariffs on China and major trading partners of the U.S.
Our sole consumer product, the Connected
Chef, may be considered discretionary purchase for consumers. Factors affecting the level of consumer
spending for such discretionary items include general economic conditions, unemployment, current inflationary or recession
concerns among consumers, the availability of consumer credit and consumer confidence in future economic conditions. Further,
the HFS business may be deemed a non-essential expense by consumers that is also affected by
economic and inflationary concerns and events. Uncertainty by consumers about current or future U.S. economic conditions,
including inflationary and recession concerns, trends in consumer discretionary spending remain unpredictable. Historically,
consumer purchases of discretionary items tend to decline during recessionary periods of high inflation or uncertain economic
conditions or trends, when disposable income is lower or anticipated to be lower, which may lead to declines in sales
and slow our long-term growth expectations. Any near or long-term downturn in the U.S. economy may adversely impact our HFS business
development and Connected Chef licensing program. Continued inflationary pressure on essentials, like food and transportation
prices, will reduce consumer purchases of discretionary items.
In
the HFS industry markets and consumer
products markets, we competehistorically with or will competecompeted 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.
With the increased demand for consumer
smart products, which product category includes the Connected Chef, of which, licensing is the focus of this business segment
in 2024 and 2025, we will continue to face increased extensive competition in the future. If the investment in capacity
exceeds the growth in demand the electronic consumer market is likely to become more competitive with additional pricing pressures.
With the emerging and evolving smart mirror market, we face growing competition and rapidly changing product technology and functionalities.
The rapidly increasing number of competitors nationwide in the HFS industry and possible consolidation of those competitors
into regional or national companies presents a significant challenge to our company in efforts to penetrate the market in 2025.
Adequate,
affordable and available
funding is a key factor in our ability to competemaintain in the HFS industry and consumer products market featuring smart
products.operations.
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 Company’s 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 Company’s 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.
Competitors may try
to align with some of our licensees or licensors in our Connected Chef business or target Company relationships with licensees
and licensors. This could lead to lower prices for our products, reduced demand for our products and a corresponding reduction
in our ability to recover development, engineering and manufacturing costs. Any of these developments could have an adverse effect
on our business, results of operations or financial condition.
If our products or services
fail to perform or fail to meet customer requirements or expectations, we could incur significant additional costs, including
costs associated with the recall of those items.
If our products or services do not
meet consumer expectations or preferences, we may be required to replace or rework the products or revise our service offerings.
In some cases, our products may contain undetected defects that only become evident after shipment and used by consumers,
or our realization of customer dissatisfaction with or waning interest in our services may only come after a significant loss
of our customer base. Even if our Connected Chef product does meet standard specifications, the products’ customers
may attempt to use our products in applications for which they were not designed resulting in product failures and creating customer
satisfaction issues. For a small company, identifying and meeting consumer demand and product and service quality standards are
critical to our business and financial performance in both the Connected Chef business and HFS business. We may lack the
financial or other resources in both industries to respond in a timely manner or at all to changing consumer tastes or preferences.
We may remain liable for product
defects or failures in the Connected Chef business in certain licensing arrangements. If such failures or defects occur
and the Company has responsibility or liability for those failures or defects, then they could result in significant
losses or product recalls due to:
For any products being sold and purchased
by consumers, a significant product recall could also result in possible adverse publicity, damage to our reputation and
a loss of customer or consumer confidence in our products and could substantially undermine or delay any success in the Connected
Chef product licensing. Further, while we believe that product liability for consumer electronic products is not significant or
widespread, we could face product liability lawsuits or regulatory proceedings by the Consumer Product Safety Commission (CPSC),
if it remains in existence or continues to fully function under the current downsizing of the Federal Government, and could
suffer losses from a significant product liability judgment or adverse CPSC finding against us if the use of our products at issue
is determined to have caused injury or contained a substantial product hazard to the public.
Our results of operations could
be materially harmed if we are unable to accurately forecast demand for our products or, for offerings of any HFS operation,
demand for services.
If we do not accurately predict consumer demand
for products and services, we may be unable to produce products or offer services that are in demand and our financial
performance will suffer.
Factors that could affect our ability to accurately
forecast demand for our products or services include:
While the Connected Chef licensing
program does not anticipate maintenance of inventory by the Company, if the Company does maintain inventory levels in excess of
customer or licensee/licensor demand may result in inventory write-downs or write-offs and the sale of excess inventory
at discounted prices or in less preferred distribution channels, which could have an adverse effect on gross margin. In addition,
if we or licensees of the Connected Chef licensing program underestimate the demand for our products, our contract manufacturers
may not be able to produce products to meet our licensees’, licensors’ or customers’ requirements,
and this could result in delays in the shipment of our products and our ability to recognize revenue, lost sales, as well as damage
to our reputation and retailer and distributor relationships.
The consumer product industry is subject
to significant pricing pressure caused by many factors, including technological advancements, intense competition, consolidation
in the retail industry, pressure from retailers to reduce the costs of products and changes in consumer demand, and increasing
need to exploit e-commerce and Social Media.
Fluctuations in the cost of Connected Chef products
could negatively affect our operating results.
The components used by our suppliers and
contract manufacturers for the Connected Chef product will be made of raw materials that may be subject to significant price fluctuations
or shortages that could materially adversely affect our cost of goods sold. In addition, certain of our contract manufacturers
may be subject to government regulations related to wage rates, and therefore the labor costs to produce our products may fluctuate.
The cost of transporting our products for distribution and sale is also subject to fluctuation. Because the Connected Chef product
will be manufactured abroad, any Connected Chef products must be transported by third parties over large geographical distances,
increased demand for freight services at a time of reduced ocean freight capacity, can significantly increase costs. Manufacturing
delays or unexpected transportation delays can also cause us to rely more heavily on airfreight to achieve timely delivery to
our customers, which significantly increases freight costs. Any of these fluctuations may increase the cost of products
and have an adverse effect on our profit margins, results of operations and financial condition.
Our
business may be impaired by claims that we infringe the intellectual property rights of others.
Litigation between competitors over
intellectual property rights can be a common business practice in an industry like the consumer product industry as a means
to protect or gain market share. Litigation to determine the validity of patents or claims by third parties of infringement of
patents or other intellectual property rights could result in significant legal expense and divert the efforts of our, or our
licensee’s or licensor’s, technical personnel and management, even if the litigation results in a determination
favorable to us or them. In the event of an adverse result in such litigation, we could be required to:
The
risk of infringement claims may be greater in emerging products and technologies like smart devices.
There can be no assurance that third parties will
not attempt to assert infringement claims against us with respect to our consumer products. Additionally, if an infringement claims
against the Company or its customers is successful, the Company may be required to pay damages or seek royalty or license arrangements,
which may not be available on commercially reasonable terms. The payment of any such damages or royalties may significantly increase
the Company’s operating expenses and materially harm the company’s operating results and financial condition. Further, royalty
or license arrangements may not be available at all, which would then require the company to stop selling certain products or using certain
technologies, which could negatively affect the company’s ability to compete effectively. We do not have reserves for litigation
or insurance for infringement litigation costs. This kind of litigation is typically very expensive to litigate, and we may lack the
funds to aggressively litigate infringement claims against us or against competitors, which could lead to a materially adverse impact
on our business.
For HFS operations, we will face potential liabilities common to health, fitness and social activities facilities servicing the general
public.
Operating a HFS operation exposes the operator
to potential litigation or liabilities resulting customers, visitors or personnel suffering personal injuries, illness, or death on company
premises or as a result of company’s services or activities. Other potential liabilities and litigation risks result from or be
based upon: discrimination claims from customers or company personnel; violations of health, safety or food codes; sexual harassment
or sexual assault suffered by customers, visitors or company personnel on company premises; data security breaches or fraudulent activities
associated with our computer systems, including privacy data law violations; conduct by individuals actually or perceived to be affiliated
with us or employed by us and that could violate ethical standards or otherwise harm the reputation of our brand; regulatory, investigative
or other actions relating to business practices; and other actionable torts common
to operating facilities open to the general public.
For HFS operations,
the high level of competition in the health, fitness and social industry may materially and adversely affect our business.
Our competition would consist of a
large number of companies, including the following providers: other HFS operators; traditional health and fitness clubs; physical fitness
and recreational facilities established by non-profit organizations and businesses for their employees; private studios and other boutique
fitness offerings; racquet, tennis, pickleball and other athletic clubs; amenity and condominium/apartment clubs; country clubs; online
personal training and fitness coaching; delivery of digital fitness content; the home-use fitness equipment industry; local tanning salons;
businesses offering similar services; and other businesses that rely on consumer discretionary spending. We may not be able to penetrate
the market or, if we establish an operation, be able to compete effectively in the markets in which we operate. Competitors may attempt
to undermine our business by pricing that we cannot afford to match, or copy our business model, or portions thereof, and thereby erode
our ability to win any market share and gain any brand recognition. Most if not all of our competitors will probably be larger financial
and marketing resources than us, have established brand recognition and be able to offer in-demand services or facilities that we cannot
afford to offer. Non-profit organizations or local governments in our market may be able to obtain land and construct facilities at a
lower cost and collect membership dues and fees without paying taxes, thereby allowing them to charge lower prices. Due to the increased
number of low-cost health and fitness and social event alternatives, we may be unable to compete with such alternatives. This competition
may limit our ability to attract customers or retain existing customers. We may also lack the funding to offer online customer registration,
scheduling and account management, and the lack of such offerings may adversely impact our ability to attract customers or retain existing
customers.
Our Connected Chef licensing program may result in our
conducting business in foreign countries and that would expose us to certain risks inherent in doing business
internationally, which may adversely affect our business, results of operations or financial condition.
If we have revenues, operations and contract
manufacturing arrangements or licensing arrangements overseas, then that may expose us to certain risks. Fluctuations in
exchange rates may affect our revenue, expenses and results of operations as well as the value of our assets and liabilities as
reflected in our financial statements. We are also subject to other types of risks, including the following:
Changes in regulatory, geopolitical,
social, economic, or monetary policies and other factors may have a material adverse effect on our business conducted overseas
in the future or may require us to significantly modify our current business practices. Abrupt political change, terrorist activity
and armed conflict pose a risk of general economic disruption in affected countries, which could also result in an adverse effect
on our business and results of operations. We do not have extensive prior experience in conducting business in Thailand, which
is the location of our prior consumer product development and production (supplemented by contractors in China). This lack of
experience may delay accomplishing our business milestones for development or production of consumer product produced by our Thailand
OEMs under our Connected Chef licensing program.
Our
financial results and ability to growfund our
basic corporate overhead and fund business development efforts may be negatively impacted
by economic, regulatory and political risks beyond our control.
If we We
are subject to risks associated
with doingsecuring necessary funding for our basic corporate overhead and business abroaddevelopment in the consumer product segment, then thoseefforts
which risks include:
These risks could negatively affect the ability
of our contract manufacturers to produce or deliver our products or procure materials and increase our cost of doing business
generally, any of which could have an adverse effect on our results of operations, cash flows and financial condition. If one or more
of these factors, make it undesirable or impractical for us to conduct business in a particular country our business could be adversely
affected.
As we currently do not have an operating product line, past financial performance is not indicative of any future growth or future financial performance.
Since we have transitioned our consumer
product business to the licensing of the Connected Chef product, past financial performance is not indicative of any future growth
or future financial performance. We will have to establish our Connected Chef licensing program and product line in the face of
extensive competition as an entirely new segment within the Smart Home category and establish the HFS business in the face
of extensive and growing competition.
Currency fluctuations may significantly
increase our expenses and affect the results of operations, especially where the currency is subject to intense political and other outside
pressure.
All our sales in 2024 were transacted in U.S.
dollars. The weakening of the U.S. dollar relative to foreign currencies can negatively impact our operating profits, through higher unit
costs. Changes in currency exchange rates may also affect the relative prices at which we and our competitors sell products in the same
market. There can be no assurance that the U.S. dollar foreign exchange rates will be stable in the future or that fluctuations in such
rates will not have a material adverse effect on our business, results of operations, or financial condition.
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 1990’s. As such, our stock transfer agent requires
required a legal opinion as well as other paperwork
to lift restrictive legends from stock certificates for non-affiliated as well as affiliated
shareholders. TheAs a former shell company
during the period when the Company was an operating company, the restrictive legends cancould 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 willwould not permanently remove
restrictive legends on stock certificates
held by shareholders. absent registration of the shareholder’s shares of common stock
under the Securities Act. This
status may makemade our common stock even more unappealing to investors and potential purchasers and more
difficult to sell or trade.
“Affiliated shareholders” are generally Company officers, directors, and holders of more than 10% of the issued shares
of the Common Stock.
The Company’s 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 Company’s Common Stock a highly risky investment unsuitable for investors who require liquidity in an investment and cannot afford the total loss of investment.
The Company’s 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.
The Company’s operations,
whether in consumer products or HFS business, 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 or harm to people or the environment. While all of the Company’s corporate operations are located in the United
States, the Company has used and may use Chinese and Thailand contract manufacturers, and if a disease spreads sufficiently
to cause a pandemic (or to cause the fear of a pandemic to rise) or governments regulate or restrict the flow of labor or products
or impede the travel of Company personnel, the Company’s ability to access these foreign contract manufacturers for its
Connected Chef licensing program could be materially and adversely affected. Epidemics and pandemics can cause the failure
of companies engaged in businesses, like the HFS business, that are open to and depend on the willingness of the public to use
public facilities. Natural disasters can damage or destroy HFS facilities and deprive the operator of revenues as well as imposing
potentially significant liabilities.
Our
ability to execute on our long-term
business development strategies depends, in part, on successfullylocating, executingconsummating the acquisition
or development of a new business line, which is in turn dependent on strategicsecuring growthadequate initiativesand inaffordable keyfunding. areas,If suchwe asacquire or
develop a new business, and no assurances is given that we can acquire or develop a new business, then our Connectedlong-term Chefstrategy
licensing program and HFS business. Our growth in these areas depends on ourobtaining abilityadequate, toaffordable successfullyworking implement the HFS
business line and license the Connected Chef product. Our long-term strategy depends oncapital, 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.
If we fail to adequately protect intellectual
property rights, competitors may manufacture and market similar products, which could adversely affect our market share and results of
operations.
We rely on trademark, trade secret, patent and
copyright laws to protect our intellectual property rights. Our trademarks are of material importance to our business and are among our
most important assets. Accordingly, our future success may depend, in part, upon the goodwill associated with our trademarks and brand
names. We own a number of patents; patent applications and other technology which we believe are significant to our business.
For any Connected Chef products made
in China and Thailand, we would face risks that our proprietary information may not be afforded the same protection in China as
it is in countries with well-developed intellectual property laws, and local laws may not provide an adequate remedy in the event of
unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine
the scope of our proprietary rights in China, and failure to obtain or maintain trade secret protection could adversely affect our competitive
business position. We cannot be sure that these intellectual property rights will be maximized or that they can be successfully asserted.
There is a risk that we will not be able to obtain and perfect, or maintain our own intellectual property rights or, where appropriate,
license intellectual property rights necessary to support new product introductions. We cannot be certain that these rights, if obtained,
will not be invalidated, circumvented or challenged in the future, and we could incur significant costs in connection with legal actions
to defend our intellectual property rights.
Even
if such rights are obtained in the United States, the laws of some of the other countries in which our products are or may be sold do
not protect intellectual property rights to the same extent as the laws of the United States. If other parties infringe our intellectual
property rights, they may dilute the value of our brands in the marketplace, which could diminish the value that consumers associate
with our brands and harm our sales. The failure to perfect or successfully assert our intellectual property rights could make us less
competitive and could have a material adverse effect on our business, operating results, and financial condition.
There
may be emerging, or new technologies patented by others. These new technologies may be critical to competing in a product niche, especially
one like the emerging smart devices in smart home industry. We may be unable to license or affordably license new technologies owned
by others and critical to competing in the product niche.
Management's Discussion & Analysis (MD&A)
New heading “Net Loss Before Income Taxes”
Largest changes
Cash used in operating activities was approximatelysee in full comparison$290,000$283,000 in20242025 compared with approximately$614,000$290,000 in2023.2024. The cash used in operating activities in20242025includedwere related to essential operating expenses as thenegativeCompanycashreduced operating costs as much as possibleimpactduringof 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 $141,000.2025.
“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.”see in full comparison
“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. …”see in full comparison
During the year ended December 31,see in full comparison2024,2025, the Company used cash in operations of approximately$290,000$283,000 and generated net operating losses of$996,000.$1,071,000. As of December 31,2024,2025, the Company had working capital deficit of$144,755$459,069 and an accumulated deficit of$11,784,360.$12,679,768. The Company’s cash balancedecreasedincreased by approximately$20,000$23,000 from$36,000 as of December 31, 2023, to$16,000 as of December 31,2024.2024, 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 and2023no revenues in 2025, the Companyinitiated an expense mitigation plan thatreduceddiscretionary spending including travel, and trade shownon-essential expenses,deferred executive management compensation, and closeddissolved the Hong Kongoperation.operation, and fully impaired the goodwill of $773,165 during 2025.
“Capstone Companies, Inc. (“Company” or “CAPC”) is a public holding company organized under the laws of the State of Florida. The Company is a leading designer, manufacturer and marketer of consumer inspired products that simplify daily living through technology. Over the past decade, the Company’s various product lines have been distributed globally including consumer markets in Australia, Japan, Korea, North America, South America, and the United Kingdom. The primary operating subsidiary is Capstone Industries, Inc. …”see in full comparison
Full comparison: every changed paragraph (58)
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 licensee’s 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 Company’s 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 Company’s focus is to acquire or start a new business line and during the ‘no shop’ period, the Company’s 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.
Total
net revenue for the year ended December
31, 2024,2025, decreased 25%100% from $143,269 to $143,269$0 as compared to $192,176 in the same period of last year.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 compared to $1,634,854 for the year 2023.2024. The Company had an estimated net tax (benefit) expense provision in 2024
2025 and 20232024 of approximately ($100,000)$195,958 and $35,000,$124,370, respectively.
Overview
Capstone Companies, Inc. (“Company”
or “CAPC”) is a public holding company organized under the laws of the State of Florida. The Company is a leading designer,
manufacturer and marketer of consumer inspired products that simplify daily living through technology. Over the past decade, the Company’s
various product lines have been distributed globally including consumer markets in Australia, Japan, Korea, North America, South America,
and the United Kingdom. The primary operating subsidiary is Capstone Industries, Inc. (“CAPI”), a Florida corporation located
at the principal executive offices of the Company. Capstone International Hong Kong, Ltd., or “CIHK”, was established to expand
the Company’s product development, engineering, and factory resource capabilities. With the 2021 shift of manufacturing to Thailand
from China, the CIHK operation was dormant. The Company has a history of exploiting technologies in areas of induction charging, power
failure control, security and home LED lighting products and most recently has entered the electronics market with its introduction of
Capstone’s 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.
The Company’s focus through
2017 was the integration of LEDs into most commonly used consumer lighting products in today’s home and the resulting
LED lighting products was the Company’s initial consumer product line. The LED category has matured and is no longer
the innovative “must have” consumer product as in previous years, as such, revenues for the LED product line have
declined significantly in 2023. The Smart Mirror failed to replace the LEG lighting products as the new product line. The
Connected Chef is the Company’s effort to establish business in an emerging segment that is intended for future revenue
growth.
The Connected Chef, a purpose-built
kitchen tablet with an accessory platform to accommodate food prep accessories such as a cutting board. The Connected Chef has Google
mobile service allowing for pre-installation of specific Google applications including Playstore, voice assistant, YouTube to
name those highly recognized. The Connected Chef was ready for formal introduction in quarter four of 2023, and the Company began
marketing the Connected Chef tablet to appliance manufacturers and distributors. The ability of the Company to promote any new,
related “connected” consumer products was dependent on securing adequate, affordable and timely funding from lenders
and investors. Due to the lack of orders and funding, the Connected Chef was not in production in 2024.
The Company developed and commenced
development of the HFS business in 2024 as the long-term strategic plan and business line. Company has not acquired or internally
developed a HFS facility in 2024.
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. 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.
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
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 recognizerecognized 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.
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.
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.
Our
gross profit has and will continue to bebeen affected by a variety of factors, including average sales price for our products, product mix, promotional
promotionalallowances, allowances,and our ability to reduce product cost fluctuations in the cost of our purchased components. See “Risk
Factors”
above in Item 1A.
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 employee’s compensation, product development, professional fees, and insurance.
Operating expenses include sales and marketing expenses,
consisting of sales representatives’ commissions, advertising, and costs related to employee’s compensation. In addition,
operating expensed includes charges relating to product development, office and warehousing, accounting, legal, and insurance.
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.
For the year ended December 31, 2024,
net revenues were $143,269, a decrease of 25% from $192,176, in fiscal 2023.
Sales reductions for anticipated discounts,
coupons, allowances and other deductions are recognized during the period the related revenue is recorded. The reduction of accrued allowances
is included in net revenues and amounted to approximately $850 and $17,000 for the years ended December 31, 2024, and 2023, respectively.
All
sales were domestic for 2024 and 2023.2024.
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.
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.
In
2024, fiscal 2024sales and 2023,marketing expenses were approximately $17,000. In 2025, the Company did not incur sales and marketing expenses
wereas approximatelythe $17,000Company anddid $76,000not respectively,have aan reductionoperating ofproduct $59,000 or 77%.line. 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.12%.
For
the years ended December 31, 2024,
2025 and 20232024, compensation expenses were approximately $139,000$0 and $469,600,$139,000, respectively, a reduction
of $330,000$139,000 or 70%. As a percent of
net revenues, 2024 expenses were 97.2% as compared to 244.4% in 2023.100%. The Company continued to reducereduced the workforce and the CEO and Directors are not being compensated as a result of not
having an active product line during 2024.2025.
For fiscal 2024,
2025, professional fees were approximately
$275,000 $197,000 compared to $426,200$275,000 in 2023,2024, a reductiondecrease of $151,200$78,000 or 36%.28%. As a percent of
net revenuerevenue, 2024 expenses were 192.6%192.6%. as
comparedThe todecrease 221.8%was indriven 2023.by Inreduction 2024,of consulting fees weredown approximatelyfrom $97,000,$98,000 to zero for
2025 as the Company did not have an operating product line during 2025, offset by a decreaseslight ofincrease $93,000, compared to $190,000 for 2023.
Accounting,in legal and otheraccounting expenses were $178,000, a decrease of $197,600 from $235,700 in the prior year.fees.
For
the years ended December 31, 2024,2025, and 2023,2024, product
development expenses were approximately $6,000$2,000 and $101,000,$6,000, respectively,
a decrease of $95,000$4,000 or 94%.66%, In 2023as the Company invested
$79,000did innot thehave developmentan of the Connected Chef and spent $22,000 in Smart Mirror development. In 2024, the Company maintained theoperating product
certifications forline theduring Connected Chef.2025.
For fiscal 2024
2025 and 2023,2024, other general and
administration expenses were approximately $124,000$99,000 and $296,000,$124,000, respectively, a decrease of $172,000
$25,000 or 58%.21%. As a percent to revenue,
other general and administrative expenses were 86.9%0% as compared to 154.2%86.9% in 2023.2024. The directors
and officers insurance decreased
in 2024 from $114,000$20,000 in 20232025 to $71,000$49,000 aand $43,000 or 38% decrease. As the Company did not have an active product line during the last
half of 2024, we discontinued the product liability insurance, a decrease of $18,000. Travel expenses decreased from $12,000 in 2023
to $1,000 in 2024. Rentdepreciation expense decreased from $96,000 in 2023$5,000 to $2,500$11,000 inas 2024.the These reductions are a resultCompany
disposed of the cost reduction
strategies taking by Management to reduce operating overhead as much as possible.equipment.
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.
For
the years ended December 31, 2024,2025, and 2023,
2024, total operating expenses were approximately $1,000,000$1,070,000 and $1,370,000,$1,100,000, respectively.
This represents a $370,000$30,000 or 27.0%3% decreaseincrease over
fiscal year 2023.2024. The primary driver for the year to year consistency is the impairment
expense recorded in both 2025 and 2024.
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.
For the year ended December 31, 2024, the operating
loss was approximately $996,000 as compared to $1,634,000 in 2023, a loss decrease of $737,000 over 2023.
For fiscal 2024 other income was $4 compared
to $77,106 in 2023, a decrease of $77,102 over 2023. The other income for the year ended December 31, 2023, resulted from $49,000
in employee retention tax credit received under Cares act 2020-2021 coupled with insurance premium refunds and insurance payouts on damage
freight claims.
Interest
expense for 20242025 amounted to approximately
$90,000 $27,000 compared to $104,000$90,000 in 2023,2024, a decrease of $14,000$63,000 or 13%,70%, due to the cancellation
of debt and issuance of preferred B-1 stock.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.
For
the years ended December 31, 2024,2025, the
net tax expensebenefit for income tax was estimated at $100,000$196,000 compared to a net tax expense benefit
of $35,000$125,000 in the same period 2023.2024.
Net Loss Before Income Taxes
Net Loss
For
fiscal 20242025 and 20232024 net loss before taxes
was approximately $1,087,000$1,116,000 and $1,661,000,$1,087,000, respectively, a net loss decreaseincrease of approximately $578,000
$29,000 over the previous
year due to the reasons summarized above.
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 20252026 through licensing arrangements with an appliance or other condumerconsumer 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 itsa Connectedstrategic Chefpartner licensingis business and/or HFS business establish revenue generating
operations.found. The Company may also
require additional funding to cover the costs of manufacturing Connected Chef product underif certainthe Company is able to obtain a licensing
licensingarrangement arrangements.in 2026.
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.business.
Short
Term Debt – notes payable with related
parties –: Related to working capital funding.
During
the year ended December 31, 2024,2025, the
Company used cash in operations of approximately $290,000$283,000 and generated net operating losses
of $996,000.$1,071,000. As of December 31, 2024,
2025, the Company had working capital deficit of $144,755$459,069 and an accumulated deficit of $11,784,360. $12,679,768.
The Company’s cash balance
decreased increased by approximately $20,000$23,000 from $36,000 as of December 31, 2023, to $16,000 as of December 31, 2024.2024, 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 2023no
revenues in 2025, the Company initiated an expense mitigation plan that reduced discretionary spending including travel, and
trade shownon-essential expenses, deferred executive management compensation, and closeddissolved the Hong Kong operation.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.
The Company is actively seeking alternative sources
of liquidity, including but not limited to accessing the capital markets, strategic partnerships, or other alternative financing measures.
but has been unable to secure unrelated, long-term funding or secure other sources of liquidity. As stated, Company’s low
market price for its common stock and poor financial condition and performance hinder these efforts.
Besides the efforts to license the
Connected Chef kitchen appliance product, the Company is seeking to establish revenue generating operations in the HFS business
by internal development of HFS operations or acquiring or being acquired by an existing, operating HFS company. Management
is closely monitoring its operations, liquidity, and capital resources and is actively working to minimize the current and future
impact of this unprecedented situation.
DirectorChairman
of the Board, and former Chief Executive
Officer, Stewart Wallach, has funded working capital sincefrom 2022 through 2025 as the Company navigates
navigated these challenges. Total working capital
note proceeds received asthrough 2024 were $672,500 and were settled for conversion
of thedebt dateinto ofPreferred thisStock, filingSeries are $672,500.B-1. Coppermine has funding working capital beginning
insince 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.$530,000. Coppermine has committed
to lending a total of $485,163$558,191 in working capital funding through SeptemberDecember 30,31, 2025.
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 2025.2026.
Cash
used in operating activities was approximately
$290,000 $283,000 in 20242025 compared with approximately $614,000$290,000 in 2023.2024. The cash used in
operating activities in 20242025 includedwere related to essential operating expenses as the negativeCompany cashreduced operating costs as much as possible
impactduring 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 $141,000.2025.
There was no cash provided by investing activities for 2025 or 2024.
Cash provided by in investing activities in
2024 was $0 compared to cash used in investing activities of $42,970 in 2023. The Company finalized production of the Connected Chef during
2023 and purchased the product mold for future manufacturing. Future capital requirements will increase to fund future mold and tooling
if the Company expands the Connected Chef manufacturing.
Cash
received and used inby financing activities for
the years ended December 31, 2024,2025, and 2023,2024, was approximately $269,000$306,000 and $632,000,$269,000, respectively.respectively,
and Duringrelated 2023, the Company received
$632,000 in working capital. In 2024, the Company received $269,000 into working capital fundingproceeds from related parties.
We
have sellhistorically sold all of our products in U.S. dollars
and pay for all of our manufacturing costs in U.S. dollars.
We
have not declared or paid any cash or other
dividends on shares of our Common Stock in the last eight years,Stock, and we presently have no intention of paying
any cash dividends
on shares of our Common Stock.
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.
We
provide our customers with limited rights of return for non-conforming product warranty claims. As a policy, the Company does not accept
product returns from retail customers, however occasionally as part of a customers in store test for new product, we may receive back
residual inventory.
Sales reductions for anticipated discounts,
promotional and marketing allowances, defective warranty claims, and other deductions are recognized during the period the related revenue
is recorded. The Company may be subject to chargebacks from customers for negotiated promotional allowances, that are deducted from open
invoices and reduce collectability of open invoices. For the years ended December 31, 2024, and 2023, the Company had processed
approximately $0 and $17,000, respectively for such allowances.
Accrued
liabilities contained in the accompanying consolidated balance sheets includehas historically included accruals for estimated amounts
of credits to be issued
in future years based on potentialoperating product warranties, compensation, benefits, marketing allowancesexpenses and other liabilities.
The
effective tax rate for the years ended
December 31, 2024,2025, and 2023,2024, respectively, was 11.44%17.56% and (2.10%)11.44% and the statutory tax
rate was 25.3% in 2025 and 23.5% in 2024 and 23.82% in 2023.2024.
What changed in the latest 10-Q
Risk Factors
Largest changes
“The No Shop Period expires as of June 2, 2026. Neither the Company nor eBliss have any obligations in respect of discussion of possible Transactions during or after the No Shop Period. Further, eBliss has no restrictions during the No Shop Period or afterwards on pursuing third party alternatives to a Transaction with the Company. eBliss may decide to pursue third party opportunities instead of considering or pursuing any Transactions with the Company.”see in full comparison
The Company has insufficient revenues to support its basic operating overhead and relies on funding from Coppermine under the Coppermine Note (as most recently amended on January 5, 2026), together with the proceeds of the eBliss Note funded on March 4, 2026, to meet basic operatingsee in full comparisonoperatingand overhead expenses through fiscal 2026. The Company may be unable to sustain operations beyond fiscal 2026 without continued financialfinancialsupport from Coppermine, additional proceeds beyond the eBliss Note, or another third-party funding source, whether debt, equity, or both. There can be no assurance that the Company can obtain sufficient funding from Coppermine, under the eBliss Note, or from any new funding sources to sustain operations beyond the end of fiscal 2026. The financial difficulties of the Company severely hamper efforts to acquire, develop, launch, promote, sustain or otherwise commercially exploit any new business line, or to attract potential acquisition candidates or candidates for other alternativetransactions, including the e-mobility opportunities being explored under the Note’s 90-day No-Shop Period, which commenced on March 4, 2026.transactions. We have not obtained any commitment from any other source for additional funding or entered into any binding agreements for development or acquisition of a new business line as of the date of the filing of this Form 10-Q.
Full comparison: every changed paragraph (6)
You
should carefully consider the “Risk Factors” disclosed under “Item 1A. Risk Factors” in our 2025 Annual Report
(as amended or revised by the Risk Factors set forth in this Form 10-Q reflecting the worsening financial condition of the Company in
2026), in disclosures and risks described in the section entitled “StatusNature of NoBusiness” Shop Period and Related Discussions”
on page 9 of this Form 10-Q.
You should be aware that these risk factors and other information may not describe every risk facing
our Company. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial also may materially
and adversely affect our business,
financial condition and/or operating results. The Company cannot foresee or anticipate changes in circumstances and resulting emergence
of risk factors affecting
the Company.
The
Company has insufficient revenues to support its basic operating overhead and relies on funding from Coppermine under the Coppermine
Note (as most recently amended on January 5, 2026), together with the proceeds of the eBliss Note funded on March 4, 2026, to meet basic
operating operating
and overhead expenses through fiscal 2026. The Company may be unable to sustain operations beyond fiscal 2026 without continued
financial financial
support from Coppermine, additional proceeds beyond the eBliss Note, or another third-party funding source, whether debt, equity,
or both. There
can be no assurance that the Company can obtain sufficient funding from Coppermine, under the eBliss Note, or from any
new funding sources to
sustain operations beyond the end of fiscal 2026. The financial difficulties of the Company severely hamper efforts
to acquire, develop,
launch, promote, sustain or otherwise commercially exploit any new business line, or to attract potential acquisition
candidates or candidates
for other alternative transactions, including the e-mobility opportunities being explored under the Note’s 90-day No-Shop Period,
which commenced on March 4, 2026.transactions. We have not obtained any commitment from any other source for additional
funding or entered into any
binding agreements for development or acquisition of a new business line as of the date of the filing of
this Form 10-Q.
The
No Shop Period expires as of June 2, 2026. Neither the Company nor eBliss have any obligations in respect of discussion of possible
Transactions during or after the No Shop Period. Further, eBliss has no restrictions during the No Shop Period or afterwards on
pursuing third party alternatives to a Transaction with the Company. eBliss may decide to pursue third party opportunities instead
of considering or pursuing any Transactions with the Company.
If
funding sources are not available, or are inadequate or unwilling to fund operations beyond the funding currently provided under the
Coppermine Note (as amended) and the eBliss Note, or any new developed or acquired business line is not capable of generating sufficient
revenues revenues
in the future to sustain operations, we will be required to reduce operating costs even further from existing reductions, which
could could
further jeopardize any future strategic initiatives and business plans. Furthermore, uncertainty concerning our ability to continue
as as
a going concern may hinder our ability to obtain future financing. Continued operations and our ability to continue as a going concern
are dependent on our ability to obtain additional funding in the near future, whether to supplement, or to provide funding after fully
drawing, the amounts available under the Coppermine Note (as amended) and the eBliss Note, and thereafter, and there are no assurances
that such funding will be available to us at all, or will be available in sufficient amounts or on reasonable terms.
As
of the date of the filing of this Form 10-Q, the Company cannot assess or predict the impact of the Trump Administration’s trade
and tariff disputes and changes in the imposition of those tariffs, or of the armed conflict between U.S.A. and Israel with Iran and
related instability in the Middle East and resulting impact on the U.S.A.’s and Global economies on: (1) Company’s future
efforts, if any, to develop or acquire a new business line; (2) general economic conditions that may affect the ability of the Company
to obtain necessary working capital funding or business development-acquisition funding; (3) the willingness of third parties to enter
into and consummate any mergers-and-acquisitions transaction or any alternative transaction with the Company; or (4) global energy prices,
supply chains and capital markets, any of which could indirectly affect the Company’s prospective business partners, including
eBliss.partners. Uncertainty
about tariffs, the Iran conflict and resulting disruption of normal trade relationships and global markets is likely
to create the sort
of economic uncertainty and conditions that are likely to be adverse to the Company’s efforts to obtain additional
funding, develop
or acquire a new business or business line, or consummate any alternative transactions.
The
Company is uncertain about whether it will succeed in its various business development efforts (including eBliss) or obtaining necessary
funding in a timely
manner and on affordable terms, or at all. The lack of adequate working capital significantly hinders and may undermine
ongoing or future
business development efforts. There is also substantial uncertainty about the Company as a going concern and its ability
to operate beyond
2026.
Management's Discussion & Analysis (MD&A)
Removed heading “Sales and Marketing of Consumer Product Line”
Largest changes
Climate Change. With no current productsee in full comparisonline in 2025,line, the Companydidhas not experience any direct, material impact on business and financialconditionconditionsin 2025from pending or existing climate-change related legislation, regulations, and international accords in the U.S., the physical impactsimpactsof 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 forforInvestors, SEC Release Nos. 33-11275; 34-99678). On April 4, 2024, the SEC had imposed an administrative stay on enforcement of the ruleruledue to pending challenges in federal courts. The Eighth Circuit ordered that the litigation would be held in abeyance until such timetimeas 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.” On JuneMay 4,3, 2026, the U.S. Securities and Exchange Commission (SECreportedlyorsentCommission)to thepublishedWhiteaHouse’sproposedOfficewithdrawal ofManagementits climate-related disclosure rule that required registrants andBudgetpublicforcompaniesreview a proposaltoformallyprovideterminatestandardized,thedetailedclimateinformationrelatedaboutriskclimate-related risks, governance, and certain greenhouse gas emissionsrule.in SEC filings. This action would eliminate the pending disclosure framework rather than replacing it with an alternative set of climate-specific reporting requirements, reverting issuers to existing, principles-based disclosure obligations.
“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. …”see in full comparison
“During periods when the Company was producing consumer products, the Company established strict engineering specifications and product testing protocols with the Company’s 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. …”see in full comparison
“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 Company’s 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 country’s individual regulatory standards.”see in full comparison
Even if a new business or operation is acquired or developed, there can be no assurance that it will produce revenues sufficient to sustainsee in full comparisonsustaincorporate operations. No assurances can be given that any new management members or additional funding by Coppermine or eBliss, which additional funding is not anticipated by the Company, will in fact result in a new business line or operation for the Company or cover all future operating expenses of the Company through 2026 or into 2027, or support any new business line or product or services. The Coppermine Note, as most recently amended on January 5, 2026, matures December 31, 2026, and Coppermine has committed to lending a total of $558,191 in working capital funding through December 31, 2026. In addition, on March 4, 2026, the Company issued the eBliss Note, a $250,000 unsecured working capital loan from eBlissGlobal, Inc.that includes a 90-day ‘no shop’ provision (with eBliss having exclusivity for the first 60 days).IfTheCoppermine90-daydoes‘nonotshop’provideperiodadditionalexpiredfundingon or about June 3, 2026, but a ‘no shop’ periodbeyondwasitsimposedcurrentoncommitment,both companies under theNoteLetterproceedsofproveIntent,insufficient,which ‘nosuperiorshop’third-partyperiodproposalwill expire on ordefinitiveabouttransactionSeptemberwith4, 2026,eBlissunlessisterminatedconsummated,soonera new source of funding is not found, orby the CompanydoesandnoteBliss.developTherevenueLettergeneratingofoperationsIntentproducing sufficientexpiresworkingoncapitalAugustprior31,to2026. Otherwise, theendAugustof1,fiscal20262026,termination noticetheisCompanyeffectivewill need to obtain a new source of working capital funding to sustain operations and any efforts to developon oracquire a new business or business line in 2027. The Company does not have an alternative source of working capital funding to funding by Coppermine and eBliss as of the date of the filing of this Form 10-Q and is uncertainaboutwhetherSeptemberit4,can obtain any alternative funding or receive any additional funding from Coppermine or eBliss. As of the date of the filing of this Form 10-Q, there is no indication of any additional funding from Coppermine or eBliss.2026.
Full comparison: every changed paragraph (74)
This
Form 10-Q contains forward-looking statements that are contained principally in the sections describing our business as well as in
“Risk
Factors, and in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations”. These statements
involve known and unknown risks, uncertainties, assumptions and other factors which may cause
our actual results, performance, or achievements
to be materially different from any future results, performances or achievements
expressed or implied by the forward-looking statements.
All statements other than statements of historical facts contained, or
incorporated by reference, in this Form 10-Q, including, without
limitation, those regarding our business strategy, business
development efforts, financial position, funding prospects, results of operations,
plans, prospects, actions taken or strategies
being considered with respect to our liquidity position, valuation and appraisals of our
assets and objectives of management for
future operations, our ability to weather the impacts of the any pandemic or similar event, financing
opportunities, and future cost
mitigation and cash conservation efforts and efforts to reduce operating expenses and capital expenditures
are forward-looking statements. The efforts of the Company to develop or acquire a new business line to generate sustained or sustainable
statements.revenues have failed as of the date of the filing of this Form 10-Q and may not succeed in the future. The effort to develop or acquire
a new business line should not be construed as an indication of the prospects or likelihood of a new business line being developed or
acquired. The Company may be unable to overcome its lack of working and expansion capital and revenue flow to fund the development or
acquisition of a new business line. Further, any new business line may be unable to generate revenues sufficient to solve the Company’s
current financial condition. These risks and uncertainties include, but are not limited to, the factors described in the section captioned
“Risk Factors” in our 2025 Annual Report on Form 10-K. In some cases, you can identify forward-looking statements by terms
terms such as “anticipates”, “believes”, “could”, “estimates”,
“expects”, “intends”,
“may”, “plans”, “potential”,
“predicts”, “projects”, “should”,
“would”, “hope” and similar
expressions (including the negative and variants of such words). Forward-looking
statements reflect our current views with respect
to future events and are based on assumptions and are subject to various risks and
uncertainties. Given these uncertainties, a
reader of this Form 10-Q should not rely upon forward-looking statements as predictions of
future events or results or place undue
reliance on forward-looking statements. The forward-looking statements contained in this Form
10-Q are made as of the date of filing
this Form 10-Q. The Company assumes
no obligation to revise or update any forward-looking statements
for any reason, except as required by law. Examples of these risks,
uncertainties and other factors include, but are not limited, to
the impact of:
● Company may be unable to develop or acquire a new business line or operation that is able to fund the overhead necessary to maintain the Company as a public company into 2027. The Company’s efforts to develop or acquire a new business line have failed as of the date of the filing of this Form 10-Q and continued efforts to develop or acquire a new business line in 2026 may also be unsuccessful.
● The Company may be unable to restructure or resolve all or most of its debt obligations in general or in any transaction for acquisition of a new business or business line, or to fund production and promotion of any new product or business line.
The
challenge facing the Company is to acquire and fund a new business line, or to establish a new profitable product line or a services
business, before the cost of marketing and establishing a revenue generating business impose unsustainable financial burdens and losses
losses on the Company. Internal development of any new business line or product or services will require advance funding, which has not been
obtained as of the date of the filing of this Form 10-Q and may be unattainable
by the Company.
The
License Agreement for the Connected Chef was terminated by mutual agreement of the Company and Licensee during the first week of November
2025, as a result of the prospective Chinese OEM refusing to produce a product developed by an American company. Consequently, the Company
and Licensee ended the License Agreement during the first week of November 2025. The Company is not considering further efforts to license
the Connected Chef as of the date of the flingfiling of this Form 10-Q, but the Company may reconsider efforts to license the Connected Chef
if trade relations between the U.S. and China improve, or an OEM who does not require upfront money and located outside of China can
be located by the Company.
Even
if a new business or operation is acquired or developed, there can be no assurance that it will produce revenues sufficient to sustain
sustain corporate operations. No assurances can be given that any new management members or additional funding by Coppermine or
eBliss, which
additional funding is not anticipated by the Company, will in fact result in a new business line or operation for the
Company or cover
all future operating expenses of the Company through 2026 or into 2027, or support any new business line or product
or services. The
Coppermine Note, as most recently amended on January 5, 2026, matures December 31, 2026, and Coppermine has
committed to lending a total
of $558,191 in working capital funding through December 31, 2026. In addition, on March 4, 2026, the
Company issued the eBliss Note,
a $250,000 unsecured working capital loan from eBliss Global, Inc. that includes a 90-day ‘no
shop’ provision (with eBliss having exclusivity
for the first 60 days). IfThe Coppermine90-day does‘no notshop’ provideperiod additionalexpired fundingon or about June 3, 2026, but a ‘no shop’ period
beyondwas itsimposed currenton commitment,both companies under the NoteLetter proceedsof proveIntent, insufficient,which ‘no superiorshop’ third-partyperiod proposalwill expire on or definitiveabout transactionSeptember with4, 2026,
eBlissunless isterminated consummated,sooner a new source of funding is not found, orby the Company doesand noteBliss. developThe revenueLetter generatingof operationsIntent producing
sufficientexpires workingon capitalAugust prior31, to2026. Otherwise, the endAugust of1, fiscal2026 2026,termination
notice theis Companyeffective will need to obtain a new source of working capital funding
to sustain operations and any efforts to developon or acquire a new business or business line in 2027. The Company does not have an
alternative source of working capital funding to funding by Coppermine and eBliss as of the date of the filing of this Form 10-Q and
is uncertain about whetherSeptember it4, can obtain any alternative funding or receive any additional funding from Coppermine or eBliss. As of the date of the filing of this Form 10-Q, there is no indication of any additional funding from Coppermine
or eBliss.2026.
If Coppermine does not provide additional funding beyond its current commitment, the eBliss Note proceeds prove insufficient, no superior third-party proposal or definitive transaction with eBliss is consummated, a new source of funding is not found, or the Company does not develop revenue generating operations producing sufficient working capital prior to the end of fiscal 2026, the Company will need to obtain a new source of working capital funding to sustain operations and any efforts to develop or acquire a new business or business line in 2027. The Company does not have an alternative source of working capital funding to funding by Coppermine and eBliss as of the date of the filing of this Form 10-Q and is uncertain about whether it can obtain any alternative funding or receive any additional funding from Coppermine. Due to eBliss terminating the Letter of Intent, the Company believes that any additional funding from eBliss or any restricting of the debt owed eBliss is highly unlikely. As of the date of the filing of this Form 10-Q, there is no indication of any additional funding from Coppermine or eBliss.
The Company is a “penny stock” company under Commission rules and the public stock market price for our common stock is impacted by the lack of significant institutional investor and any primary market maker support. Investment in our common stock is highly risky and should only be considered by investors who can afford to lose their investment and do not require on demand liquidity. Potential investors should carefully consider risk factors in our SEC filings. The Company’s common stock lacks the primary market maker and institutional investor support to protect the public market from being unpredictable and volatile. Investors may not have liquidity or desired liquidity in our common stock as an investment. With the lack of any revenues and revenue generating operations, and lack of any funding covering anticipated future overhead, the inability of the Company to develop or acquire a new business line as of the date of the filing of this Form 10-Q, and the doubt as a going concern, any investment in the Company’s common stock is highly risky in terms of liquidity and risk of loss of investment.
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 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 eBliss Note. During the 90 days following
the funding of the principal
of the eBliss Note (“No Shop Period”), the Company willcould 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 willhad to cease any third party discussions for any Transactions for the No
Shop Period, except that the Company maycould 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 iswas 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. TheOn sixtyMay day14, period2026, the Company and
eBliss entered into a non-binding Letter of Intent (the No“LOI”) Shopwith Periodthe hasintent expiredto asexplore the possibility of a merger, other
business combination or similar corporate transaction between the firsttwo weekcompanies. ofThe MayLOI 2026contained a mutual ‘no shop’ provision
that supersedes the ‘no shop’ provision in the eBliss Note. The ‘no shop’ provision in the eBliss Note was to
expire on or about June 3, 2026. On July 8, 2026, the Company and eBliss entered into Amendment Number One to the LOI, extending the
‘no shop’ provision and the NoLOI’s Shopexpiration Perioddate expiresfrom as
ofJuly June31, 2,2026 to August 31, 2026. eBliss notified the Company
on August 1, 2026, that it was terminating the LOI, which terminates 35 days after the written notice. See Note 1 and Note 2 for further
information.
The
Company and eBliss have held preliminary discussions on a possible Transaction, but these discussions havedid not
resulted result in any agreement on the
terms and conditions of a Transaction.Transaction as of August 1, 2026, the date of eBliss termination notice for the LOI. The Company and eBliss
were may be
unable to reach any agreement for any Transactions and, as such, maythe two companies will not seek to consummate or pursue any Transactions.Transactions
as of the date of the filing of this Form 10-Q.
2025Product
Product Development Efforts. The following discusses efforts by the Company to develop a new product line in 2025over andthe inlast 2023few andyears. 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.
HFS
Business Development Efforts. The following section discusses Company’s efforts to develop a business line in the HFS industry
in 2025, which efforts did not produce a new business line or operation in fiscal year 2025 or in the first fiscal quarter of 2026. These
efforts have beenwere suspended in March 2026 for the 90-day ‘no shop’ period as described in “eBliss Note” above.above and
further suspended under the subsequent ‘no shop’ restrictions in the LOI. Upon expiration or earlier termination of the ‘no
shop’ provision in the LOI, the Company will no longer be restricted from soliciting or pursuing third-party transactions
with respect to the HFS business and may resume its HFS business development efforts. There can be no assurance that the Company will
resume such efforts, or that any resumed efforts will be successful.
E-Mobility
Business Development. In parallel with its HFS efforts, the Company iswas evaluating opportunities in the e-mobility industry, including
including the e-bike business, principally through the discussions with eBliss Global, Inc. during the 90-day ‘No Shop’
Period under the eBliss Note.eBliss. eBliss is a private Delaware corporation that is gearing up forcommenced production
of e-bikes for personal
transportation in Utica, New York in July 2026. The Company and eBliss are parties to a non-binding Letter of
Intent dated May 14, 2026, as amended July 8, 2026 (see Note 1), to negotiate a possible merger, other business combination or similar
corporate transaction between eBliss and the Company. There is no legally binding agreement, agreement in principle, or other non-binding agreement understanding
between the Company
and eBliss toon consummatethe essential terms of any merger, business combination, strategic relationship, joint venture or similar transactionTransaction as of the
dateAugust of1, 2026, the filingdate ofon thiswhich FormeBliss 10-Q.notified There can be no assurancethe
Company that anyeBliss was terminating the LOI. The discussions between the Company and eBliss willdid not result in
any agreement or commitment
for or consummation of any Transactions. As of the date of the filing of this Form 10-Q, there is no agreement, commitment or consent to terms and conditions
for any Transactions between the Company and eBliss and no agreement, commitment or consent may be reached by the Company and eBliss for
any Transactions.
Corporate
Status. The Company’s business activities were limited to business development efforts during the first quarterhalf of fiscal
2026. The
Company has no revenue generating business and no products in active commercialization as of the date of the filing of
this Form 10-Q.
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 beginning in 2024 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, and Coppermine has committed to lending a total
of $558,191 in working capital funding through December 31, 2026. In addition, on March 4, 2026, the Company issued the eBliss Note to
eBliss eBliss
Global, Inc. (“eBliss”), a $250,000 unsecured working capital promissory note that includes a 90-day ‘no shop’
provision (with eBliss having exclusivity for the first 60 days) during which the Company and eBliss will discuss a potential merger,
business combination, strategic relationship, joint venture or similar transaction. There is no legally binding agreement between the
Company and eBliss to consummate any such transaction as of the date of the filing of this Form 10-Q. See Note 32 — Notes Payable
for further information
regarding the Coppermine Note and the eBliss Note.Note and the LOI between the Company and eBliss. There is no assurance that funding from
Coppermine or eBliss
will extend beyond the second half of 2026.2026 or that either company will restructure its current loans to the Company.
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 and
operational overhead into the latter half of 2026.
The
Company does not currently have an operating product line. The net loss for the threesix months ended MarchJune 31,30, 2026 was $92,269$177,193 as compared
to $111,079$187,612 in 2025. During the threesix months ended MarchJune 31,30, 2026 and 2025 the Company used cash in operating activities of approximately
$77,082$139,526 in 2026 and $98,989$156,611 in 2025. The decrease in net cash used in operations primarily relates to a decrease in professional fees
and other general and administrative expenses compared to the prior year period, in an effort to operate as efficiently as possible under
a low cost strategy while the Company explores strategic business opportunities.
As
of MarchJune 31,30, 2026, the Company has negative working capital of $551,338$636,262 and an accumulated deficit of $12,772,037.$12,856,961. The Company’s
cash balance increased by approximately $218,000$156,000 from $39,000 as of December 31, 2025 to approximately $257,000$195,000 as of MarchJune 31,30, 2026.
The increase was due to the working capital note proceeds from both eBliss and Coppermine in the first quarter of 2026. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern.
Besides
the efforts to license the Connected Chef kitchen appliance product, which effort has not successfully commercialized the Connected Chef
product or resulted in any production of that product as of the date of the filing of this Form 10-Q, the Company is seeking to establish
revenue generating operations in the HFS business by internal development of HFS operations or acquiring or being acquired by an existing,
operating HFS company, and is also evaluating opportunities in the e-mobility industry, including the e-bike business, principally through
the discussions with eBliss Global, Inc. during the 90-day ‘no shop’ period under the eBliss Note. Management is closely
monitoring its operations, liquidity, and capital resources and is actively
working to minimize the current and future impact of this
unprecedented situation.
The
lack of adequate working capital and lack of tangible assets to attain asset based funding significantly hindershinder and may undermine ongoing
or future business development efforts. There is also
substantial uncertainty about the Company as a going concern and its ability to
operate beyond fiscal 2026.
The
Company’s business operations in 2024 and 2025 wereconsisted of the HFS business development efforts and third-party licensing of the
Connected Connected
Chef. The Company’s long-term business strategy of the Company in 2025 was focused on the HFS business developmentdevelopment, with the third-party licensing
of the Connected Chef as a secondary business. The implementationImplementation of thethis long-term business strategy depends on having adequate working
capital until
revenue flow from new business operationsoperations, or revenuesrevenue from Connected Chef productproducts, replaces third partythird-party funding as the Company’s principal
meanssource of funding for overhead. The failure of the Connected Chef licensing effort for the Connected Chef in late 2025 hasleft leftthe Company with only its business
development development
efforts. WeThe haveCompany thirdhas party funding forfunded basic operational overhead,overhead through the eBliss Note and the Coppermine Note (as amended), into thefor
latter half of fiscal 2026. WeThe Company may be unable to achieve sufficient working capital, when and in the amounts required, to meet operational overhead
overhead beyond fiscalDecember 31, 2026. WeAs 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-Q.10-Q, Wethe wereCompany has not achieved adequate funding for all anticipated
working capital needs for fiscal year 2027 and has not been able to secure adequate funding for the internal development andor 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 Company’s 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 Coppermine’s business approach. The Company’s 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. Thehe Company believes that identifying
identification of a suitable acquisition target or a strategic alliance with an established HFS industry business may potentiallyenhance enhance
theits ability of the Company to attract funding
for acquiring or establishing a new HFS businessbusiness, (eitherwhether internally or through an acquisition).acquisition. As described in Note 1, on May 14, 2026
Duethe toCompany and eBliss entered into a non-binding Letter of Intent containing a mutual ‘no shop’ provision that supersedes
the ‘no shop’ provision in the eBliss Note,Note; that provision, as extended, runs through August 31, 2026. On August 1, 2026,
eBliss notified the Company that it was terminating the LOI under the 35-days’ prior written notice termination provision. The
Company’s HFS industry business development efforts, which have not succeeded
to date, areremain suspended forduring this period. Upon
expiration or earlier termination of the 90-dayexclusivity ‘period, the Company will no shop’longer period.be restricted from soliciting or pursuing third-party
proposals with respect to the HFS business and may resume its HFS business development efforts. There can be no assurance that the Company
will resume, pursue, or successfully complete any HFS-related business opportunity, or that adequate financing will be available to do
so.
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.operation or the likelihood of the Company developing or acquiring a business in the
HFS industry. 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-Q 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 iswas suspended for the 90-day No Shop Period under the eBliss Note.Note until June 3, 2026, and then further suspended under the ‘no
shop’ provision of the LOI until August 31, 2026, the expiration date of the LOI and ‘no shop’ provision. Otherwise,
the August 1, 2026, termination notice from eBliss terminates the ‘no shop’ provision and the LOI as of September 4, 2026.
The Company intends to pursue opportunities in HFS Industry upon expiration of the LOI ‘no shop’ period.
Connected
Chef Product. With respect to 2025 efforts to develop the Connected Chef product into a new product line, the Company regards the following
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 is a potential strength if the Company decides
and is able to launch
a new product or services business.business as part of any new business line, including an HFS business line. Selling branded merchandise is a
common part of HFS operations.
The
Company’s 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.
The Company’s 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 management’s 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 product’s design and utility through
a combination of sourcing quality components, stringent manufacturing quality control and conducting rigorous third-party testing. The
Company’s history of developing cost-competitive products without compromising quality standards iscould be a competitive strength
of the Company if product development, promotion and sales are part of the
Company’sany consumernew products.business line.
As
of the date of the filing of this Form 10-Q report,Report, the Company’s working capital constraints hinder full implementation of the
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-Q report and caused the Company to pursue the licensing program in 2025.Report.
With
respect to the Connected Chef, and in the past with any new product line, the Company’s 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 continue
to lack
the financial resources or ability to license, develop or acquire new technologies or functionalities in demand by consumers,
which failure may
undermine the commercial viability of Connected Chef. Further, the Company’s 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 wereare currently beyond the available capabilities
and resources of the Company to
develop in 2025 or 2024.Company.
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. It also lacked and lacks the financial,
marketing and technical resources to compete against competitors with greater
financial, distribution, marketing, and technical resources,
including greater brand recognition with consumers.
Strategic
Reviews. Like many companies, the Company conducts periodic strategic reviews where the feasibility of significant corporate transactions
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,line or source of sustained revenues, 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
any HFS business or e-mobilityother business development efforts or, if the Company elected to revise its licensing efforts, aggressively pursue
Connected Chef licensing.
eBliss was the sole e-mobility company identified by the Company in 2026 as a possible interested party to a transaction with the Company. With the termination of the LOI, the Company does not anticipate any future efforts to develop a new business line in the e-mobility industry, including the e-bike segment. The intended focus of the Company in 2026 will be the HFS industry due to potential opportunities in that industry for small companies, seeking to operate a facility or provide support services for a facility.
-
Connected Connected
Chef, a purpose-built kitchen appliance tablet, which is a unique form factor with Google GMS operating system, with an integrated
platform platform
for cooking accessories, i.e.: cutting board. The development effort for the Connected Chef has been suspended in the first fiscal quarterindefinitely
of 2026 due to failure of 2025 licensing arrangement and focus on business development efforts under the Note and its ‘no shop’
provision.arrangement.
2025Tariffs.
Tariffs. President Trump imposed aggregate tariffs of 20% on Chinese imports. These tariffs produced retaliatory tariffs from China on certain
certain U.S. imports. This trade dispute adversely impacted the Connected Chef product licensing business by hindering possible Chinese contract
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,
manufacturers, The Company’s 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-Q reportReport to estimate or project
the impact of the current
trade dispute and tariff hikes on the Connected Chef licensing business.
Sales
and Marketing of Consumer Product Line
The
Company had no sales during 2025. With respect to the sale of consumer products in 2024, the Company relied on direct promotion by Company’s
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.
In
the three months ended March 31, 2026, the Company had no major customers.
We
used social media platforms and online advertising campaigns to further grow the Company’s 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,platforms
(however, but the Company didhas not emphasizeactively pursued promotion or activelyuse utilizeof Social Media marketing in 20252026 due to the lack of a product or intoservice 2026:suitable
for Social Media promotion.
Consumer
Products. InThe termsCompany’s offormer theLED consumerlighting and Connected Chef product industry, the Companylines 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 Company’s
previous consumer products competedcompeting with products made by large multinationals with global operations as well as numerous othersmaller, smaller,specialized
specialized national or regional competitorscompetitors, who generally focus on narrower markets, products, or particular categories. Competitors
includedincluding Gentex Corporation, Seura Solutions, Inc., Magna International, Inc,Inc., AmazonAmazon, and Samsung
Electronics Co. Ltd. The Company discontinued these product lines in 2025 and currently has no operating product line. See the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for further information regarding these discontinued product lines.
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.
WithThe
respectCompany’s to past production of consumer products, the Company’sformer research and development operationsoperations, based in Florida and Thailand
haveThailand, designed and engineered many of the Company’s
discontinued consumer products, within collaboration from itswith third-party manufacturing partners,
software developersdevelopers, and Capstone U.S. engineering
advisers, advisers.and Theoutsourced Company outsources the manufacturemanufacturing and assembly of our products to a
select group of OEM manufacturers overseas. The Company discontinued these product
lines in 2025 and currently has no active product research, development, or manufacturing operations.
During
periods when the Company was producing consumer products, the Company established strict engineering specifications and product testing
protocols with the Company’s 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 Company’s 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 country’s individual regulatory standards.
Investments
in technical and product development are expensed when incurred and are included in the operating expenses..
The
Company did not experience any cybersecurity incidents for the threesix months ended MarchJune 31,30, 2026.
The
Company washas not engaged in production or manufacturing activities insince 2025.2023. 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 current product line in 2025,line, the Company didhas not experience any direct, material impact on business and financial conditionconditions
in 2025 from pending or existing climate-change related legislation, regulations, and international accords in the U.S., the physical impacts
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
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
rule due to pending challenges in federal courts. The Eighth Circuit ordered that the litigation would be held in abeyance until such time
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.” On
June May 4,3, 2026, the U.S. Securities and Exchange Commission (SEC reportedlyor sentCommission) to
thepublished Whitea House’sproposed Officewithdrawal of Managementits climate-related
disclosure rule that required registrants and Budgetpublic forcompanies review a proposal
to formallyprovide terminatestandardized, thedetailed climateinformation relatedabout riskclimate-related risks,
governance, and certain greenhouse
gas emissions rule.in SEC filings. This action would eliminate the pending disclosure framework rather
than replacing it with an alternative set of climate-specific reporting requirements, reverting issuers to existing, principles-based
disclosure obligations.
We
believe that there have been no significant changes to our critical accounting policies during the threesix months ended MarchJune 31,30, 2026, as
as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included
in our 2025 Annual Report.
Operating
expenses include salesprofessional fees and marketing expenses, advertising expensecompliance and costsregulatory related to consultant fees.expenses. In addition, operating expense
include charges relating to
office expenses, accounting, legal, and insurance.
Company
did not have an operating product line during the three and six month periodperiods ended MarchJune 31,30, 2026 or 2025.
The
Company made concerted efforts to reduce operating expenses during 2026 as the Company did not have a revenue generating product line
during the three and six month periodperiods ended MarchJune 31,30, 2026.
For
the three months ended MarchJune 31,30, 2026, and 2025, professional fees were approximately $67,000$51,000 and $78,000$42,000 respectively, aan decreaseincrease of
$11,000$9,000 or 14%,21%, which isrelates consistent withto the Company’stiming costof efficiencyprofessional strategyfees whileincurred pursuingduring possiblethe businesssecond opportunities.quarter of 2026, which are not forecasted
to occur during the second half of 2026.
For the six months ended June 30, 2026, and 2025, professional fees were approximately $119,000 and $121,000 respectively, a decrease of $2,000 or 2%, which is consistent with the Company’s cost efficiency strategy while pursuing possible business opportunities
For
the three months ended MarchJune 31,30, 2026, product development expenses were $0 as compared to $125$0 in 2025, as the Company did not have
a revenue
generating product line during the three month period ended MarchJune 31,30, 2026.
For the six months ended June 30, 2026, product development expenses were $0 as compared to $125 in 2025, as the Company did not have a revenue generating product line during the six month period ended June 30, 2026.
For
the three months ended MarchJune 31,30, 2026, other general and administrative expenses were approximately $15,000$20,000 as compared to $28,000 in
2025 for aan decrease of $13,000$8,000 or 48%29% which is consistent with the Company’s cost efficiency strategy while pursuing possible business
opportunities.
For the six months ended June 30, 2026, other general and administrative expenses were approximately $35,000 as compared to $56,000 in 2025 for a decrease of $21,000 or 37% which is consistent with the Company’s cost efficiency strategy while pursuing possible business opportunities
For
the three months ended MarchJune 31,30, 2026, and 2025, total operating expenses were approximately $82,000$71,000 and $107,000,$70,000, respectively, aan decreaseincrease
of approximately $25,000$1,000 or 23%,1%, as denoted above.
For the six months ended June 30, 2026, and 2025, total operating expenses were approximately $153,000 and $177,000, respectively, a decrease of approximately $24,000 or 13%, as denoted above.
CAPC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding CAPC (13F)
None of the 59 investors we track reported a position in their latest 13F.