Capstone Companies (CAPC) Risk Analysis

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.

Item 1A. Risk Factors.You should carefully consider the “Risk Factors” disclosed under “Item 1A. Risk Factors” in our 2024 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 2025). 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 has insufficient revenues to support its basic operating overhead and relies on funding from Coppermine under an amended promissory note to meet basic operating and overhead for the first three fiscal quarters of 2025. The Company may be unable to sustain operations beyond 2025 without continued financial support from Coppermine or other third-party funding source, either debt or equity or both. In 2024, the Company received financial support from a senior officer and director, but the Company does not believe (based on discussions with the director and senior officer) that any financial support from personal funds by the senior officer or by any other director will be forthcoming in any amount or in any significant amount. There can be no assurance that the Company can obtain sufficient funding from Coppermine or any new funding sources to sustain operations beyond the end of 2025. The financial difficulties of the Company severely hamper efforts to acquire, develop, launch, promote, sustain or otherwise commercially exploit any new business lines, or to attract potential acquisition candidates or candidates for other alternative transactions.While the New Note and MTA provided funding of essential working capital needs, there is substantial doubt about our ability to continue as a going concern if Coppermine or another source does not provide funding beyond the end of 2025. The ongoing concern about the Company may hinder our ability to obtain further financing or engage in acquisitions or alternative transactions. While we are pursuing possible additional funding from Coppermine and other sources as well as exploring a possible new business line, we have not obtained any commitment from Coppermine or 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.Our public auditor’s report for the 2024 Annual Report stated that the Company has incurred operating losses, has incurred negative cash flows from operations and has an accumulated deficit, and these and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.Except for low-cost initiatives in business development, ones that do not require upfront funding, the current funding of the Company under the New Note is insufficient to fund the development, launch and promotion of a new business line or to acquire a new business line. The Company will have to raise additional funding from third parties to fund any development, launch and promotion of a new business line or to fund acquisition of a new business line requiring upfront or sustained working capital or to simply sustain operations beyond early 2026.31If funding sources are not available or are inadequate or unwilling to fund operations beyond funding under the New Note and MTA, or any new developed or acquired business line is not capable of generating sufficient revenues in the future to sustain operations, we will be required to reduce operating costs even further from existing reductions in operating costs, which could further jeopardize any future strategic initiatives and business plans. Furthermore, uncertainty concerning our ability to continue 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 provide funding after using, the funding under the New Note and MTA, 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 tariffs and changes in the imposition of those tariffs on: (1) Company’s future efforts, if any, to license the Connected Chef product; (2) general economic conditions that may affect the ability of the Company to obtain necessary working capital funding or (3) the willingness of third parties to enter into and consummate any mergers-and-acquisitions transaction or any alternative transaction with the Company. Uncertainty about tariffs and resulting disruption of normal trade relationships 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 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 early 2026.There may be risks that are not presently material or known and not discussed in this Form 10-Q or other SEC filings of the Company. The Company’s status as a company without sustained revenue generating operations as of the date of the filing of this Form 10-Q and the doubt about the viability of the Company as a going concern creates substantial doubt about the ability of the Company to develop or acquire a new business line or sustain operations beyond funding under the New Note and MTA. There are also risks within the economy, the industry, and the capital markets that could materially adversely affect the Company’s ability to develop or acquire a new business, including those associated with an economic recession, inflation, a global economic slowdown, political instability, war, government regulation (including tax regulation), employee attraction and retention and funding working capital needs for a new business line. These factors affect businesses generally, including the Company and, as a result, are not discussed in detail, but are applicable to the Company. As a “penny stock” without primary market maker support, and due to the decline in financial performance of the Company in 2023, 2024 and continuing into 2025, an investment in our common stock involves a very high degree of risk. If any of the following risks actually occurs or continues to impact our business, our business, financial condition or results of operations could worsen. In that case, the trading price of our common stock could decline further, and an investor may lose all or part of the investor’s investment in our common stock. Any investor should read the section entitled “Cautionary Statement Regarding Cautionary Statement Regarding Forward-Looking Statements on page 18 above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this Form 10-Q. 32

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.