ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2025

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

The condensed consolidated financial statements contained in this report are unaudited. In the opinion of management, the condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position as of June 30, 2025, and results of operations, stockholders’ equity and cash flows for the three and six months ended June 30, 2025 and 2024. All material intercompany accounts and transactions are eliminated in consolidation. These condensed consolidated financial statements and notes are presented in accordance with the rules and regulations of the SEC relating to interim financial statements and in conformity with U.S. GAAP. Certain information and note disclosures have been condensed or omitted in the condensed financial statements pursuant to SEC rules and regulations, although the Company believes that the disclosures made herein are adequate to make the information not misleading. The condensed unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2024 (the “2024 Annual Report”) filed with the SEC on March 17, 2025 and April 8, 2025, respectively.

The operating results for any interim period are not necessarily indicative of the operating results to be expected for any other interim period or the full fiscal year.

Liquidity and Going Concern

Liquidity and Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

As of June 30, 2025, the Company had negative working capital of $325,205, an accumulated deficit of $11,947,212, a cash balance of $41,777, short- term notes payable of $373,686 and $195,958 of long-term liabilities for deferred taxes. Further, during the six months ended June 30, 2025, the Company incurred a net loss of $187,612 and used cash in operations of $156,611.

These liquidity conditions raise substantial doubt about the Company’s ability to continue as a going concern. 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

On October 31, 2024 the Company signed an Unsecured Promissory Note with Coppermine Ventures, LLC (“Coppermine”), a private Maryland limited liability company based in Baltimore County, Maryland, of $125,914 to the Company. On January 29, 2025, the Company entered into an Amended and Revised Unsecured Promissory Note (“New Note”) with Coppermine. The New Note revised the October 31, 2024 note for an amended principal balance of $485,163 and amended the maturity date to December 31, 2025. The New Note is to provide for projected quarterly funding needs of the Company to pay for essential corporate maintenance expenses due in the first three fiscal quarters of 2025, necessary to meet the reporting and filing requirements under federal and state securities laws and regulations, maintenance of the quotation of the Company’s Common Stock on the OTC Markets Group QB Venture Market and maintenance of directors’ and officers’ insurance and basic management and accounting operations. The Company requests quarterly drawdowns from Coppermine and has received $361,469 of the $485,163 principal amount as of June 30, 2025. The amended principal amount is intended to provide sufficient working capital to maintain the corporate existence of the Company while the executive management continues efforts to develop or acquire a new business line or revenue generating operation. The New Note accrues interest at a simple annual rate of 7%. The New Note is not secured by collateral or any other secured interest and does not provide for any conversion of debt-to-equity securities or issuance of any securities. For consideration for the working capital loan, the Company signed a Management Transition Agreement on October 31, 2024.

Unless the Company succeeds in raising additional capital or successfully increases cash generated from operations, or finds and consummates an alternative transaction to improve its financial condition, management believes there is substantial doubt about the Company’s ability to continue as a going concern and meet its obligations over the next twelve months from the filing date of this Form 10-Q. Other than debt financing from Coppermine Ventures, LLC for basic operating capital, the Company has not raised any third-party funding for business development or acquisitions. The Company has not consummated an alternative transaction, such as the acquisition of a revenue generating operation or business, as of the date of the filing of this Form 10-Q. In the second fiscal quarter of 2025, the Company has expanded the scope of its search for alternative transactions to include potential acquisitions or strategic relationships with companies engaged in industries that are complementary to the health, fitness and social activities industry. The Company has also sought to generate revenues from its Connected Chef product through the licensing arrangement described in “Connected Chef Product Line” below. The licensing arrangement has not generated any revenues as of the date of the filing of this Form 10-Q. These financial statements do not include any adjustments that might result from the Company’s inability to continue as a going concern.

Nature of Business

Nature of Business

The Company has its principal executive offices in Deerfield Beach, Florida.

On April 13, 2012, the Company established a wholly owned subsidiary in Hong Kong, named Capstone International Hong Kong Ltd (“CIHK”), which provided support services such as engineering, new product development, product sourcing, factory certification and compliance, product price negotiating, product testing and quality control and ocean freight logistics for the Company’s other subsidiaries. With the shift of manufacturing to Thailand from China, the CIHK operation was downsized and then became dormant as of March 2022.

LED Lighting Product Line. The Company’s focus through 2017 was the integration of LEDs into most commonly used consumer lighting products in today’s home. 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 from previous years. From time to time, the Company receives orders from one distributor which the Company will fulfill.

Smart Mirror Product Line. The Connected Surfaces was the Company’s effort to establish business in an emerging segment that was intended for future revenue growth. The Connected Surfaces Smart Mirror products did not achieve significant sales, therefore all inventory was expensed as of December 31, 2023 and the remaining inventory on hand was liquidated as of June 30, 2024.

Connected Chef Product Line. During 2023, the Company developed the Connected Chef (“Connected Chef”), a purpose-built kitchen tablet with an accessory platform to accommodate food prep accessories such as a cutting board. The Connected Chef has Google mobile service allowing for pre-installation of specific Google applications including Playstore, voice assistant, and YouTube. The ability of the Company to promote any new, related “connected” consumer products was dependent on securing adequate, affordable and timely funding from lenders and investors, which the Company was unsuccessful in obtaining over the last few years. On March 21, 2025, the Company executed a License Agreement with a company (“Licensee”) based in the United Kingdom. The Licensee received a limited, exclusive, non-transferable, worldwide license to promote, market, sell, distribute, produce and manufacture Connected Chef. Under the License, the Company would receive a license fee of $15 for each Connected Chef sold and received by a buyer. Promotion, marketing and sale of the Connected Chef is subject to finalizing production arrangements with the contract manufacturer of the Connected Chef. The term of the License is 5 years plus one (1) year, post-termination extension to permit sell off of any inventory. As of the date of this Form 10-Q filing, there have been no sales of the Connected Chef and no license revenue generated for the Company.

Health, Fitness and Social Industries. During 2024, the Company commenced its business development efforts for a business line or software development project focused on year-round health, fitness and social activities (this business line being referred to as “HFS” or “HFS business”) which development effort has been expanded in the second quarter of fiscal year 2025 to include software development. Due to the popularity of sports like pickle ball and flag football, health, fitness and social activities at dedicated facilities are being developed nationwide by numerous companies. Pickle ball has been the fastest growing sport in America since 2021 and its popularity is based in large part in that it can be played by all fitness active demographics groups (e.g. children, adults and elders (since it does not require the skills and athleticism of tennis or other physically demanding sports)) and can be played as a recreational or competitive amateur/collegiate and professional sport. Professional pickle ball is increasingly popular sports entertainment. A typical HFS facility offers sports like indoor and outdoor pickle ball, padel and often another recreational sport or sports (e.g. martial arts, swimming, basketball, racquetball, tennis) with a food-drink-entertainment area. Some HFS facilities add field sports like soccer, lacrosse, and football (traditional and flag) in order to host tournaments, local school competitions, or recreational league play. The HFS facilities typically seek individual, family and group memberships charging periodic fees as well as additional fees for special offerings or events. Special events consist of children summer camps, birthday parties, corporate employee outings, or corporate sponsor events promoting their specific products (e.g. drinks, cooler products, drink ware, sporting equipment, apparel) through branding which may be performed in house by the HFS facility.

In furtherance of the Company’s efforts in HFS business development, the Company entered into a Management Transition Agreement (“MTA”), dated October 31, 2024, with Coppermine Ventures, LLC, a private Maryland limited liability company, (“Coppermine”) to identify and nominate a chief executive officer and two board members for the Company as a management team to focus on development of the health, fitness and social business line. Coppermine operates a successful and growing health, fitness and sports business in the State of Maryland. On December 4, 2024, the Company employed an experienced founder and manager of an established health, fitness and social company, Alexander Jacobs, as Company’s Chief Executive Officer, in order to lead the HFS business development. Mr. Jacobs is the founder, senior executive and owner of Coppermine. On January 20, 2025, the Company’s Board of Directors (“Board”) appointed Brian Rosen, a nominee of Coppermine, as a non-employee director of the Company. Mr. Rosen has a business relationship with Coppermine. The Company also appointed Warner Session, a Washington, D.C. real estate lawyer and lobbyist, as an independent director to the Board on January 9, 2025, in order to assist in the Company’s efforts to develop the health, fitness and social business line. Mr. Session’s experience and skills in real estate transaction and funding and lobbying are deemed as important skill sets for the development and operation of any HFS business.

The Company’s business concept also includes the development of software applications for customer registration and management at the Coppermine HFS facilities. On March 13, 2025, the Company entered into a Memorandum of Understanding with Coppermine for the Company to produce a development plan for an online customer registration and management application (“CRM Application”) for Coppermine’s owned, affiliated or managed health, fitness and social activities business. On May 13, 2025, the Company and Coppermine signed an agreement whereby the Company will make an assessment and, based on that assessment, produce a written plan and proposal (“Proposal”) for the development, testing and installation of an online customer management and registration application (“Application”) for Coppermine’s year-round social, athletic, and fitness programs and events conducted at twenty (20) facilities in the State of Maryland (“Sites”). This Agreement covers only the assessment and production of the Proposal. If the Proposal is accepted by Coppermine, then the two companies would seek to negotiate a written agreement for the actual development, testing, installation and support of the Application. Coppermine will pay a flat $24,000 for the assessment and production of the Proposal. If the Company develops the Application, then the Company would explore possible commercialization of the Application through licensing of the Application to other providers of social, athletic, and fitness programs and events in the United States, subject to the terms and conditions of any written agreement for the actual development, testing, installation and support of the Application for Coppermine. As of the date of this Form 10-Q filing, there is no written agreement for the development, testing and support of the application.

For the Proposal and any subsequent software development, the Company will primarily rely upon a third-party software developer and affiliated contractors, each acting as an independent contractor of the Company, to produce the Proposal and, if work is contracted for the Application, to provide the software code, test it, make any necessary modifications and then install the developed application. As such, the ability of the Company to perform its tasks for the Proposal and Application will rely to a significant extent on the performance of its independent contractors. Any work beyond the Proposal would require the acceptance of the Proposal by Coppermine and the signing of a definitive software development agreement by the Company and Coppermine, which agreement would include the Proposal acceptable to Coppermine and the Company and a budget for fees and costs. The Company’s traditional business has not been in software development, but the Company’s Chairman of the Board of Directors has extensive experience in working with independent contractors and original equipment manufacturers for product development, both foreign and domestic, for the Company, and in the development of a software application at another company. The Company will rely on the experience of its Chairman of the Board of Directors for the Proposal and any subsequent work on the Application.

As of the date of the filing of this Form 10-Q, the Company has not entered into any legally binding agreement for the acquisition of a HFS business or launch of a HFS business line and the Company has expanded its business development efforts to include potential opportunities in industries related to HFS Business, being primarily apparel and merchandise branding in an effort to locate a viable revenue generating business. There is no assurance that the expansion of business development efforts, or HFS development efforts, will result in development of a new business line or acquisition of a new business line. The Company’s strategic focus in business development continues to be focused on HFS Business, including related industries, as of the date of the filing of this Form 10-Q.

The Company’s operations through June 30, 2025 consisted of only one reportable segment for financial reporting purposes, Consumer Home Goods, as there has been no revenue and no expenditures on the HFS business line.

Goodwill

Goodwill

On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation (“CAPI”). Capstone was incorporated in Florida on May 15, 1996, and was engaged primarily in the business of wholesaling technology inspired consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of CAPI’s Common Stock, and recorded goodwill of $1,936,020. Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired. Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company will then perform a one-step quantitative impairment text, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company’s market capitalization. The Company recognized $623,538 of impairment charges during 2020. During the annual analysis of goodwill, management determined the fair value of the single reporting unit was less than the carrying value of the Company, as such, management recorded a goodwill impairment of $539,317 as of December 31, 2024. There was no goodwill impairment recorded for the six-month period ended June 30, 2025.

Fair Value Measurement

Fair Value Measurement

The accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC), “Fair Value Measurements and Disclosures (ASC 820-10) requires the Company to make disclosures about the fair value of certain of its assets and liabilities. ASC 820-10 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. ASC 820-10 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are as follows:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

Level 3: Significant unobservable inputs.

Earnings Per Common Share

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding as of June 30, 2025, and 2024. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For calculation of the diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants using the treasury stock method. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of June 30, 2025, and 2024, the total number of potentially dilutive common stock equivalents excluded from the diluted earnings per share calculation was 208,288 options, 199,733 warrants and 765,075 shares of Series B-1 Convertible Preferred Stock (“B-1 Stock”) of the Company convertible into 50,999,900 shares of common stock for 2024 and 408,288 options, 199,733 warrants and 15,000 of B-1 stock convertible into 999,900 shares of common stock for 2024.

Reclassifications

Reclassifications

Company identified a historical misclassification within stockholders’ equity. Specifically, treasury stock repurchases had previously been presented as a reduction to additional paid-in capital (“APIC”) instead of being separately presented as treasury stock, at cost, within stockholders’ equity. This reclassification had no impact on the total stockholders’ equity, net income, earnings per share, cash flows, or previously reported results for any period.

Revenue Recognition for Consumer Product Business

Revenue Recognition for Consumer Product Business

The Company does not have a product line that is generating revenues as of the date of the filing of this Form 10-Q.

Direct-to-consumer orders for the Connected Surfaces Smart Mirrors were sold initially through e-commerce platforms. The Company also sold the Connected Surfaces Smart Mirror program through independent retailers. The Company only billed the customer and recognized revenue upon the customer obtaining control of the Smart Mirror order which generally occurred upon delivery.

The following table presents net revenue by geographic location which is recognized at a point in time:

Schedule of net revenue by major source
	For the Six Months Ended June 30, 2025				For the Six Months Ended June 30, 2024
	Revenues		% of Revenue		Revenues		% of Revenue
Lighting Products – U.S.		—		—		57,829		40	%
Smart Mirror Products- U.S.		—		—		85,439		60	%
Total Net Revenue	$	—		—	$	143,268		100	%


	For the Three Months Ended June 30, 2025				For the Three Months Ended June 30, 2024
	Revenues		% of Revenue		Revenues		% of Revenue
Lighting Products – U.S.		—		—		57,829		42	%
Smart Mirror Products- U.S.		—		—		79,990		58	%
Total Net Revenue	$	—		—	$	137,818		100	%

Smart Mirror customer orders were shipped within one to two days of receipt. Revenue was recorded upon processing of the sale with a third-party merchant processor such as Stripe or Amazon Pay. Lighting Product customer orders received were not long-term orders and were typically shipped within nine months of the order receipt, but certainly within a one-year period.

Our Smart Mirror customers were charged when executing the e-commerce purchase. We did not have extended payment terms for our Smart Mirror customers. Our Lighting Product payment terms varied by the type of customer, the customer’s credit standing, the location where the product will be picked up from and for international customers and which country their corporate office is located. The time between invoicing date and when payment is due may vary between 30 days and 90 days depending on the customer type. To ensure there are no payment issues, overseas customers or new customers may be required to provide a deposit or full payment before the order is delivered to the customer. During 2024, the Smart Mirror inventory was liquidated.

Sales reductions for anticipated discounts, allowances and promotional coupons are recognized during the period the related revenue is recorded. The discounts, allowances and promotional coupons amounted to approximately $0 and $840 for the six months ended June 30, 2025 and 2024, respectively and $0 and $0 for the three months ended June 30, 2025 and 2024, respectively.

Warranties

Warranties

Under the License Agreement for the Connected Chef, the Company is not responsible for any warranty liability associated with sales of the Connected Chef by the licensor or its distributors.

For the LED product line, the Company provided the end user with limited rights of return as a consumer assurance warranty on all products sold, stipulating that the product will function properly for the warranty period. The warranty period for all products is one year from the date of consumer purchase.

As the Company did not have a product line as of the date these financials are presented, the Company did not record an accrued warranty liability as of June 30, 2025 or December 31, 2024.

Sales and Marketing

Sales and Marketing

Sales and marketing costs, including advertising, public relations, and trade show expenses, are expensed as incurred and included in sales and marketing expenses. Sales and marketing expenses were $0 and $17,403 for the six months ended June 30, 2025 and 2024, respectively, and $0 and $7,812 for the three months ended June 30, 2025 and 2024, respectively.

Product Development

Product Development

All research and development costs are charged to results of operations as incurred.

For the six months ended June 30, 2025, and 2024, product development expenses were $125 and $1,903, respectively, and $0 and $1,903 for the three months ended June 30, 2025 and 2024, respectively.

Income Taxes

Income Taxes

Income tax expense was $0 for the three and six months ended June 30, 2025 and 2024. There is no income tax benefit for the losses for the three and six months ended June 30, 2025 and 2024, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.

The Company is subject to income taxes in the U.S. federal jurisdiction, various state jurisdictions and certain other jurisdictions.

The Company accounts for income taxes under the provisions of 740 Income Taxes. ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. The Company and its U.S. subsidiaries file consolidated income tax returns.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

Tax regulations within each jurisdiction are subject to the interpretation of the relaxed tax laws and regulations and require significant judgement to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities generally for a period of 3 years from the later of each return due date or date filed. If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be recorded as a component of income tax expense.

Stock Based Compensation

Stock Based Compensation

The Company accounts for stock-based compensation under the provisions of ASC 718 Compensation- Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expenses over the requisite service periods in the Company’s condensed consolidated statements of operations. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. In conjunction with the adoption of ASC 718, the Company adopted the straight-line single option method of attributing the value of stock-based compensation expense. The Company accounts for forfeitures as they occur.

Stock-based compensation expense recognized during each of the six months ended June 30, 2025, and 2024 was $0.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. The Company evaluates its estimates on an ongoing basis, including those related to revenue recognition, periodic impairment tests, product warranty obligations, valuation of inventories, tax related contingencies, valuation of stock-based compensation, other contingencies and litigation, among others. The Company generally bases its estimates on historical experience, agreed obligations, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Historically, past changes to these estimates have not had a material impact on the Company’s financial statements. However, circumstances could change, and actual results could differ materially from those estimates.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB, issued Accounting Standards Update 2024-04, Debt-Debt with Conversions and Other Option, (“ASU 2024-04”) . ASU 2024-04 is intended to clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This ASU is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures.

In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), and in January 2025, the FASB issued Accounting Standards Update No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date ("ASU 2025-01"). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for us for our annual reporting for fiscal 2028 and for interim period reporting beginning in fiscal 2029 on a prospective basis. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures.

The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change.

CAPSTONE COMPANIES, INC. 10-Q