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 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, DC 20549

 FORM 10-K

 (Mark One)

 ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December
31, 2023

 or

 TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from _______ to _______

 Commission File Number 000-28831

 CAPSTONE COMPANIES, INC.

 (Exact name of small business issuer as specified
in its charter)

 Florida

 84-1047159

 (State or Other Jurisdiction of Incorporation)

 (I.R.S. Employer No.)

 # 144-V 10 Fairway Drive, Suite 100,

 Deerfield Beach, Florida 33441

 (Address of principal executive offices) (Zip
Code)

 (954) 252-3440

 (Small business issuer's telephone number,
including area code)

 Securities registered pursuant to Section 12(b)
of the Exchange Act:

 Title of each class Trading

 Name of each exchange on which registered

 Symbol(s)

 None

 N/A

 N/A

 Securities registered pursuant to Section 12(g) of
the Act:

 COMMON STOCK, $0.0001 PAR VALUE

check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
 No

check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes No

 Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes No

check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, emerging growth company
or a smaller reporting company. See definitions of "large, accelerated filer", "accelerated filer", "emerging
growth company" and "smaller reporting Company" in Rule 12b-2 of the Exchange Act. (Check one):

 Large accelerated
filer Accelerated filer Non-accelerated filer Smaller reporting Company
Emerging Growth Company

 If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
e ectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant's executive o cers during the relevant recovery period pursuant to
§240.10D-1(b).

check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 As of June 30, 2023,
the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of our common
stock issued and outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference
to the closing sales price for the common stock on June 30, 2023, as reported on the OTC QB Venture Market, was $ 3,625,952

check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.

 Number of estimated
shares outstanding of the Registrant's Common Stock as of March 29, 2024 is 48,826,864.

 DOCUMENTS INCORPORATED
BY REFERENCE

 None

 Item
 Number

 Page

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved
 Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal
 Proceedings

 Item 4.

 Mine Safety
 Disclosures (Not Applicable)

 Part
 II

 Item 5.

 Market for Registrants
 Common Equity and Related Stockholder Matters

 Item 6.

 [RESERVED]

 Item 7.

 Management's Discussion
 and Analysis of Financial Condition and Results of Operation

 Item 7A.

 Quantitative and Qualitative
 Disclosures About Market Risk (Not Applicable)

 Item 8.

 Financial Statements and
 Supplementary Data

 Item 9.

 Change in and Disagreements
 with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosure Regarding Foreign
 Jurisdictions that Prevent Inspection

 Item 10.

 Directors, Executive Officers
 and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain
 Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and
 Related Transactions, and Director Independence

 Item 14.

 Principal Accounting Fees
 and Services

 Item 15.

 Exhibits, Financial Statement
 Schedules

 Item 16.

 Form 10-K Summary

 DEFINITIONS:

 As used in this Annual Report on
Form 10-K, the following terms have the stated meaning or meanings:

 (1)

 "Capstone International
 Hong Kong Ltd" or "CIHK" is a wholly owned subsidiary of Capstone Companies, Inc. and a Hong Kong registered Company.

 (2)

 "Capstone Industries,
 Inc., a Florida corporation and a wholly owned subsidiary of CAPC, may also be referred to as "CAPI" or "Capstone".

 (3)

 "Capstone Companies,
 Inc.," a Florida corporation, may also be referred to as "we," "us" "our," "Company,"
 or "CAPC". Unless the context indicates otherwise, "Company" includes in its meaning all of Capstone Companies,
 Inc. Subsidiaries.

 (4)

 "China" means
 People's Republic of China.

 (5)

 References to "33
 Act" or "Securities Act" means the Securities Act of 1933, as amended.

 (6)

 References to "34
 Act" or "Exchange Act" means the Securities Exchange Act of 1934, as amended.

 (7)

 "SEC" or "Commission"
 means the U.S. Securities and Exchange Commission.

 (9)

 "Subsidiaries"
 means Capstone Industries, Inc. ("CAPI"), Capstone International H.K Ltd., ("CIHK").

 (10)

 Any reference to fiscal
 year in this Annual Report on Form 10-K means our fiscal year, ending December 31 st.

 (11)

 "LED" or "LED's"
 means a light-emitting diode component(s) which can be assembled into light bulbs or can be used in lighting fixtures.

 (12)

 "OEM" means
 "original equipment manufacturer."

 (13)

 "Connected Surfaces"
 or "Connected Products" means smart home devices with embedded sensors that provide communication and data transfer between
 the Connected Surface and internet-enabled systems of the Company or associated third parties. Connected Surfaces may permit internet
 access for defined functions.

 (14)

 "GMS" means
 Google Mobile Service

 We may use "FY" to mean "fiscal
year" and "Q or QTR" to mean fiscal quarter in this Report.

 FORWARD LOOKING STATEMENTS

 This Form 10-K report contains "forward-looking
statements". Those statements appear in a number of places in this Form 10-K report and include, without limitation, statements
regarding the intent, belief and current expectations of the Company, its directors or its officers, with respect to: Company's
future business and financial prospects and ability to sustain operations; the development and commercialization of new products; the
Company's policies regarding investments, dispositions, financings, conflicts of interest and other matters; and trends affecting
the Company's financial condition or results of operations. Forward looking statements include words like "expect,"
"anticipate," "hope," "project," "may," "should," "could," or
similar words or variants thereof. Any forward-looking statement is not a guarantee of future performance and involves several risks and
uncertainties. Actual results may differ materially from those results implied in the forward-looking statement as a result of various
factors, some factors being beyond the Company's control or ability to foresee. Among the factors that could cause plans, actions
and results to differ materially from current expectations are, without limitation: disruption from natural or human causes, including
severe weather, accidents, fires, earthquakes, terrorist acts and epidemic or pandemic diseases, such as the COVID-19 pandemic. The accompanying
information contained in this Form 10-K report, including the "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and "Risk Factors" identifies other important factors that could cause such differences. With
respect to any forward-looking statement that includes a statement of its underlying assumptions or bases, the Company cautions that,
while it believes such assumptions or bases to be reasonable and has formed them in good faith, assumed facts or bases almost always vary
from actual results, and the differences between assumed facts or bases and actual results can be significant or "material"
depending on the circumstances. When, in any forward-looking statement, the Company, or its management, expresses an expectation or belief
as to future results, that expectation or belief is expressed in good faith and is believed to have a reasonable basis, but there can
be no assurance that the stated expectation or belief will result or be achieved or accomplished. Further, the Company is a "penny
stock" company with no primary market makers and limited trading activity. Such a status makes highly risky any investment in the
Company securities. See "Risk Factors" below. The forward-looking statements in this Form 10-K report are made as of the date
hereof, and, unless required by law or regulation, we do not assume any obligation to update, amend or clarify them to reflect events,
new information or circumstances occurring after the date hereof.

 You should read this Form 10-K report and the
documents that we may reference in this Form 10-K report and have filed with the SEC, with the understanding that our actual future results,
performance, and events and circumstances may be materially different from what we expect.

 Item 1. Business

 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 designer, manufacturer
and marketer of consumer products that are designed to simplify daily living through technology.

 As of the date of the filing of this Form 10-K
report, the Company does not have a current product that is being actively produced or is in production. The Company's former product
line, LED consumer lighting products, matured in 2022 and is no longer in production. The Company's efforts to develop Connected
Surface consumer products, specifically a Smart Mirror for residential use, as a new product line did not succeed in attracting sufficient
revenues to be a sustainable product line. The inability of the Smart Mirrors to become a viable revenue source was due, in part, to
delays in production and launch due to COVID 19 pandemic, changes in consumer preferences in the smart mirror market in the U.S.,
unwillingness of brick-and-mortar retailers that purchased the LED products in bulk to purchase the Smart Mirrors, and established competition
in the smart mirror market from companies with greater brand recognition and marketing resources than the Company. The e-commerce initiatives
of the Company did not spur significant sales of the Smart Mirror products and all inventory was written off as expensed as of December
31, 2023.

 During 2023, the Company developed a Connected
Surface Chef kitchen utility tablet, the "Connected Chef". 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 and YouTube to name those highly recognized.
The Connected Chef was ready for formal introduction in quarter four of 2023, and Management is actively marketing the Connected Chef
tablet to appliance manufacturers and distributors, but the product has no purchase commitments from retailers as of the date of this
Form 10-K report. Further, the Company will have to raise funding to fund production costs, which funding may not be available
to the Company.

 The Connected Surfaces portfolio is designed
to tap into consumer's ever-expanding Internet of Things, wireless connected lifestyles prevalent today. The "Connected Chef",
is a purpose-built tablet form factor with an integrated platform for cooking accessories, being a cutting board, and designed
to safely deliver and access content on mobile and web based platforms. The Company received Google Mobile Service ("GMS")
approval during 2023 which allows the tablet integrated in the Connected Chef to operate the Android Operating System and pre install
Google's proprietary applications such as Chrome, Drive, Gmail, Playstore, Youtube directly through the Connected Chef tablet.
Youtube food videos have generated nearly 51 billion views. Rather than using and sharing recipes on one's smartphone in the kitchen,
recipes can be looked up directly using the users preferred search engine (for example, Chrome). Access to content online with
millions of cooking and food related websites and videos as well as tutorials and cooking classes all in one device. Connected
Chef becomes a digital recipe bookshelf. The Connected Chef also provides a cleaner and safer appliance in the cooking
area. A smartphone is covered in germs as it is carried everywhere throughout the day, a smartphone has 25,127 bacteria per square inch.
Smartphones harbor more than 3 times the number of germs than doorknobs, 8643 bacteria per sq inch. The Connected Chef is designed to
become an anchor in the digital kitchen. Tastefully styled and excellent quality are obvious to the discerning eye while maintaining
affordability for mainstream use.

 The Connected Chef is not in production and
has not received any pre-production orders. The Company is actively seeking potential pre-production orders for the Connected Chef as
well as funding for its production and extensive marketing if pre-production orders are received. While there has been some interest
in the Connected Surface cutting board from a few potential retail buyers, there have been no orders and the marketing of this product
is limited by the Company's lack of adequate working capital.

 Without a product line that can produce sufficient
revenues to sustain corporate operations, the Company has relied on funding primarily from Stewart Wallach, Company's Chief
Executive Officer and a Company director, in 2023 and into 2024, to sustain operations. Operations and general overhead
of the Company have been reduced in 2023, in response to the lack of significant revenues from product sales and limited working capital.
There can be no assurance that funding from Mr. Wallach or other sources will be available in the amounts, or when needed, to adequately
fund Company operations or the development of another new product line, or production of any new product line. Since December 2023, the
Company has also endeavored to find a new business line capable of generating revenues to adequately fund the Company and to locate
funding sources for development, marketing and production of a new product line. The effort to find a new business line includes seeking
a possible merger and acquisition opportunities amongst private operating companies and possible sources of working capital funding
for existing and possible new business line development. As of the date of the filing of this Form 10-K, the Company has not secured
working capital funding or entered into any legally binding agreement for a merger or acquisition of a new business line.

 The Company will require third party funding to cover
operating overhead and to resume efforts to fund its marketing and product launch campaigns. The future growth will be directly
impacted by the level of exposure, messaging and distribution capabilities. Certain members of the Company's management ("Corporate
Insiders and Directors") have provided short-term funding from time to time to support the Company's basic operational
funding needs, but there is no guarantee that this funding will continue or be adequate to fund operations or Connected Surfaces program
production, marketing and inventory needs and, if a new product is launched, to also fund possible enhancements in functions
demanded by the consumers. The Company will require third party funding to sustain basic operations and continue efforts to market any
Connected Chef product launch.

 As of the filing of this Form 10-K, all of the
Company's retail sales are made on an order-by-order basis, rather than through long-term sales contracts. As such, the nature of
the Company's business did not provide visibility of material forward-looking information from its customers and suppliers beyond
a few months.

 Our Current Strategy

 The Company's looking forward strategy
is focused on developing a new Connected Surfaces product, the Connected Chef, that can generate sufficient revenues to sustain the Company's
operations or alternatively, locate a new business line that can accomplish sustainability of operations. These efforts will depend on
having adequate working capital from funding to establish a new product line or business line and adequate cash flow from
product sales. We may be unable to achieve sufficient working capital when and, in the amounts, required to meet operational needs and
overhead or to pursue or establish a new product lines or a new business line or new business line. We have not
achieved adequate funding as of the date of the filing of this Form 10-K report and we may be unable to achieve sufficient working
capital when and, in the amounts, required to meet operational needs and overhead. The lack of adequate, timely and affordable funding
may undermine the efforts of the Company to establish a revenue stream from the Connected Chef product line and efforts to sustain
Company operations.

 As a consumer product company, the Company competes
in competitive consumer market channels that can be affected by volatility from a number of general business and economic factors such
as, consumer confidence and preferences, employment levels, new technologies, credit availability, costs and barriers of producing products
from foreign original equipment manufacturers ("OEMs") and commodity costs. Demand for the Company's products is highly
dependent on economic drivers such as consumer spending and discretionary income. The Company faces competition from numerous competitors
in the consumer product industry, foreign and domestic, and some of those competitors have substantially greater market share, brand recognition,
distribution and financial and technical resources than the Company. The Company's strategy has been to develop well designed and
made products that appeal to a niche market. The Company also relies on the production and engineering resources and technical expertise
of its contract manufacturers to compensate for a lack of those resources internally. The lack of working capital hinders the ability
of the Company to leverage the development, design and production capabilities of OEMs.

 Due to working capital constraints, and results
from prior e-commerce marketing efforts, the Company is not investing any significant funds in e-commerce marketing and promotion efforts
and is re-evaluating the potential of e-commerce efforts to generate significant revenues. The Company is intending to focus on direct
sales or a licensing agreement with appliance manufacturers and distributors with the Connected Chef product line.

 Subject to adequate funding and favorable cash
flow from Connected Surfaces products, which has not been achieved, the Company is exploring various potential initiatives to execute
its traditional organic growth strategy, which is designed to enhance its market presence, expand its customer base and maintain its recognition
as an industry leader in new product development, and also alternative business lines and new product lines. Key elements of our traditional
organic growth strategy include:

 Connected Surfaces. While consistently
launching successful lighting programs in years prior to 2022, the Company determined that it needed to develop a new product line with
greater profit margin potential than LED Lighting and as a replacement revenue generating source. The Company refocused its development
and marketing initiatives and is focused on developing the Connected Surfaces products as its primary business line to replace the LED
lighting business, which is no longer being actively promoted by the Company. The discontinuance of the LED lighting product line was
due to gross margin reductions as a result of increased tariffs.

 The Company's existing product roadmap
outlines a plan for an additional product launch in Q2 of 2024, branded the "Connected Chef", a kitchen appliance
item, which is a purpose-built tablet integrated into a multi-purpose cutting board and designed to safely deliver and access content
on mobile and web based platforms a kitchen utility item. The Company received Google Mobile Service ("GMS") approval
during 2023 which allows the tablet integrated in the Connected Chef to operate the Android Operating System and pre install Google's
proprietary applications such as Chrome, Drive, Gmail, Playstore, Youtube directly through the Connected Chef tablet ("Google"
is a trademark of Google LLC, a subsidiary of Alphabet, Inc., a SEC reporting company). Youtube food videos have generated nearly
51 billion views. Rather than using and sharing recipes on one's smartphone in the kitchen, recipes can be looked up directly using
the users preferred search engine (like, Chrome). With access to content online with millions of cooking and food related
websites and videos as well as tutorials and cooking classes all in one place the Connected chef becomes a digital recipe bookshelf.
The Connected Chef also provides a cleaner and safer appliance in the cooking area. A smartphone is covered in germs as it is
carried everywhere throughout the day, a smartphone has 25,127 bacteria per square inch. Smartphones harbor more than 3 times the number
of germs than doorknobs, 8643 bacteria per sq inch. The Connected Chef is designed to become an anchor in the digital kitchen. The
design is aimed at tastefully styled and coupled with excellent quality in order to appeal to the discerning eye while
maintaining affordability for mainstream use.

 The Company believes the Connected Chef program
could leverage existing relationships with its traditional retail partners and collectively contribute organic growth for the
Company, as well as serving as a basis for partnering with appliance manufacturers and distributors. The ability of the Company
to promote any of its Connected Surface products and any new, related "connected" consumer products will depend on securing
adequate, affordable and timely funding from lenders and investors. As of the date of the filing of this Form 10-K report, the Company
has not secured that funding. Chief Executive Officer and Director Stewart Wallach has been providing interim financing of basic operations
while the Company pursues other financing options for new product development and marketing.

 Perceived or Essential Strengths

 Prior to the maturing of the LED product line
in 2021-2022, Capstone believes that the following competitive strengths have traditionally served to support its business strategies:

 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. Capstone believes that its
insight into the needs of retail programming and its proven execution track record with noted retailers globally positions it well for
future growth.

 The Company's chief executive officer
has over three decades 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.

 Product Quality: With prior
product lines, the Company has achieved 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. To deliver cost-competitive
products without compromising quality standards, we leveraged purchasing volume and capitalize on strategic vendor relationships. If the
Company can obtain the necessary funding to launch the Connected Chef product line, the Company believes that its traditional operating
strengths will continue to benefit a new product line based on past performance. This assumption may prove misplaced when and if the Company
achieves sufficient working capital to extensively market and produce the Connected Chef. The Company has no marketing studies to support
an assumption about the appeal to consumers of the Connected Chef as a viable product line. Positive responses to the concept of the Connected
Chef have come from a limited number of potential retail purchasers and strategic partners.

 Perceived
Weaknesses

 The Company lacks a product line generating
revenues sufficient to sustain operations. The Company's lack of a product line generating sufficient revenue to support operations
and lack of sufficient working capital funding have delayed the marketing of its new product line, The Connected Chef.

 When the Company
had a product line generating sufficient revenues and adequate working capital, the Company did not possess the business, marketing,
technical and financial resources of larger or mid-sized competitors or the brand recognition, distribution channels or domestic and
international markets of some of the larger competitors. The Company will face that same disadvantage with any new product line or new
business line. The declining financial performance of the Company due to discontinuation of the LED lighting product line and failure
of the Connected Surface Smart Mirrors to replace the LED lighting product line as a viable revenue source has placed the Company in
a seriously weakened financial position, which in turn increases the need for working capital funding from investors or lenders. The
Company lacks a credit line for long-term general working capital or growth. The Company lacks the hard assets for affordable, sufficient
debt financing and the low market price of its Common Stock makes equity funding difficult in terms of finding suitable investors who
will provide adequate, affordable, timely working capital funding.

 In the past
and with any new product line or new business line, the Company's products will face the risk of new technologies or functionalities
shifting consumer demand away from the products produced by the Company. The Company may lack the financial resources or ability to license
or acquire new technologies or functionalities in demand by consumers, which failure may undermine the commercial viability of Company's
product line.

 The product
launch of the Smart Mirrors did not meet projected revenue goals for 2023. The Company's investment in e-commerce marketing did
not produce desired sales or market penetration for Connected Surfaces Smart Mirror. These factors coupled with a lack of bulk orders
from Big Box retailers left the Company without a viable product line and a revenue generating source sufficient to sustain the Company.

 Any plan to
expand the Company's product portfolio through Connected Surfaces involves the inherent risk of increased operating and marketing
costs without a corresponding increase in operational revenues and profits. Expense categories including prototyping, engineering, advertising,
public relations, tradeshows and social media platforms will continue to be incurred for a period before revenues occur.

 Even
with revenue sources sufficient to sustain Company operations and support a new product line, the Company lacks the large internal research
and development capability of its larger competitors. Even with sufficient working capital, Capstone operates with a small number of
employees whose functions are dedicated to executive management, sales and marketing or administrative support. The limited number of
employees may hinder or delay the ability of the Company to identify or respond to consumer preferences or new technology developments
in a product line. Hiring may be required with any growth and qualified personnel may not be readily available. We cannot match the compensation
packages to prospective employees that many larger competitors may offer, and we lack the funding and other resources to change our operational
model and its reliance on contractors for many functions and capabilities, including development, production, shipping, warehousing and
distribution of products. The weakened financial condition of the Company further undermines the ability of the Company to add essential
personnel for any effort to re-establish a viable product line or new business line.

 As
a smaller reporting company, and with any new product line, we were and are more vulnerable to events like COVID-19 pandemic, production
and shipping delays, travel and operational disruptions and restrictions and an accelerated shift to e-commerce from reliance on brick-and-mortar
retail sales. We lack 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.

 Capstone's
international purchases can become more expensive if the U.S. Dollar weakens against the foreign currencies. Should the increased U.S.
tariffs imposed on Chinese manufactured goods remain it may increase the cost of electronic components used in our products.

 While we have
established new production capacity in Thailand, there is no final resolution of the U.S. / China trade dispute from which specific components
are sourced. Developing a new, efficient OEM relationship in a new country takes time and effort to reach acceptable production efficiencies.
We have only a short operational experience with Thai OEM's and cannot predict long term effectiveness of the relationship. Without
working capital funding, we will be unable to fully exploit foreign OEM capabilities or resolve the need for alternative foreign sources
of critical components for Connected Surface products.

 Like many companies,
the Company conducts periodic strategic reviews where the feasibility of significant corporate transactions are considered, including
mergers, asset purchases or sales and diversification or change in business lines. The financial condition of the Company has prompted
an enhance consideration and search for a significant corporate transaction, including, without limitation, a possible merger and acquisition
transaction or reorganization to sustain operations or to acquire a new business line that can support company operations. 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, and the Company being in transition from a declining product line and not yet establishing a profitable product
line, as well as the Company having its shares of Common Stock quoted on The OTC Markets Group, Inc. QB Venture Market and being a "penny
stock", the Company may be unable to consummate a significant corporate transaction that sustains operations or creates a new viable
product line or business line.

 Products and Customers

 Current product lines under development
as of this Form 10-K report are as follows:

 -

 Connected Surfaces – Connected Chef, a purpose-built
 kitchen appliance tablet, which is a unique form factor with Google GMS operating system, with an integrated platform for cooking accessories,
 i.e.: cutting board.

 The following product lines that are discontinued
for manufacturing, but available for sale as of the date of this Form 10-K report are as follows:

 Connected Surfaces – Smart Mirrors

 -

 Standard Rectangular

 -

 Wardrobe/Fitness Mirror

 LED Lighting: Discontinued in 2023

 The plan to expand the Company's product
portfolio through Connected Surfaces involves the inherent risk of increased operating and marketing costs without a corresponding increase
in operational revenues and profits. Expense categories including prototyping, engineering, advertising, public relations, tradeshows
and social media platforms will continue to be incurred before shipments and related revenues occur. Promotion of the Connected Surfaces
product line was hampered in 2023 by the lack of adequate, long-term funding and declining revenues from product sales and a lack of bulk
orders from brick-and-mortar retailers and e-commerce resellers for a discretionary purchase item like the Smart Mirrors.

 Over the past ten years, the Company has established
product distribution relationships with numerous leading international, national and regional retailers, including but not limited to:
Amazon, Costco Wholesale, Sam's Club-Walmart, the Container Store and Firefly Buys. These distribution channels may sell the Company's
products through the internet as well as through retail storefronts and catalogs/mail order. The Company is actively marketing the Connected
Chef to appliance manufacturers and distributors, though no letter of intent or deal terms have been executed as of the date of this
Form 10-K filing. The Company believes it has developed the scale, manufacturing efficiencies, and design expertise that serves
as the foundation for aggressive pursuit of niche product opportunities in our largest consumer domestic and international markets. The
Company may have to pursue a different market segment if it cannot secure adequate orders from these traditional distribution channels.
With the growth of e-commerce, the Company lacks an effective e-commerce capability. Reliance on sales to brick-and-mortar retailers
may not produce sufficient orders to allow the Company to become profitable or sustain operations, especially if the Company's
product line is deemed by retailers to be not appealing or in demand with consumers. The Company has a very limited product line and
lacks different product lines to offer in lieu of unsuccessful, existing product lines to retailers.

 The Company's products are subject to general
economic conditions that impact discretionary consumer spending on non-essential items. Such continued progress depends on a number of
assumptions and factors, including ones mentioned in "Risk Factors" below. Critical to growth are economic conditions in the
markets that foster greater consumer spending as well as success in the Company's initiatives to distinguish its brands from competitors
by design, quality, and scope of functions and new technology or features. The Company's ability to fund the pursuit of our goals
remains a constant, significant factor and weakness.

 Tariffs. The President Trump administration
implemented certain tariffs that directly affected the Company's competitiveness. While all companies in certain industries are
affected equally, the appeal for these products to consumers was negatively impacted when retail prices increased due to higher duty rates.
The Company has seen promotional schedules cut back and retailers have requested pricing adjustments that would not be known to them in
advance to products being shipped. The Company's previous business model insulates the Company from paying duties as its retail
partners are the importers of record. The obvious unknown is the final impact of tariffs to the landed costs. Accordingly, retailers have
demonstrated caution in their promotional planning schedules and will continue to do so until the administration has clarified its position
enabling importers to calculate estimated landed costs.

 Tariffs and
trade restrictions imposed by the previous U.S. administration provoked trade and tariff retaliation by other countries. A "trade
dispute" of this nature or other governmental action related to tariffs or international trade agreements or policies has the potential
to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof and,
thus, to adversely impact our businesses. As of the date of this report, the current U.S. administration is currently reviewing its position
on this issue and there has not been a resolution of the Chinese-American trade dispute.

 Sales and
Marketing

 We use direct
sales by our Chief Executive Officer and sales agents to sell our products, which effort includes direct sales to home-goods chain
retailers. Company's e-commerce initiatives have not provided significant sales during 2023.

 Our sales within
the U.S. are primarily made by our in-house sales team and our independent sales agencies. Our independent sales agencies are paid a
commission based upon sales made in their respective territories. Our sales agencies are recruited, trained and monitored by us directly.
We will utilize an agency as needed to help us provide service to our retail customers as required. The sales agency agreements are generally
one (1) year agreements, which automatically renew on an annual basis, unless terminated by either party on 30 days' prior notice.
Our international sales to divisions of U.S. based retailers are made by our in-house sales team.

has historically promoted its products to retailers and distributors at North American trade shows, such as the Consumer Electronics
Show ("CES") or the International Hardware Show, but also relies on the retail sales channels to advertise its products directly
to the end user consumers through various promotional activities. Subject to adequate working capital, this marketing effort will continue
as a complement to the social media and e-commerce initiatives.

 Direct Import
Sales. We currently ship finished products directly to our retail customer from Thailand and China. 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. Direct import sales are made in larger quantities (generally container
sized lots) to customers worldwide.

 Domestic
Sales. The strategy of selling products from a U.S. domestic warehouse enables the Company to provide timely delivery and serve as
a domestic supplier of imported goods. With this model the Company imports goods from overseas and is responsible for all related costs
including ocean freight, insurance, customs clearance, duties, storage, and distribution charges related to such products and therefore
such sales command higher sales prices than direct sales. Domestic orders are for a much smaller size and could be as low as a single
unit directly to the end consumer if ordered through an online website. To support an effective e-commerce business model, we were required
to warehouse adequate inventory levels enabling the Company to ship orders directly to the end consumer expediently. Due to the poor
performance of the Smart Mirrors, the Company wrote off all inventory on hand as of December 31, 2023 and is currently attempting to
liquidate the remaining stock.

 We have utilized social media platforms and
online advertising campaigns to further grow the Company's online presence. In addition to Facebook, Instagram, Pinterest and Linked In,
The Company has launched a You Tube channel to host Smart Mirror videos and established a Twitter account. Our Social Media marketing
has not resulted in any significant sales of products. We have not been and may not be able to effectively compete in e-commerce and
Social Media marketing and sales. The Company has a Social Media presence on the following Social Media platforms, however the Company
is not emphasizing Social Media marketing in 2024:

 FACEBOOK 1:
and

 INSTAGRAM 2:

 PINTEREST 3:

 LINKEDIN 4:

 TWITTER 5

 YOUTUBE 6

 1 Facebook is a registered trademark of Facebook,
Inc.

 2 Instagram is a registered trademark of Instagram.

 3 Pinterest is a registered trademark of Pinterest.

 4 Linked In is a registered trademark of Linked In
Corporation.

 5 Twitter is a registered trademark of Twitter Corporation.

 6 YouTube is a registered trademark
of YouTube Corporation.

 Competitive Conditions

 In terms of the consumer product industry, the
Company operates in a highly competitive environment, both in the United States and internationally, in the former LED lighting product
segment and in the new Connected Surfaces internet of things product segments. The Company's consumer products compete with products
made by large multinationals with global operations as well as numerous other smaller, specialized national or regional competitors who
generally focus on narrower markets, products, or particular categories. Competitors include Gentex Corporation, Seura Solutions, Inc.,
Magna International, Inc. and Samsung Electronics Co. Ltd. The competitiveness and changes in consumer tastes in smart mirror market is
evidenced by lululemon athletica, inc. acquiring a smart mirror company for $500 million in 2020 and then discontinuing the sale of its
smart mirror product line in December 2023.

 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 and other Connected Surface products are an emerging industry. The Company's product
line is innovative. 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. 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.

 Research, Product Development, and Manufacturing
Activities

 The Company's research and development
operations based in Florida and Thailand have designed and engineered many of the Company's products, with collaboration from its
third-party manufacturing partners, software developers and Capstone U.S. engineering advisers. The Company outsources the manufacture
and assembly of our products to a select group of OEM manufacturers overseas. With no product line in production, the Company's
research and development efforts have been limited to the Connected Chef. Our research and development focus includes efforts to:

 Establish Capstone Connected Surfaces portfolio as an innovator in the smart home segment.

 Develop product with increasing technology and functionality with enhanced quality and performance, and at a very competitive cost; and

 Solidify new manufacturing relationships with contract manufacturers in Thailand.

 The Company establishes strict engineering specifications
and product testing protocols with the Company's contract manufacturers and ensure that their factories adhere to all Regional Labor
and Social Compliance Laws. These contract manufacturers purchase components that we specify and provide the necessary facilities and
labor to manufacture our products. We leverage the strength of the contract manufacturers and allocate the manufacturing of specific products
to the contract manufacturer best suited to the task. Quality control and product testing is conducted at the contract manufacturers facility
and at their 3 rd party testing laboratories overseas.

 Capstone uses 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, Capstone uses globally recognized certified testing laboratories such as United Laboratories
(UL) or Intertek (ETL) to ensure all products are designed and tested to adhere to each country's individual regulatory standards.
The Company also hires quality control inspectors who examine and test products to Capstone's specification(s) before shipments
are released.

 To successfully
implement Capstone's business strategy, the Company must continually improve its current products and develop new product segments
with innovative imbedded technologies to meet consumer's growing expectations. The Connected Surfaces product development is our
current effort to achieve those expectations. The continuation of Company's declining business and financial performance may significantly
hinder or undermine efforts to establish a profitable Connected Surface product line capable of sustaining operations. Establishing the
Connected Surfaces product line as a viable revenue source is essential to sustaining the Company as a consumer product company. The
Company will need adequate funding to sustain that business line and operations.

 Investments
in technical and product development are expensed when incurred and are included in the operating expenses.

 Raw Materials

 The principal
raw materials currently used by Capstone are sourced in Thailand and China, as the Company orders product exclusively through contract
manufacturers in the region. These contract manufacturers purchase components based on the Company's specifications and provide
the necessary facilities and labor to manufacture the Company's products. Capstone allocates the production of specific products
to the contract manufacturer the Company believes is more experienced to produce the specific product and whose facility is located in
the country that most benefits from the U.S. Tariff regulations. To ensure the consistent quality of Capstone's products, quality
control procedures have been incorporated at each stage of the manufacturing process, ranging from the inspection of raw materials through
production and delivery to the customer. These procedures are additional to the manufacturers' internal quality control procedures
and performed by Quality Assurance personnel.

 Raw Materials – Components
 and supplies are subject to sample inspections upon arrival at the contract manufacturer, to ensure the correct specified components
 are being used in production.

 Work in Process –
 Our quality control inspectors conduct quality control tests at different points during the product stages of our manufacturing process
 to ensure that quality integrity is maintained.

 Finished Goods –
 Our inspectors perform tests on finished and packaged products to assess product safety, integrity and package compliance.

 Raw materials
used in manufacturing include plastic resin, copper, LED bulbs, batteries, and corrugated paper. Prices of materials have remained competitive
in the last year. The Company believes that adequate supplies of raw materials required for its operations are available at the present
time. The Company cannot predict the future availability or prices of such materials. These raw materials are generally available from
a number of different sources, and the prices of those raw materials are susceptible to currency fluctuations and price fluctuations
due to transportation, government regulations, price controls, economic climate, or other unforeseen circumstances. In the past,
the Company has not experienced any significant interruption in availability of raw materials. We believe we have extensive experience
in manufacturing and have taken positions to assure supply and to protect margins on anticipated sales volume.

 Section 1502
of Title XV of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires SEC-reporting companies to disclose annually
whether any conflict minerals are necessary to the functionality or production of a product. Based on our inquiries to our manufacturers,
we do not believe as of the date of such inquiries that any conflict minerals are used in making our products.

 Distribution
and Fulfillment

 Since January 2015, the Company has outsourced
its U.S. domestic warehousing and distribution needs to a third-party warehousing facility situated in Anaheim, California. The warehouse
operator provides full inventory storage, packaging and logistics services including direct to store and direct to consumer shipping capabilities
that electronically interface to our existing operations software. The warehouse operator provides full ERP (Enterprise Resource Planning),
Inventory Control and Warehouse Management Systems.

 These fulfillment services can be expanded to
the east coast in Charleston, South Carolina, if the Company needed to establish an east coast distribution point. This relationship,
if required, will allow us to fully expand our U.S. distribution capabilities and services. As the Company moved into the e-commerce and
direct to consumer marketplace, the Company developed a new website with full shopping cart capabilities. The Company has negotiated contracts
for secured credit card processing capability, state sales tax compliance services and order fulfillment and logistics services, at a
very competitive rate.

 Seasonality

 In general,
sales for household products and electronics are seasonally influenced. Certain gift products cause consumers to increase purchases during
key holiday winter season of the fourth quarter, which requires increases in retailer inventories during the third quarter.

 We do not have sufficient
operational experience with Connected Surfaces to predict the seasonality of Connected Surfaces.

 Intellectual Property

 CAPC owns a
number of patents and trademarks as denoted below:

 Patent
 / Trademark Serial Number

 Patent
 / Trademark Name

 Status
 / Issue Date

 Patent
 / Trademark Expiration Date

 Country

 97365117

 Connected
 Chef

 Pending

 N/A

 USA

 Trademark
 on name

 90758255

 Capstone
 Connected

 Pending

 N/A

 USA

 Trademark
 on name and logo

 90286667

 Thin
 Cast

 Pending

 N/A

 USA

 Trademark
 on name and logo

 10,203,262

 Apparatus
 and method for switch state detection and controlling electrical power

 03/12/2019

 03/12/2039

 USA

 apparatus
 and method for switch state detection and controlling electrical power

 D779,109
 S

 Lamp
 simulating a UFO

 02/14/2017

 02/14/2032

 USA

 Design
 patent – lamp simulating UFO

 While the Company
may license third party technologies for its products, or may rely on other companies, especially OEMs, for design, engineering and testing,
the Company believes that its oversight of design and function of its products and its marketing capabilities are significant factors
in the ability of the Company to sell its products.

 Value of
Patents

 The actual
protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and
the availability of legal remedies in the country. Issued patents or patents based on pending patent applications or any future patent
applications may not exclude competitors or may not provide a competitive advantage to us. In addition, patents issued or licensed to
us may not be held valid if subsequently challenged and others may claim rights in or ownership of such patents. The validity and breadth
of claims in technology patents involve complex legal and factual questions and, therefore, the extent of their enforceability and protection
is highly uncertain.

 Reverse engineering, unauthorized copying or
other misappropriation of our technologies could enable third parties to benefit from our technologies without paying us. We cannot assure
shareholders that our competitors have not developed or will not develop similar products, will not duplicate our products, or will not
design around any patents issued to or licensed by us. We will assess any loss of these rights and determine whether to litigate to protect
our intellectual property rights on a case by case basis.

 We rely on
trademark, trade secret, patent, and copyright laws to protect our intellectual property rights. We cannot be sure that these intellectual
property rights will be effectively utilized or, if necessary, successfully asserted. There is a risk that we will not be able to obtain
and perfect our own intellectual property rights, or, where appropriate, license intellectual property rights from others to support
new product introductions. There can be no assurance that w e can acquire licenses under patents belonging to others
for technology potentially useful or necessary to us and there can be no assurance that such licenses will be available to us, if at
all, on terms acceptable to us. Moreover, there can be no assurance that any patent issued to or licensed by us will not be infringed
or circumvented by others or will not be successfully challenged by others in lawsuits. We do not have a reserve for litigation costs
associated with intellectual property matters. The cost of litigating intellectual property rights claims may be beyond our financial
ability to fund.

 As is customary
in the retail industry, many of our customer agreements require us to indemnify our customers for third-party intellectual property infringement
claims. Such claims could harm our relationships with customers and might deter future customers from doing business with us. With respect
to any intellectual property rights claims against us or our customers, we may be required to cease manufacture of the infringing product,
pay damages and expend significant Company resources to defend against the claim and or seek a license.

 Information
Technology

 The efficient
operation of our business is dependent on our information technology systems. We rely on those systems to manage our daily operations,
communicate with our customers and maintain our financial and accounting records. In the normal course of business, we receive information
regarding customers, associates, and vendors. Since we do not collect significant amounts of valuable personal data or sensitive business
data from others, our internal computer systems are under a light to moderate level of risk from hackers or other individuals with malicious
intent to gain unauthorized access to our computer systems. Cyberattacks are growing in number and sophistication and are an ongoing
threat to business computer systems, which are used to operate the business on a day to day basis. Our computer systems could be vulnerable
to security breaches, computer viruses, or other events. The failure of our information technology systems, our inability to successfully
maintain our information or any compromise of the integrity or security of the data we generate from our systems or an event resulting
in the unauthorized disclosure of confidential information or degradation of services provided by critical business systems, whether
by us directly or our third-party service providers, could adversely affect our business operations, sales, reputation with current and
potential customers, associates or vendors, results of operations, product development and make us unable or limit our ability to respond
to customers' demands.

 We have incorporated
into our data network various on and off-site data backup processes which should allow us to mitigate any data loss events, however our
information technology systems are vulnerable to damage or interruption from:

 hurricanes, fire, flood
 and other natural disasters

 power outage

 internet, computer system,
 telecommunications or data network failure Hacking as well as malware, computer viruses, ransomware and similar malicious software
 code

 Environmental
Regulations

 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 2023, there were no material capital expenditures for environmental control facilities
and no such material expenditures are anticipated.

 Climate Change. With no products in
ongoing production in 2023 from OEMs, and only limited sales of product from existing inventory in 2023, the Company did not experience
any direct, material impact on business and financial condition in 2023 from pending or existing climate-change related legislation,
regulations, and international accords in the U.S., the physical impacts of climate change, or perceived indirect material impact from
business trends. On March 6, 2024, the Commission adopted final rules to require registrants to disclose certain climate-related
information in registration statements and Form 10-K annual reports. The Company is uncertain as of the date of the filing of this Form
10-K on the impact of these new rules on the Company. On March 15, 2024, the U.S. Fifth Circuit Court of Appeals granted an administrative
stay of the Commission's new climate change disclosure rules. This judicial stay was lifted on March 22, 2024, due to court
challenges to Commission's new climate change disclosure rules being consolidated in the Eighth Circuit court.

 Employees

 As of December 31, 2023, we employed 5 employees and
consultants: 2 in our U.S. office and 3 individual consultants, 2 of which resided in Hong Kong, formerly employees of our Hong Kong operation.
We consider our relations with our employees to be good. None of our employees are covered by a collective bargaining agreement. We believe
that our staff is adequate to handle the current operations, but we recognize that the new product line and social media marketing may
require additional personnel. Our ability to hire additional personnel is subject to adequate revenue flow and funding.

 The following table sets forth the number of individuals
by function:

 Employee Function

 Number of Employees

 Executive

 Sales/Customer Service/Distribution

 Research & Development/Technology/Product Development

 Administrative

 TOTAL

 Corporate Information

 Our principal executive offices are located
at #144-V, 10 Fairway Drive Suite 100, Deerfield Beach, Florida USA 33441. Our telephone number is (954)570-8889 and our website is at
URL: www.capstonecompaniesinc.com. Our U.S. subsidiaries operate out of our principal executive offices.

 We file our financial information and other
materials required under the Exchange Act electronically with the SEC. These materials can be accessed electronically via the Internet
at www.sec.gov. Such materials and other information about the Company are also available through our corporate website:
Any URL referenced in this Form 10-K report does not incorporate by reference or otherwise the contents of the website pages accessed
through the referenced URL.

 Government Regulation

 Our operations are subject to regulation by
federal and state securities authorities as well as various federal, state, foreign and local laws and regulations governing a consumer
products company and a for-profit business. We are not subject to any U.S. federal, state or local regulation that poses, in our opinion,
any special or unusual burden or obstacle to conducting our business and financial affairs. Our main concern, although greatly diminished
in terms of government regulation is the changing regulatory environment in China and greater Asia and its impact on our ability to access
manufacturing sources and obtain our specific consumer products. Despite some political uncertainty, Thailand continues to encourage foreign
direct investment as a means of promoting economic development, employment, and technology transfer. We established Thailand as an alternative
to China. While the general trend in China has to be conducive to trade and commerce in terms of U.S. companies conducting business with
domestic companies, China is a still a single-party nation-state in which the central government has the power to dramatically and immediately
change its trade and commercial policies and laws.

 The Company's Hong Kong SAR subsidiary
is dormant and the Company does not have a corporate presence in Hong Kong as of 2023. Hong Kong and China remain a possible source for
research and development for products and product production in the future. As such, Chinese and Hong Kong legal developments remain
a potential, pertinent issue for the Company.

 The Chinese government has also imposed its
laws, policies and directives in Hong Kong SAR, which has created uncertainty about whether Hong Kong SAR will continue to encourage
and enable foreign companies to conduct business in Hong Kong SAR without undue interference from the Chinese government. Chinese government
intervention in Hong Kong's political and legal affairs since 2020, which has taken the form of unilaterally imposing Chinese laws
and policies in Hong Kong, create a heightened threat of Hong Kong's traditional pro-foreign business policies, regulation and
economic environment being altered to suit national security concerns and international objectives of the Chinese government and becoming
untenable for foreign businesses, especially U.S. companies conducting business in Hong Kong in light of growing U.S.-Chinese tensions
in international affairs and global economic competition. Chinese government's imposition of the National Security Law in Hong
King on June 30, 2020, undermined Hong Kong's autonomy and introduced heightened uncertainty for foreign and local firms operating
in Hong Kong. On March 5, 2022, Chinese Premier Li Keqiang asserted that Beijing intends to exercise "overall jurisdiction over
the two SARs," referring to Hong Kong and Macau. Political or military conflict between the United States and China, who are rivals
for power and influence in Asia and to an increasing extent all along the Pacific Rim as well as being diametrically opposed to one another
over the status of Taiwan, could provoke an even more strident, anti-U.S. change in Chinese trade or commercial laws and regulation,
including Hong Kong trade and commercial laws, that makes it more difficult or expensive for us to obtain consumer products.

 New Hong Kong Security Law. On March
19, 2024, effective March 23, 2024, Hong Kong Legislative Council unanimously passed the Safeguarding National Security Ordinance under
Article 23 of the Basic Law ("NSO Act"). The NSO Act greatly expands the authority of the Hong Kong government to respond to
and govern: treason, insurrection, sedition, theft of state secrets, espionage, sabotage and foreign interference in Hong Kong political
affairs. As of the filing of this Form 10-K, the Company is uncertain on the impact of the 212-page NSO Act on the Company's business
and financial condition and impact of regulation thereon. Many aspects of the NSO Act, in terms of enforcement and implementing rules
and policy, are unclear or not in existence as of the filing of this Form 10-K.

 While Thailand has experienced a degree of political
instability for decades, due to the influence and intervention of the Thai military in political affairs, the trade and commercial environment
in Thailand has been generally receptive to and encouraging foreign commerce in Thailand. U.S. State Department 2023 assessment of Thailand
concluded that Thailand remains encouraging to foreign investment and commerce. Due to uncertainties associated with conducting business
in China and Hong Kong, the Company established manufacturing capabilities in Thailand through a local contract manufacturing concern
in order to reduce reliance on China and Hong Kong for products and engineering.

 Working Capital Requirements and Financing

 In order to successfully launch the online Connected
Surfaces business, the Company was required to maintain sufficient on hand available inventory levels, to allow for immediate fulfilment
of an online order. This required additional investment combined with investments in new product expansion of Connected Surfaces, new
product molds, product testing and outside certifications, package design work, and further expansion of its capabilities in Thailand,
the Company may require additional working capital.

 On April 5, 2021, the Company entered into five
separate securities purchase agreements ("SPAs") whereby the Company privately placed an aggregate of 2,496,667 shares of
Common Stock for an aggregate purchase price $1,498,000 (transactions being referred to as the "Private Placement"). The
five investors in the Private Placement consisted of four private equity funds and one individual – all being "accredited
investors" (under Rule 501(a) of Regulation D under the Securities Act of 1933, as amended, ("Securities Act"). The
$1,498,000 in proceeds from the Private Placement was used mostly to purchase start up inventory for the Company's new Smart Mirror
product line, for a major online e-commerce fulfilment company, and the remainder for advertising and working capital.

 On July 2, 2021, the Board of Directors ("Board")
resolved that the Company required a purchase order funding facility to procure additional inventory to support the online Smart Mirror
product. The Board resolved that certain Directors could negotiate the terms of a Purchase Order Funding Agreement for up to $1,020,000
with Directors Stewart Wallach and J. Postal and E. Fleisig, a natural person. On October 18, 2021 the Company received the $1,020,000
funding under this agreement. The note payable is due on September 13, 2024. These loans may be prepaid in full or partially without any
penalty.

 On May 1, 2022, the Company negotiated three
$200,000 working capital funding agreements, to provide $600,000 in funding for daily operations. The Board resolved that certain Directors
could negotiate the terms of a Working Capital Funding Agreement for up to a total of $600,000, with Directors S. Wallach (through Group
Nexus, a company controlled by Mr. Wallach), J. Postal and Mouhaned Khoury, a natural person. Under
these agreements the interest terms are 5% based on a 365-day year, maturing May 1, 2024. These loans may be prepaid in full or
partially without any penalty.

 On October 13, 2022, the Company negotiated
a $50,000 Working Capital Funding agreement with Jeffrey Postal, a director, to provide funding for daily operations (the "Working
Capital Funding Agreement"). The term of this agreement is 18 months and principal accrues simple interest at a rate of 5 percent
per annum. The loan may be prepaid in full or partially without any penalty.

 On December
1, 2022, the Company negotiated a $50,000 Working Capital Funding agreement with Jeffrey Postal, a director, to provide funding for daily
operations (the "Working Capital Funding Agreement"). The term of this agreement is 18 months and principal accrues simple
interest at a rate of 5 percent per annum, maturing June 1, 2024. The loan may be prepaid in full or partially without any penalty.

 On
January 3, 2023, the Company negotiated a $40,000 Working Capital Funding agreement with Director S. Wallach (through Group Nexus, a
company controlled by Mr. Wallach), to provide funding for daily operations. Principal accrues simple interest at a rate of 5 percent
per annum, maturing June 15, 2024. The loan may be prepaid in full or partially without any penalty.

 On
March 27, 2023, the Company negotiated a Working Capital Funding agreement with Director S. Wallach to provide funding for daily operations.
Total funding under the agreement amounted to $592,500 as of December 31, 2023. Principal accrues simple interest at a rate of 5 percent
per annum, maturing June 15, 2024. The loan may be prepaid in full or partially without any penalty.

ability to maintain sufficient working capital is highly dependent upon achieving expected operating results. Failure to achieve expected
operating results could have a material adverse effect on the Company's working capital, ability to obtain financing, and its operations
in the future.

 In addition,
we intend to seek alternative sources of liquidity, including but not limited to accessing the capital markets, or other alternative
financing measures. However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital
markets on terms acceptable to us. An economic recession or a slow recovery could adversely affect our business and liquidity.

liquidity and cash requirements are discussed more fully in Part II, Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, below.

 Item 1A. Risk Factors.

 Described below
and throughout this Form 10-K report are certain factors and risks that the Company's management believes are applicable to the
Company's business and the industries in which it operates. If any of the described events occur, the Company's business,
results of operations, financial condition, liquidity, or access to funding could be materially adversely affected. When stated below
that a risk or factor may have a material adverse effect on the Company business, it means that such risk may have one or more of these
effects. There may be additional risks that are not presently material or known. There are also risks within the economy, the industry,
and the capital markets that could have a material adverse effect on the Company, including those associated with an economic recession,
inflation, a global economic slowdown, political instability, government regulation (including tax regulation), employee attraction and
retention, and customers' inability or refusal to pay for the products and services provided by the company. There are also risks
associated with the occurrence of extraordinary events, such as terrorist attacks or natural disasters (such as tsunamis, hurricanes,
tornadoes, and floods) and pandemics or epidemics. These risks and factors affect businesses generally, including the Company, its customers
and suppliers and, as a result, are not discussed in detail below, but are applicable to the Company. As a "penny stock"
without primary market maker support, any investment in our Common Stock is highly risky and should only be considered by investors who
can afford to lose their entire investment and do not require immediate liquidity. These risk factors are not the only risks that we
or our subsidiaries may face. Additional risks and uncertainties not presently known to us or not currently believed to be important
also may adversely affect our business.

 Business and Operational
Risks

 Our auditors have issued a going concern opinion,
and we will not be able to achieve our objectives and will have to cease operations if we cannot adequately fund our operations.

 Our public auditors issued a going concern opinion
in connection with the audit of our annual financial statements for the fiscal year ended December 31, 2023. A going concern opinion
means that there is substantial doubt that the company can continue as an ongoing business for the next 12 months. If we are unable to
continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution
could be significantly lower than the values reflected in our financial statements. In addition, the inclusion of an explanatory paragraph
regarding substantial doubt about our ability to continue as a going concern and our lack of cash resources may materially adversely
affect our share price and our ability to raise new capital or to enter into critical contractual relations with third parties. There
is no assurance that we will be able to adequately fund our operations in the future.

 The declining revenues in 2023 and 2022 of our
primary business line of LED lighting products ceasing to be a revenue source in 2023, and the Connected Surfaces product line not becoming
a replacement revenue source have resulted in significant operating losses and imposed a need to sustain operations with outside funding
of working capital. If the Company cannot obtain adequate, affordable funding, whether equity or debt, as needed, the Company will have
difficulty sustaining the Company as a going concern.

 Cash flow from operations was and is not sufficient
to sustain operations and support optimal marketing efforts of Connected Surfaces Smart Mirror product line as a primary revenue source.
In order to attempt to secure adequate working capital in 2023, we took the actions detailed below. These actions are not deemed sufficient
to meet all expected working capital needs for 2024 for a full implementation of our plan to establish the Connected Surfaces product
lines as viable product lines and to meet general operating overhead needs. We anticipate the need to raise working capital funding to
meet our funding needs in 2024 and supplement any cash flow from operations. Because of the low market price and liquidity of our Common
Stock, our declining financial performance, lack of hard assets required for asset based loans, and our transition from a declining product
line and primary source to a new, unproven product line, we may be unable to raise necessary, affordable and timely working capital in
2024 and that failure could be fatal to our ability to sustain the Company as an operating company.

 During the year ended December 31, 2023, the Company
used cash in operations of approximately $614,527 and generated net operating losses of approximately $1,634,000. As of December
31, 2023, the Company has working capital deficit of $3,279,303 and an accumulated deficit of $10,797,216. The Company's
cash balance decreased approximately $25,000 from $61,463 as of December 31, 2022 to $36,466 as of December 31, 2023. 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 effort to launch the Connected Chef product line as the primary revenue source in 2024. While certain directors have provided
working capital funding to the Company in the past, including 2023, there is no guarantee, and none can be given that these insiders
will do so when and as required by the Company in 2024.

 The Company does not have an alternative product
line to replace the Connected Chef product line in 2024. If the Connected Chef product line does not become a viable revenue source in
2024, the Company will need funding to sustain operations and efforts to establish the Connected Chef product line as a viable revenue
source. The Company has not received pre-production orders for the Connected Chef product line and the Company lacks the working capital
to extensively market the Connected Chef, which is not in production.

 The Company does not have an alternative product line
to the Connected Surfaces Connected Chef product line and would be unable to develop an alternative in 2024 due to a lack of adequate
working capital. The financial condition of the Company has caused the Company to seek to effect an extraordinary corporate transaction
to protect shareholder value and sustain the Company as an operating company. This effort is being pursued in conjunction with efforts
to secure pre-production orders for the Connected Chef. An extraordinary corporate transaction could include a merger or sale of the Company
or reorganization of the Company under bankruptcy protection or otherwise or could result in the liquidation of the current business and
efforts to fund a new business line in 2024 if adequate, affordable funding is available. The Company may be unable to effect, if necessary,
an extraordinary corporate transaction or obtain significant funding for a new product line in 2024 to sustain the Company as an operating
company. Reorganization under the protection of the bankruptcy code is one possible extraordinary corporate transaction if the Connected
Chef product lines does not become a viable revenue source and other extraordinary corporate transactions are not possible. While the
Company is continuing efforts to establish the Connected Chef product line as a viable revenue source, the Company is exploring possible
alternative new business lines, which alternative business lines could be internally developed with sufficient funding or acquired in
a merger or asset acquisition. If the Company receives a pre-production bulk order for the Connected Chef, the Company would have
to raise working capital to fund production and the Company may be unable to raise that funding on affordable terms or at all.

 Our operating results and sustainability
as an operating company are substantially dependent on the acceptance of new products or finding a new business line.

 If the Company does not located a new business
line capable for sustaining the Company as an operating company, then the Connected Chef product line is the only available product line
to replace the matured LED product line and the success of the Connected Chef product line is critical to our continued operation as a
consumer product company. Even if the Connected Chef receives pre-production orders, there can be no assurance that the Connected Chef
would generate sufficient sales or continued sales to fund ongoing operations of the Company. Our future success depends on our ability
to deliver innovative, higher performing and lower cost solutions for existing and new markets and for customers to accept those solutions.
As a small company, innovation is critical to our ability to compete with larger competitors. We must introduce new products in a timely
and cost-effective manner, and we must secure production orders for those products from our customers. The development of new products
is a highly complex process, and we have in some instances experienced delays in completing the development and introduction of new products.
Our research and development efforts are aimed at solving increasingly complex problems, and we do not expect that all our projects will
be successful. The successful development, introduction and acceptance of new products depend on a number of factors, including the following:

 Having adequate, affordable, timely working capital
 funding.

 achievement of technology
 solutions required to make commercially viable products.

 the accuracy of our predictions
 for market requirements.

 our ability to predict,
 influence and / or reach evolving consumer and technical standards.

 our timely completion of
 product designs and development.

 our ability to effectively
 transfer increasingly complex products and technology from development to manufacturing; and

 market acceptance of our
 new product by retailers and consumers and availability of adequate inventory to timely meet demands of retailers and customers.

 If any of these
or other similar factors becomes problematic, we may not be able to deliver and introduce new products in a timely or cost-effective
manner and be unable to effectively compete in the product market segment.

 Our
operations depend on a small number of personnel and the loss of key personnel or the inability to replace or add key personnel 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. Company has not developed personnel to readily replace key personnel. The loss of key personnel, being Stewart
Wallach, Company's Chief Executive Officer, would severely harm the business. As of December 31, 2022, James McClinton, our Chief
Financial Officer for over 30 years, elected to retire. The Company hired Dana Eschenburg Perez, as an external consultant as of January
1, 2023 to perform the functions of Chief Financial Officer. We do not have key man life insurance.

 Our personnel are focused on executive management
or marketing. Our marketing is supplemented by contractor sales agencies, and we have a relatively small research and development capability
overseas. We rely on 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 business operations if we 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.
If our operations grow, we may have to increase the number of our personnel in the future to handle any growth or expansion of product
lines or product categories. 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 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 our sales, profitability
and financial condition and our prospects for growth. Historic inflation in 2022 has created uncertainty about consumer confidence and
its impact on demand for our products in 2023.

 Many of our products may be considered discretionary
items for consumers, including the Connected Chef. Factors affecting the level of consumer spending for such discretionary items include
general economic conditions, unemployment, the hyper-inflation affecting the U.S. in 2023, the availability of consumer credit and consumer
confidence in future economic conditions. Uncertainty in U.S. economic conditions continues, particularly considering the impacts rising
inflation, and trends in consumer discretionary spending remain unpredictable. Historically, consumer purchases of discretionary items
tend to decline during recessionary periods periods of high inflation, when disposable income is lower or during other periods of economic
instability or uncertainty, which may lead to declines in sales and slow our long-term growth expectations. Any near or long-term downturn
in the U.S. market in which we sell most of our products, or other key markets, may materially harm our sales, profitability and financial
condition and our prospects for growth. The "Big Box" retailers that are the traditional buyers of our products would be less
inclined to purchase our products, including the Connected Chef, if economic concerns (including inflation concerns) are predicted to
reduce consumer purchases of discretionary items. Continued inflationary pressure on essentials, like food prices, will reduce consumer
purchases of discretionary items.

 If we are unable to effectively develop,
manage and expand our marketing programs and sales channels for our products, our operating results may suffer.

 When we actively market a product line in production,
or for a new product line like Connected Chef, then developing, maintaining and expanding marketing programs and sales channel will be
a significant challenge and risk factor for the Company. Since we typically seek to target niche markets for a product line, then effective
marketing and use of sales channels becomes critical to the successful launch of a new product line, especially with limited working capital.
We do not have an extensive staff devoted to e-commerce and social media promotions and we have not retained outside firms to assist on
a regular basis in this effort. The Company is seeking funding to support the promotion of the Connected Chef product line. Attaining
affordable funding of the marketing effort may be critical to success of the marketing and promotion of the Connected Chef. The cost and
difficulty of establishing a new product line is difficult to estimate and difficult to fund by a small company like the Company, especially
when that effort is faced with the inherent difficulties of penetrating a new product segment like smart devices, which has a growing
number of competitors and has an ongoing, evolving need to meet changing consumer expectations and demands for enhanced or new technologies
and functions; and against numerous competitors with significantly greater financial and technology resources, brand recognition and brand
loyalty by consumers and logistical and marketing capabilities than our company.

 The markets in which we operate are highly
competitive and have evolving technical or consumer requirements.

 In the consumer lighting market, which is a
maturing market for us, we compete with companies that manufacture and sell traditional lighting products and we compete with companies
that make smart mirrors for residential use, we compete with companies that have greater market share, name recognition and technical
resources than we do. Competitors continue to offer new products with aggressive pricing. Aggressive pricing actions by our competitors
in our businesses could reduce margins if we are not able to reduce costs at an equal or greater rate than the sales price decline.

 With the increased demand for consumer smart
products, including the Connected Surfaces, which is the focus of our business, we will continue to face increased competition in the
future across our businesses. 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.

 As competition increases in smart products,
including connected surfaces, we need to continue to develop new products that meet or exceed the needs of our customers. Adequate, affordable
and available funding is key to our ability to compete in the smart mirror markets. Competitors may also try to align with some of our
strategic customers. 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.

 As is true in any consumer product industry,
the ability of a company to respond to changing consumer tastes and purchasing habits is key to success in consumer products. Introduction
of new products brings the risk of increased development, production and marketing costs as well as that investment failing to produce
revenues or profits that justify the investment in new products.

 If our
products 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.

 The manufacturing
of our products involves complex processes. We do not have sufficient consumer experience with our products to determine the extent of
any customer service problems or product returns and defects and those factors impact on revenues. Our customers specify quality, performance
and reliability standards that we must meet. If our products do not meet these standards, we may be required to replace or rework the
products. In some cases, our products may contain undetected defects that only become evident after shipment and used by consumers. Even
if our products meet standard specifications, our 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 quality standards are critical to our business and financial performance.

 If failures
or defects occur, they could result in significant losses or product recalls due to:

 costs associated with the
 removal, collection and destruction of the product.

 payments made to replace
 product.

 costs associated with repairing
 the product.

 the write-down or destruction
 of existing inventory.

 insurance recoveries that
 fail to cover the full costs associated with product recalls.

 lost sales due to the unavailability
 of product for a period.

 delays, cancellations or
 rescheduling of order for our products; or

 increased product returns.

 For any products being sold and purchased by consumers,
a significant product recall could also result in 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 critical Connected Surfaces product launch.
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) 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. We provide warranty periods of 1 year on our products. Although we believe our
warranty reserves are appropriate, we are making projections about the future reliability of new products and technologies, and we may
experience increased variability in warranty claims. Increased warranty claims could result in significant losses due to a rise in warranty
expense and costs associated with customer support.

 Our results of operations could be materially
harmed if we are unable to accurately forecast demand for our products.

 If we do not accurately predict consumer demand
for products, we may be unable to produce products that are in demand and our financial performance will suffer.

 To ensure adequate inventory supply for the
new product categories and to support e-commerce, we must forecast inventory needs and place orders with our manufacturers before firm
orders are placed by our customers. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a
shortage of products to deliver to our online customers. With the logistical problems referenced above, the forecast of inventory needs
is even more crucial to our business and financial performance and efforts to establish a viable Connected Chef product line and revenue
source. We could accurately predict inventory needs and timely place orders for products and then have logistical problems delay delivering
of products and result in a lack of inventory to fill orders. The ability to timely fill orders for the Connected Chef is an important
achievement in the effort to establish the product line as a viable revenue source.

 Factors that
could affect our ability to accurately forecast demand for our products include:

 an increase or decrease
 in consumer demand for our products.

 our failure to accurately
 forecast consumer acceptance for our new products.

 product introductions by
 competitors.

 unanticipated changes in
 general market conditions or other factors, which may result in cancellations of advance orders or a reduction or increase in the
 rate of reorders or at-once orders placed by retailers.

 weakening of economic conditions
 or consumer confidence in future economic conditions, which could reduce demand for discretionary items, such as our products; and

 terrorism or acts of war,
 or the threat thereof, political or labor instability or unrest or public health concerns and disease epidemics, such as the COVID-19
 pandemic, which could adversely affect consumer confidence and spending or interrupt production and distribution of product and raw
 materials.

 constraints on marketing
 and sales efforts and analysis due to limited financial resources.

 Inventory levels in excess of customer 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 underestimate the demand for our products, our manufacturers
may not be able to produce products to meet our customer 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 electronics
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.

 Fluctuations in the cost of
products could negatively affect our operating results.

 The components used
by our suppliers and manufacturers are 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 manufacturers are 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 our products are manufactured abroad, our 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
our cost of products and have an adverse effect on our profit margins, results of operations and financial condition.

 Regulatory and
Legal Risks

 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 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 technical personnel and management, even if the
litigation results in a determination favorable to us. In the event of an adverse result in such litigation, we could be required to:

 pay substantial damages.

 indemnify our customers.

 stop the manufacture, use
 and sale of products found to be infringing.

 discontinue the use of
 processes found to be infringing.

 expend significant resources
 to develop non-infringing products or processes; or

 obtain a license to use
 third party technology.

 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 products. Additionally, if an infringement
claim 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.

 Our operations in foreign
countries expose us to certain risks inherent in doing business internationally, which may adversely affect our business, results of
operations or financial condition.

 We have revenue,
operations and contract manufacturing arrangements in overseas that 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:

 Delays in shipping or production
 of products or increased costs in production and shipping of products from international sources, including delays in unloading shipped
 products in U.S. ports.

 protection of intellectual
 property and trade secrets.

 tariffs, customs, trade
 sanctions, trade embargoes and other barriers to importing/exporting materials and products in a cost effective and timely manner,
 or changes in applicable tariffs or custom rules.

 rising labor costs or labor
 unrest.

 the burden of complying
 with foreign and international laws.

 adverse tax consequences.

 the risk that because our
 brand names may not be locally or nationally recognized, we must spend significant amounts of time and money to build brand recognition
 without certainty that we will be successful.

 political conflict or trade
 wars affecting our efforts to conduct business abroad.

 Changes in
regulatory, geopolitical, social, economic, or monetary policies and other factors may have a material adverse effect on our business
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 product development and production (supplemented
by contractors in China). This lack of experience may delay accomplishing our business milestones for development or production of product
from our Thailand OEM's.

 Our financial
results and ability to grow our business may be negatively impacted by economic, regulatory and political risks beyond our control.

 All of our manufacturers are located outside
of the United States in 2023. As a result, we are subject to risks associated with doing business abroad, including:

 political or labor unrest,
 terrorism, public health crises, disease epidemics and economic instability resulting in the disruption of trade from foreign countries
 in which our products are manufactured.

 currency exchange fluctuations
 or requirements to transact in specific currencies.

 the imposition of new laws
 and regulations or government-imposed protective or preventative measures, including those relating to labor conditions, quality
 and safety standards and disease epidemics or other public health concerns, as well as rules and regulations regarding climate change.

 actions of foreign or U.S.
 governmental authorities impacting trade and foreign investment, particularly during periods of heightened tension between U.S. and
 foreign governments, including the imposition of new import limitations, duties, anti-dumping penalties, trade restrictions or restrictions
 on the transfer of funds.

 reduced protection for
 intellectual property rights in some countries.

 disruptions or delays in
 shipments.

 changes in local economic
 conditions in countries where our customers, manufacturers and suppliers are located.

 These risks
could negatively affect the ability of our 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.

 Additional Financial
Risk Factors

 Our inadequate or expensive
funding and financing alternatives.

 Our current
short-term debt level as of December 31, 2023 and 2022 was $2,540,476 and $620,137, respectively.

will need additional outside working capital funding in fiscal year 2024 to support the Company's operations and develop and market
the Connected Chef product line.

 Cash flow from
operations are primarily dependent on our net income adjusted for non-cash expenses and the timing of collections of receivables, level
of inventory and payments to suppliers.

 Other adverse consequences could
include:

 a significant portion of
 our cash from operations could be dedicated to the payment of interest and principal on future debt, which could reduce the funds
 available for operations.

 the level of our future
 debt could leave us vulnerable in a period of significant economic downturn; and

 we may not be financially
 able to withstand significant and sustained competitive pressures.

 Since we are transitioning our product focus
to Connected Surfaces products past financial performance is not indicative of any future growth or future financial performance. We will
have to establish our Connected Surfaces product line in the face of extensive competition as an entirely new segment within the Smart
Home category.

 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 2023 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. However, as the Company volumes increase, the leveraged buying power has enabled the Company to minimize
the impact on 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.

 If we
fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or
timely report our financial condition or results of operations. If our internal control over financial reporting is not effective, it
may adversely affect investor confidence in us and the price of our common stock.

 As a public company
we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal control.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial
reporting and provide a management report on our internal control over financial reporting. If we identify material weaknesses in our
internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.
If we are unable to assert that our internal control over financial reporting is effective, if our independent registered public accounting
firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, or if we are unable to
comply with the requirements of the Sarbanes-Oxley Act in a timely manner, then, we may be late with the filing of our periodic reports,
investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could
be negatively affected.

 Risk Factors for
our Common Stock

 Penny Stock and Volatile Market
Price.

 The Company's Common Stock is subject to possible
volatile trading, including rapid increases and decreases in market price due to trading in the open market. Company's declining
business and financial condition has depressed the already low market price and trading of the Company's Common Stock in
2023. The Company's Common Stock lacks the primary market makers and institutional investors who can protect the market price from
volatility in trading and market price. Company does not have any research analyst issuing recommendations. The common stock is also
a "penny stock" under SEC rules and suffers the limitations and burdens in trading of penny stocks. This lack of market support
and penny stock status means that trading, especially by day traders, can cause a rapid increase or decrease in market price of the common
stock and makes any investment in the common stock extremely risky and unsuitable for investors who cannot withstand the loss of their
entire investment and requires liquidity in the investment. An investment in the Common Stock remains an extremely risky investment that
is not suitable for investors who cannot afford the loss of investment and can withstand or tolerate a lack of liquidity.

 We are also a former
shell company under current SEC rules and interpretations thereof. As such, our stock transfer agent requires a legal opinion as well
as other paperwork to lift restrictive legends from stock certificates for non-affiliated as well as affiliated shareholders. The restrictive
legends can 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 will 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 make 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.

 Further, our common stock is quoted on The OTC Markets
Group, Inc. QB venture market. Many brokerage houses will not accept OTC stocks for deposit or for trading due to the compliance burdens
and reduced financial benefits of trading in OTC stocks. Some shareholders may hold paper stock certificates and experience difficulty
in finding a broker who will accept such stock or experience difficulty in meeting the requirements for deposit of such stock in a brokerage
account. These difficulties further decreases the appeal of our common stock to investors.

 No Dividends.

 We have not paid,
and we do not intend to pay dividends on our Common Stock in the foreseeable future. We currently intend to retain all future earnings,
if any, to finance our current and proposed business activities. We may also incur indebtedness in the future that may further prohibit
or effectively restrict the payment of cash dividends on our Common Stock.

 Our controlling
stockholders may take actions that conflict with your interests.

 Certain of
our officers and directors beneficially own approximately 40% of our outstanding common stock as of the date hereof. Assuming support
from public shareholders with a sufficient voting power, then our officers and directors will be able to exercise control over all matters
requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant
corporate transactions, and they will have significant control over our management and policies. The directors elected by these stockholders
will be able to influence decisions affecting our capital structure significantly. This control may have the effect of delaying or preventing
changes in control or changes in management or limiting the ability of our other stockholders to approve transactions
that they may deem to be in their best interest. For example, our controlling stockholders will be able to control the sale or other
disposition of our operating businesses and subsidiaries to another entity.

 General Risk Factors

 Consumer shopping preferences and shifts
in distribution channels continue to evolve and could negatively impact our results of operations or our future growth.

 Consumer preferences regarding the shopping
experience continue to rapidly evolve. If we or our wholesale customers do not provide consumers with an attractive shopping experience,
our brand image and results of operations could be negatively impacted. If we do not successfully execute this strategy or continue to
provide an engaging and user-friendly digital commerce platform that attracts consumers, our brand image and results of operations could
be negatively impacted as well as our opportunities for future growth.

 The Company's operations could be
disrupted by natural or human causes beyond its control.

 The Company's operations 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 participates in a Chinese and Thailand product supply chain, 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 conduct normal business operations
could be impacted which could adversely affect the Company's results of operations and liquidity. Most of the Company products
are sourced and made in China and Thailand and an increased or prolonged disruption could substantially and adversely impact the Company's
production of products. Currently, the Company's Chinese and Thailand suppliers have reopened and building to full production capabilities.

 We may
not successfully execute our long-term strategies, which may negatively impact our results of operations.

 Our ability
to execute on our long-term strategies depends, in part, on successfully executing on strategic growth initiatives in key areas, such
as our new Connected Chef product. Our growth in these areas depends on our ability to continue to successfully market these new products
to existing customers, grow our e-commerce and mobile application offerings in the U.S. market and continue to successfully increase
our product offerings in the Connected Surfaces category. Our long-term strategy depends on 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.

 Our products
are made in China and Thailand. We 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.

 Our results
of operations and financial condition could be seriously impacted by security breaches, including cybersecurity incidents.

 Failure to
effectively prevent, detect and recover from security breaches, including attacks on information technology and infrastructure by hackers;
viruses; breaches due to employee error or actions; or other disruptions could result in misuse of our assets, business disruptions,
loss of property, and confidential business information. Such attacks could result in unauthorized parties gaining access to at least
certain confidential business information. However, to date, we have not experienced any financial impact, changes in the competitive
environment or business operations that we attribute to such attacks. Although management does not believe that we have experienced any
security breaches or cybersecurity incidents, there can be no assurance that we will not suffer such attacks in the future. We actively
manage the risks within our control that could lead to business disruptions and security breaches and have expended significant resources
to enhance our control environment, processes, practices and other protective measures. Despite these efforts, as these threats continue
to evolve, particularly around cybersecurity, such events could adversely affect our business, financial condition or results of operations.

 We expect
our results of operations to fluctuate on a quarterly and annual basis.

 Company's
revenue and results of operations could vary significantly from period to period and may fail to match expectations because of a variety
of factors, some of which are outside of our control. As a result of the potential variations in our revenue and results of operations,
period-to-period comparisons may not be meaningful and the results of any one period should not be relied on as an indication of future
performance. In addition, our results of operations may not meet the expectations of investors or public market analysts who follow us,
which may adversely affect our stock price. Since the Connected Chef is a new product line, we lack the operational experience to determine
if Connected Chef has seasonal sales cycles.

 Item 1B.
Unresolved SEC Staff Letters.

 None for the
fiscal year ended December 31, 2023.

 Item 2. Properties.

 The Company had operating
lease agreements for its principal executive offices in Fort Lauderdale, Florida that expired June 30, 2023. The Company's principal
executive office were located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. The Company did not renew the expiring
operating lease.

 On July 1, 2023,
the Company commenced an office space license to use designated office space at #144-V, 10 Fairway Drive, Suite 1000, Deerfield Beach,
Florida 33441. The short-term lease is a month-to-month agreement for professional office space for a monthly fee of $75 with a security
deposit of $75. The agreement may be terminated by the Company or the licensor of the office space upon a written notice provided thirty
(30) days in advance.

has one short storage rental in effect as of 2023 with a duration of less than twelve months.

 Item 1C. Cybersecurity.

 Our information systems consist
of computer systems used by the Company's Chief Executive Officer and chief financial officer. They actively monitor our threat
environment for cybersecurity threats using various methods, including automated detection tools, scans of the threat environment, investigations
of potential threats they discover or that are reported to them, and reports and services that identify threats. They monitor our information
systems for vulnerabilities using internal and third-party penetration testing, intelligence feeds, and vulnerability databases.

 Company's
computer systems involve the use of third-party technology or service providers, or vendors, such as hosting platforms, open-source software,
and application providers. Employees are provided specific guidance to mitigate the risk of a cybersecurity attack. This guidance includes
safeguards over confidential data, being aware of suspicious emails, choosing passwords, protection of Company issued and use of personal
devices, managing large data transfers. Employees are directed to immediately contact the Chief Executive Officer if they encounter any
suspicious activity.

 If a cybersecurity risk is identified,
Company's policy is to use vendors to assist the Company to identify, assess, and manage material risks from cybersecurity threats
to corporate systems, which consulting firms may include consulting firms, external legal counsel, incident response vendors, auditors,
monitoring technology, and cybersecurity data providers.

 The Company's Chief Executive
Officer is tasked with reporting on cybersecurity measures and issues to the entire board of directors. In the event of a cybersecurity
incident, Company policy is for the Company Chief Executive Officer to report the cybersecurity incident to the Company's board
of directors and take remedial actions to mitigate and remediate cybersecurity incidents.

 As of and for the year ended December 31,
2023, there have been no cybersecurity incidents that have materially affected the Company's business strategy, results of
operations, or financial condition.

 Item 3.
Legal Proceedings.

 We are not
a party to any material pending legal proceedings and, to the best our knowledge, no such action by or against us has been threatened.
From time to time, we may be subject to legal proceedings and claims that arise in the ordinary course of business. Although occasional
adverse decisions or settlements may occur in such routine lawsuits, we believe that the final disposition of such routine lawsuits will
not have material adverse effect on our financial position, results of operations or cash flows.

 Other Legal Matters

 To the best
of our knowledge, none of our directors, officers or owner of record of more than five percent (5%) of the securities of the Company,
or any associate of any such director, officer or security holder is a party adverse to us or has a material interest adverse to us in
reference to pending litigation.

 Item 4.
Mine Safety Disclosures (Not Applicable).

 Item 5.
Market for Registrants Common Equity and Related Stockholder Matters.

Common Stock is quoted on The OTC Markets Group, Inc.'s QB Venture Market Tier under the trading symbol "CAPC".

 As
of March 18, 2024, there were 240 approximately
holders of record (excluding OBO/Street Name accounts) of our Common Stock and estimated 48,826,864 outstanding shares of the Common
Stock.

 Dividend Policy

 We have not
declared or paid any cash or other dividends on shares of our Common Stock in the last seven years, and we presently have no intention
of paying any cash dividends on shares of our Common Stock. We do not currently anticipate, based on existing financial performance,
to be declaring or paying dividends on any series of our preferred stock in the foreseeable future. Our current policy is to retain earnings,
if any, to finance the expansion and development of our business. The future payment of dividends on shares of our Common Stock are at
the sole discretion of our board of directors.

 Recent Sales
of Unregistered Securities

 There were
no unregistered securities sold or issued during the year ended December 31, 2023.

 Unregistered
Sales of Equity Securities and Use of Proceeds.

 Adoption of Stock Repurchase
Plan

 On August 23,
2016, the Company's Board of Directors authorized the Company to implement a stock repurchase plan for up outstanding common stock.
The repurchase plan may be discontinued at any time at the Company's discretion.

 On December
19, 2018, Company entered a Purchase Plan pursuant to Rule 10b5-1 under the Exchange Act, with Wilson Davis & Co., Inc., a registered
broker-dealer. Under the Purchase Plan, Wilson Davis & Co., Inc will make periodic purchases of shares at prevailing market prices,
subject to the terms of the Purchase Plan.

 On May 31,
2019, the Company's Board of Directors the maximum amount of aggregate funding available for possible stock repurchases under the
stock repurchase program remained at $1,000,000 during the renewal period.

 During May
and June 2022, the Company repurchased 66,167 shares of the Company's outstanding common stock in the open market. The total purchase
cost was $11,662.

 On July 7,
2022, the Board of Directors resolved to discontinue the stock purchase agreement.

31, 2023, a total of 816,167 of the Company's common stock was repurchased since the plan was incepted at a total cost of 119,402.
The cost of the repurchased shares were recorded as a reduction of additional paid-in capital.

 Item 6.
Reserved.

 Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations

 This Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and other parts of this Report contain forward-looking statements,
that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions
and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified
by words such as "future," "anticipates," "believes," "estimates," "expects,"
"intends," "plans," "predicts," "will," "would," "could," "can,"
"may," and similar terms. Forward-looking statements are not guarantees of future performance and Company's actual results
may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include,
but are not limited to, those discussed in this Report under the heading "Risk Factors," which are incorporated herein by
reference. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included
in this Report. All information presented herein is based on CAPC's fiscal year 2023 results. Unless otherwise stated, references
to particular years or quarters refer to the CAPC's fiscal years ended in December and the associated quarters of those fiscal years.
Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

 Executive Summary

 Total
net revenue for the year ended December 31, 2023, decreased 45% to $192,176 as compared to $346,474 in the same period of last year.
The net operating loss was approximately $1,634,854 for the year 2023 compared to a net loss of $2,921,514 in 2022. The Company
had an estimated net tax provision in 2023 and 2022 of $35,000 and
$68,000, respectively.

 The following discussion is designed to provide a
better understanding of our audited consolidated financial statements and notes thereto, including a brief overview of our business and
products, key factors that impacted our performance and a summary of operating results.

 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.

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 in 2023. The Connected Surfaces is the Company's effort to establish business in an
emerging segment that is intended for future revenue growth. The smart home segment is the umbrella category in which we intend to participate
with the Connected Surfaces program. The Connected Surfaces products have not enjoyed significant sales in 2023 – either online
or through efforts to sell in bulk to brick-and-mortar, "big box" retailers. The Smart Mirror product line had limited sales
for 2023, and all inventory was expensed as of December 31, 2023.

 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 Management
is actively marketing the Connected Chef tablet to appliance manufacturers and distributors, but the product has no purchase commitments
from retailers as of the date of this filing. Further, the Company will have to raise funding to fund production costs, which funding
may not be available to the Company.

 Principal
Factors Affecting Our Financial Performance

 There are a
number of industry factors that affect our financial performance which include, among others:

 Overall Demand for
 Products and Applications. Our potential for growth depends on the successful introduction and consumer acceptance of the
 Connected Chef. The Company's products are characterized as non-essential and economic conditions, especially consumer uncertainty
 or worries over economic conditions and growth, affect consumer demand. Uncertainty over global economic conditions that may affect
 the U.S. economy is not conducive to consumer purchases of our category of consumer products. These uncertainties make demand difficult
 to forecast for us and our customers.

 Strong and Constantly
 Evolving Competitive Environment. While we have demonstrated our abilities to compete successfully in the retail channels
 since our inception, competition in the marketplace we serve is strong. Many companies have made significant investments in product
 development, production equipment and product marketing. Product pricing pressures exist as market participants often initiate pricing
 strategies to gain or protect market share. To remain competitive, market participants must continuously increase product performance
 or functionality, reduce costs and develop improved ways to support their customers. To address these competitive measures, we invest
 in research and development activities to support new product development, sustain low product costs and deliver higher levels of
 performance and product functionality to differentiate our products in the market.

 Profit Margins.
 The Company's product planning strategies are driven by the need to deliver sustainable profit margins. This, in conjunction
 with close management of related marketing costs, are required to sustain or grow the Company's market presence.

 Affordable Funding.
 The Company needs to secure affordable funding resources to support ongoing product development and new market penetration.

 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.

 Results of operations

 Net Revenues

 For 2023,
revenue was derived from sales of our residential lighting products and Connected Surfaces Smart Mirrors. The residential products
were directed towards consumer home LED lighting for both indoor and outdoor applications while the Smart Mirrors were sold directly
to consumers via e-commerce efforts. We recognize revenue upon shipment of the order to the customer when all performance
obligations have been completed and title has transferred to the customer and in accordance with the respective sale's
contractual arrangements. Each contract on acceptance will have a fixed unit price. All of our sales were to the U.S. market in 2023
and we expect to the U.S Market to continue to be the major source of revenue for the Company. 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.

 Cost
of Goods Sold

 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.

 Gross
Profit

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

Expenses

 Operating expenses
include sales and marketing expenses, consisting of social media advertising, sales representatives' commissions, advertising,
show expense and costs related to employee's compensation. In addition, operating expensed includes charges relating to product
development, office and warehousing, accounting, legal, insurance and stock-based compensation.

 CONSOLIDATED RESULTS
OF OPERATIONS AND OUTLOOK

 December
 31, 2023

 December
 31, 2022

 Dollars

 %
 of Revenue

 Dollars

 %
 of Revenue

 Revenue,
 Net

 $
 192,176

 100.0
 %

 $
 346,474

 100.0
 %

 Increase
 in inventory reserve and inventory write offs

 133,775

 (69.8
)%

 692,154

 (200.0
)%

 Cost
 of sales

 324,041

 (168.6
)%

 256,868

 (73.9
)%

 Gross
 Profit (Loss)

 (265,640
)

 (138.2
)%

 (602,548
)

 (173.9
)%

 Expenses:

 Sales
 and marketing

 75,890

 39.6
 %

 359,535

 103.8
 %

 469,599

 244.8
 %

 817,409

 235.9
 %

 Professional
 fees

 426,157

 221.9
 %

 457,500

 132.0
 %

 Product
 development

 101,409

 52.6
 %

 203,751

 58.8
 %

 Other
 general and administrative

 296,159

 154.2
 %

 480,771

 138.8
 %

 Total
 Operating Expenses

 1,369,214

 713.0
 %

 2,318,966

 669.3
 %

 Loss

 (1,634,854
)

 (851.6
)%

 (2,921,514
)

 (843.2
)%

 Other
 Income (Expenses)

 Miscellaneous
 Income, net

 77,106

 40.1
 %

 394,952

 114.0
 %

 Interest
 expense, net

 (103,741
)

 (54.2
)%

 (69,686
)

 (20.1
)%

 Total
 Other Income, net

 (26,635
)

 (14.1
)%

 325,266

 93.9
 %

 Loss
 Before Tax Benefit

 (1,661,489
)

 (865.1
)%

 (2,596,248
)

 (749.3
)%

 Tax Expense

 0.5
 %

 67,503

 19.5
 %

 Net
 Loss

 $
 (1,696,439
)

 (883.3
)%

 $
 (2,663,751
)

 (768.8
)%

 Net Revenues

 For the year
ended December 31, 2023, net revenues were $192,176, a decrease of $154,298 or 45% from $346,474 in fiscal 2022.

 Due to working
capital constraints during 2023, the Company was unable to effectively market the Smart Mirrors, resulting in lower than anticipated
revenues.

 The Company selectively supports retailer's
initiatives to maximize sales of the Company's products on the retail floor or to assist in developing consumer product awareness,
by providing marketing und allowances to the customer. The Company also provides promotional coupons for the Connected Surfaces Smart
Mirror when determined necessary. 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
$17,000 and $26,700 for the years ended December 31, 2023 and 2022, respectively.

 For the years ended December 31, 2023 and 2022,
international sales were approximately $0 or 0% of revenue and $44,000 or 13 % of revenue, respectively.

 The following table disaggregates net
revenue by major source:

 For the Year Ended December 31, 2023

 For the Year Ended December 31, 2022

 Capstone Brand

 % of Revenue

 Capstone Brand

 % of Revenue

 Lighting Products- U.S.

 $
 65,025

 %

 $
 228,680

 %

 Smart Mirror Products- U.S.

 127,151

 %

 73,154

 %

 Lighting Products-International

 —

 —
 %

 44,640

 %

 Total Revenue

 $
 192,176

 %

 $
 346,474

 %

 Gross Profit
and Cost of Sales

 Gross loss for the year ended December 31, 2023,
was approximately ($265,640), or (138.2%) of net revenues, as compared to ($602,548) or (173.9%) of net revenues, for fiscal 2022.
For the years ended December 31, 2023 and 2022, cost of sales were approximately $458,000 and $949,022, respectively, a reduction of
$491,206 or 22% from the previous year. The gross profit reduction was the direct result of the reduced revenue in the year, relating
to the low sales of the Smart Mirror and reduction in sales of the LED lighting products. Costs represented 239% and 274% of net
revenues for 2023 and 2022, respectively. This increased cost was primarily due to a write off of ending Smart Mirror inventory at December
31, 2023 of $133,775. Management is currently reviewing liquidation opportunities on the Smart Mirror while actively marketing the new
product line of 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.

 Operating Expenses

 Sales and Marketing Expenses

 In fiscal 2023 and 2022, sales and marketing expenses were approximately
$76,000 and $360,000 respectively, a reduction of $284,000 or 79%. As a percent to revenue, 2023 sales and marketing expenses
were 39.6% as compared to 104% in 2022

 Social Media
expense in 2023 was $3,500, a reduction of $142,500 or 98% from $146,0000 in 2022. Advertising and promotional expenses were $4,700 in
2023 as compared to $24,900 in 2022, a reduction of $20,200 or 81%. The decrease in social media and advertising expenses were in connection
with the working capital restraints. Trade Show expense was $0 in 2023 as compared to $113,300 in 2022, a reduction of $113,300 as the
Company did not attend any trade shows during 2023.

Expenses

 For the years
ended December 31, 2023 and 2022 compensation expenses were approximately $469,600 and $817,400, respectively, a reduction of $347,800
or 43.0%. As a percent of net revenues, 2023 expenses were 244.8% as compared to 235.9% in 2022. The Company reduced the workforce during
2023 as a result of the poor sales on the Smart Mirror.

 Professional
Fees

 For fiscal
2023, professional fees were approximately $426,200 compared to $457,500 in 2022, a reduction of $31,300 or 7 %. As a percent of net
revenue 2023 expenses were 221.9% as compared to 132.0% in 2022. In 2023, consulting fees were approximately $190,000 compared to $260,000
for 2022. Accounting, legal and other expenses were $235,700, an increase of $38,100 from $197,600 in the prior year.

 Product
Development Expenses

 For the years ended December 31, 2023, and 2022,
product development expenses were approximately $101,000 and $204,000, respectively, a decrease of $103,000 or 50%. In 2023 the Company
invested $79,000 in the development of the Connected Chef compared to $44,000 in 2022. In 2023, the Company spent $22,000 in Smart
Mirror development compared to approximately $138,000 in 2022.

 Other General
and Administrative Expenses

 For fiscal 2023 and 2022, other general and
administration expenses were approximately $296,000 and $481,000, respectively, a decrease of $185,000 or 38.6%. As a percent
to revenue 2023 other general and administrative expenses were 154.2% as compared to 138.8% in 2022. The Directors insurance
decreased in 2023 from $124,000 in 2022 to $114,000 a $10,000 or 8% decrease. The Company's liability insurance also decreased
in 2023 from $32,000 to $17,000, a decrease of $15,000 or 46.9%. Lodging fees decreased from $41,000 in 2022 to $12,000 in 2023.
These reductions are a result of the cost reduction strategies taking by Management to streamline and reduce operating overhead as much
as possible.

 Total Operating
Expenses

 For the years ended December 31, 2023, and
2022, total operating expenses were approximately $1,369,000 and $2,319,000, respectively. This represents a $950,000
or 41.0% decrease over fiscal year 2022.

 Operating Loss

 For the year ended December 31, 2023, the operating
loss was approximately $1,634,000 as compared to $2,922,000 in 2022, a loss decrease of $1,288,000 over 2022.

 Other Income (Expense)

 For fiscal 2023 other income was approximately
$77,000 compared to $395,000 in 2022, a decrease of $318,000 over 2022. The other income for the year ended December 31,
2022 resulted from $152,000 in employee retention tax credit received under Cares act 2020-2021, versus $49,000 received in 2023 and
$162,000 freight claim recovery for the damaged Smart Mirror inventory that was written off in December 31, 2021.

 Interest expense for 2023 amounted to $104,000
compared to $70,000 in 2022, an increase of $34,000 or 49%, due to the increase of $632,500 in notes payable held by the Company, accruing
interest at 5% per annum.

 For
the years ended December 31, 2023, the net tax expense for income tax was estimated at $35,000 compared
to a net tax expense of $67,000 in the same period 2022.

 The effective tax rate for the years ended
December 31, 2023 and 2022, respectively, was (2.10 %) and (2.61%) and the statutory tax rate was 23.82% in
2023 and 25.39% in 2022.

 For fiscal 2023 and 2022 net loss before
taxes was approximately $1,661,000 and $2,596,000, respectively, a net loss decrease
of approximately $934,000 over the previous year due to the reasons summarized above.

 RESULTS
OF OPERATIONS AND BUSINESS OUTLOOK

 Our goal is
for the new Connected Chef kitchen utility device to launch in early 2024 through a partnership with a appliance manufacturer and distributor.
Approximately 46% of domestic households have one smart device in their home. Our Connected Surfaces portfolio falls in line with the
average user of internet-of-things home devices. Management believes that the execution of the Company's strategy and development
of the Connected Surfaces category will provide attractive opportunities for profitable growth over the long term.

 The Company will
require additional funding to build its marketing effort, inventory levels and service levels once the revised marketing back to retail
phase validates the Company's strategic initiatives. The future growth will be directly impacted by the level of exposure, messaging
and distribution capabilities.

 By working diligently
overseas with alternate manufacturers located outside China, particularly in Thailand, we anticipate minimal impact to our selling prices
and related margins of profit that could otherwise be impacted by an ongoing trade dispute between the United States and China. Other
factors, like inflation and its impact on consumer confidence and willingness to purchase discretionary purchases like our Connected
Chef, may impact selling prices and related margins of profit.

 Contractual Obligations

 The following table represents contractual
obligations as of December 31, 2023.

 Payments Due by Period

 Total

 2024

 2025

 2026

 After 2027

 Accounts payable and accrued liabilities

 $
 804,623

 $
 804,623

 $
 —

 $
 —

 $
 —

 Short-Term Debt – related parties

 1,946,315

 1,946,315

 —

 —

 —

 Short-Term Debt

 594,161

 594,161

 —

 —

 —

 Long-Term Debt – related parties

 —

 —

 —

 —

 —

 Long-Term Debt

 —

 —

 —

 —

 —

 Operating and Short Term Leases

 —

 —

 —

 —

 —

 Total Contractual Obligations

 $
 3,345,099

 $
 3,345,099

 $
 —

 $
 —

 $
 —

 Notes to
Contractual Obligations Table

 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.

 Short Term
Debt – notes payable with related parties – Related to working capital funding.

 Short Term
Debt – note payable with unrelated parties – Related to working capital funding.

 Long Term Debt
– related parties – Related to working capital and purchase order funding.

 Long Term Debt
— note payable unrelated parties – Related to purchase order funding.

 LIQUIDITY AND CAPITAL RESOURCES

 During the year ended December 31, 2023, the
Company used cash in operations of approximately $614,000 and generated net operating losses of $1,634,000. As of December 31, 2022,
the Company had working capital deficit of $3,277,000 and an accumulated deficit of $10,797,000. The Company's cash
balance decreased by approximately $25,000 from $61,000 as of December 31, 2022 to $36,000 as of December 31, 2023. With the reduced
revenues in 2022 and 2023 the Company initiated an expense mitigation plan that reduced discretionary spending including travel, lodging
and trade show expenses, deferred executive management compensation, and closed the Hong Kong operation. These efforts assisted the Company
in conserving cash and allowing for management to focus on finalizing production of the Connected Chef by the end of 2023.

 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 long term funding or establish strategic partnerships, 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 finish development the Connected Chef kitchen appliance product line, the Company is exploring the merger of the Company with
a private operating company as a possible means of developing a new business line as well as considering other common strategic
alternatives for a company facing business and financial challenges and uncertainties such as ours. 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.

 Director and Chief Executive Officer, Stewart
Wallach, has funded working capital since 2022 as the Company navigates these challenges. Total working capital note proceeds received
as of the date of this filing are $672,500. The note payable accrues simple interest at a rate of 5 percent per annum,
matures June 15, 2024, with the ability for the Company to request a 90-day extension.

can make no assurances that it will be able to raise the required capital. 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 will need to seek additional capital through debt and/or
equity financing. These factors raise substantial doubt about the Company's ability to continue as a going concern.

 Summary of Cash Flows

 Years ended December 31,

 2023

 2022

 (In thousands)

 Net cash provided by (used in):

 Operating Activities

 $
 (614,527
)

 $
 (1,904,367
)

 Investing Activities

 (42,970
)

 —

 Financing Activities

 632,500

 688,338

 Net increase (decrease) in cash

 $
 (24,997
)

 $
 (1,216,029
)

 As of December 31, 2023 the Company's
working capital deficit was approximately $3,300,000 of which $36,000 was cash. Current liabilities were $3,345,000 and include:

 Accounts
 payable of approximately $69,000 for amounts due vendors and service providers.

 Accrued
 expenses of approximately $735,000 for warranty allowances, wages, and customer deposits.

 Notes
 payable – related parties - current portion of approximately $1,946,000.

 Notes
 payable – unrelated parties - current portion of approximately $594,000.

 Cash
Flows provided by (used in) Operating Activities

 Cash used in operating activities was approximately
$614,000 in 2023 compared with approximately $1,900,000 in 2022. The cash used in operating activities in 2023 included the negative
cash impact of the net loss, which was approximately $1,696,000, offset by a decrease in inventory of $412,000, an increase in
accounts payable and accrued expenses of $495,000.

 Cash Flows
used in Investing Activities

 Cash provided
by in investing activities in 2023 was $42,970 compared to cash used in investing activities of $0 in 2022. The Company continued and
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 as the Company expands the Connected Chef manufacturing.

 Cash Flows
used in Financing Activities

 Cash received and used in financing activities for
the years ended December 31, 2023 and 2022, was approximately $632,000 and $688,000, respectively. During 2023, the Company received
$632,000 in working capital. In 2022, the Company received $700,000 in working capital funding netted against a $12,000 repurchase
of common shares.

 Exchange Rates

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

 While exchange
rates have been stable for several years, we cannot assure you that the exchange rate between the United States, Chinese and Thailand
currencies will continue to be stable and exchange rate fluctuations may have a material effect on our business, financial condition
or results of operations.

 Off Balance
Sheet Arrangements

 We do not have material
off-balance sheet arrangements that have or are reasonably likely to have a material future effect on our results of operations or financial
condition.

 DIVIDENDS

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

 RELATED-PARTY
TRANSACTIONS

 See Note 4
of the Consolidated Financial Statements at Item 15 of this Report.

 RECENT ACCOUNTING
PRONOUNCEMENTS

 See Note 1
of the Consolidated Financial Statements at Item 15 of this Report.

 CRITICAL
ACCOUNTING POLICIES

 The preparation
of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S.
GAAP") requires management to make certain estimates and assumptions regarding matters that are inherently uncertain and that ultimately
affect the reported amounts of assets, liabilities, revenues and expense, and the disclosure of contingent assets and liabilities. On
an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition; 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.

 Revenue Recognition

 The Company recognizes
lighting product revenue when the Company's performance obligations as per the terms in the customers purchase order have been
fully satisfied, specifically, when the specified product and quantity ordered has been manufactured and shipped pursuant to the customers
requested ship window, when the sales price as detailed in the purchase order is fixed, when the product title and risk of loss for that
order has passed to the customer, and collection of the invoice is reasonably assured. This means that the product ordered and to be
shipped has gone through quality assurance inspection, customs and commercial documentation preparation, the goods have been delivered,
title transferred to the customer and confirmed by a signed cargo receipt or bill of lading. Only at the time of shipment when all performance
obligations have been satisfied will the judgement be made to invoice the customer and complete the sales contract.

 The Company may enter
into a licensing agreement with globally recognized companies, that allows the Company to market products under a licensed brand to retailers
for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage of licensed product revenue to
the licensor in order to market the licensed product.

may also enter into a private label agreement, whereby the Company produces and ships products to a customer that has been packaged and
will be marketed under the customers own private label.

expenses license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale
is recorded. These costs are recorded within sales and marketing expenses.

 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.

 Customer orders
received are not long-term orders and are typically shipped within six months of the order receipt, but certainly within a one-year period.

 Our payment
terms may vary by the type of customer, the customer's credit standing, the location where the product will be picked up from and
for international customers, which country their corporate office is located. The term between invoicing date and when payment is due
may vary between 30 days and 90 days depending on the customer type. In order 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.

selectively supports retailer's initiatives to maximize sales of the Company's products on the retail floor or to assist
in developing consumer awareness of new products launches, by providing marketing fund allowances to the customer. The Company recognizes
these incentives at the time they are offered to the customers and records a credit to their account with an offsetting charge as either
a reduction to revenue, increase to cost of sales, or marketing expenses depending on the type of sales incentives.

 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, 2023 and 2022, the
Company had processed approximately $17,000 and $26,700, respectively for such allowances.

 Accounts Receivable

 For product
revenue, the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivables
are recognized at the amount expected to be collected and are not subject to any interest or finance charges. The Company does not have
any off-balance sheet credit exposure related to any of its customers.

 Allowance for Credit Losses

 The Company evaluates the collectability of
accounts receivable based on a combination of factors. In cases where the Company becomes aware of circumstances that may impair a specific
customer's ability to meet its financial obligations subsequent to the original sale, the Company will recognize an allowance against
amounts due, and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all
other customers, the Company recognizes an allowance for credit losses based on the length of time the receivables are past due and consideration
of other factors such as industry conditions, the current business environment and the Company's historical payment experience.
An allowance for credit losses is established as losses are estimated to have occurred through a provision for bad debts charged to earnings.
This evaluation is inherently subjective and requires estimates that are susceptible to significant revisions as more information becomes
available.

 As of both December 31, 2023 and 2022, management
determined that the accounts receivable is fully collectible. As such, management has not recorded an allowance for credit losses.

 Goodwill

 On September 13, 2006, the Company entered into
a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation ("Capstone"). Capstone was incorporated in
Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products to distributors
and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares
of Capstone'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.

 In January
2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which requires an entity to perform a one-step
quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit's carrying
amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). ASU 2017-04 was effective for the Company's
fiscal year ended December 31, 2019. The adoption of ASU 2017-04 did not have a material effect on the Company's consolidated financial
statements.

 Goodwill is
tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might
be impaired. If the carrying amount exceeds its fair value, an impairment loss is recognized. Goodwill is not amortized. The Company
estimates the fair value of its single reporting unit relative to the Company's market capitalization. There was no impairment
charge for the year ended December 31, 2023 and 2022.

 Accrued Liabilities

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

 Income Taxes

is subject to income taxes in the U.S. federal jurisdiction, various state jurisdictions and certain other jurisdictions. The Company
accounts for income taxes under the provisions of Financial Accounting Standards Board ("FASB") Accounting Standard Codification
("ASC") 740 Income Taxes. ASC 740 requires recognition of deferred income tax assets and liabilities for the expected
future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of
assets and liabilities. The Company and its U.S. subsidiaries file consolidated income tax returns.

 Tax regulations
within each jurisdiction are subject to the interpretation of the relaxed tax laws and regulations and require significant judgement
to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities generally for a period of 3
years from the later of each return due date or date filed.

 If the Company were to subsequently record an
unrecognized tax benefit, associated penalties and tax related interest expense would be recorded as a component of income tax expense.

 As
of December 31, 2023, the Company had federal and state net operating loss carry forwards of approximately $6,540,000 and $5,028,000
respectively. The federal net operating loss is available to the Company indefinitely and available to offset up to 80% of future
taxable income each year. The net deferred tax liability as of December 31, 2023 and 2022 was $320,000 and $285,000, respectively,
and is reflected in long-term liabilities in the accompanying consolidated balance sheets.

 On March 27, 2020, the CARES Act was enacted
into law. The CARES Act is a tax and spending package intended to provide economic relief to address the impact of the COVID-19 pandemic.
The CARES Act included several significant income and other business tax provisions that, among other things, would eliminate the taxable
income limit for certain net operating losses ("NOLs") and allow businesses to carry back NOLs arising in 2018, 2019, and
2020 to the five prior tax years. The Company was able to carryback the 2018 and the 2019 NOLs to 2017 tax year and generate an estimated
refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted in a net benefit of approximately $862,000
which was recorded in the first quarter 2020 of which a total of $806,800 was subsequently received. During the year ended December 31,
2022, the difference of $55,265 was reflected in income tax expense on the consolidated statement of operations.

 The effective tax rate for the years ended
December 31, 2023 and 2022, respectively, was (2.10%) and (2.61%) and the statutory tax rate was 23.82% in 2023 and 25.9%
in 2022.

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

 Deferred tax assets are to be reduced by a valuation
allowance if it is more likely than not that some portion or all of the deferred assets will not be realized. The Company has evaluated
the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company's
history of cumulative net losses incurred and has concluded that it is more likely than not that the Company will not realize the benefits
of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December
31, 2023 and 2022. Since indefinite-lived assets cannot be used as a source of taxable income to support the realization of deferred
tax asset, a valuation allowance was recorded against the deferred tax assets, and a net deferred tax liability or naked credit of approximately
$320,000 and $285,000 is presented on the company's balance sheet, respectively. The Company's valuation allowance
increased by $248,056 in 2023.

 The Company recognizes liabilities for uncertain tax
positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely
of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns,
the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for
income taxes.

 Item
7A. Quantitative and Qualitative Disclosures about Market Risk. (Not Applicable)

 Item 8.
Financial Statements and Supplementary Data.

 The financial
statements and financial statement schedules of CAPC as well as supplementary data are listed in Item 15 below and are included after
the signature page to this Form 10-K report.

 Item 9.
 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 None.

 Item 9A. Controls and Procedures.

 Disclosure Controls and Procedures

 Evaluation of Disclosure
Controls and Procedures.

 The Company's Chief Executive
Officer and the Chief Financial Officer evaluated the effectiveness of the Company's disclosure controls and procedures as of December
31, 2023 and concluded that the Company's disclosure controls and procedures are effective. The term disclosure controls and
procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act, is accumulated, recorded, processed, summarized and communicated to the
Company's management, including its principal executive and principal financial officers, or persons performing similar functions,
as appropriate to allow timely decisions regarding required disclosure to be reported within the time periods specified in the SEC's
rules and regulations.

 Management's Annual Report on Internal
Control over Financial Reporting. The Company's management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness
of the Company's internal control over financial reporting based on the criteria set forth in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the Company's
assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 2023 to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP
and includes those policies and procedures that:

 Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company.

 Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

 Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

 Because the Company is a smaller reporting company,
this Form 10-K report does not include an attestation report of our independent registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm.

 Management, including the Company's Chief
Executive Officer and Interim Chief Financial Officer, does not expect that the Company's internal controls will prevent or detect
all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have
been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls
may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

 The certifications of our Chief Executive Officer
and Interim Chief Financial Officer attached as Exhibits 31 and 32 and to this Report include information concerning our disclosure controls
and procedures and internal control over financial reporting.

 Item 9B. Other Information.
None

 Item 9C. Disclosure Regarding
Foreign Jurisdictions that Prevent Inspection. Not applicable.

 Item 10.
Directors, Executive Officers and Corporate Governance.

 CURRENT
BOARD OF DIRECTORS

 The incumbent and
current members of the Board of Directors are:

 1.

 Stewart Wallach. Mr. Wallach
 has been a Director since April 2007.

 2.

 Gerry McClinton. Mr. McClinton
 resigned as a Director as of November 30, 2022

 3.

 Jeffrey Postal. Mr. Postal
 has been a Director since January 2004.

 4.

 Jeffrey Guzy. Mr. Guzy
 was appointed as a Director on May 3, 2007. Mr. Guzy is deemed an "Independent Director" under applicable standards.

 5.

 George Wolf was appointed
 as a Director on January 13, 2022.

 Each Director's
term is for one year. Company Directors have typically been elected in the past by written consent of stockholders holding more than
50% of the current voting power. The Company uses the written consent because a small number of shareholders have sufficient voting power
to decide the election of Directors and approval or denial of any other corporate resolution and the cost of conducting an annual stockholders'
meeting is significant for a small reporting company. The Company conducts regular stockholder-investor conference calls to allow stockholders
to interact with Company senior management and to ask questions of that management.

 Further, stockholders
may make inquiries in writing by sending their inquiries to Secretary, Capstone Companies, Inc., #144-V 10 Fairway Drive, Suite 100,
Deerfield Beach, Florida 33441. The information required in Part III of this Form 10-K report is set forth in the information statement
filed for the written consent approval of nominee slates of Directors and the requirements for stockholders to submit proposed resolutions
and Director nominees is set forth in this Form 10-K report.

 DIRECTOR
PROFILES

Wallach, Age 72, Chief Executive Officer and Chairman of the Board of Directors since April 23, 2007, a director of the Company since
September 22, 2006, and the founder and Chief Executive Officer and Chairman of the Board of Directors of Capstone Industries, Inc.,
a wholly owned subsidiary, and principal operating subsidiary of the Company since September 20, 2006. Mr. Wallach is an American entrepreneur
and has founded and operated a number of successful businesses over his 35-year career. Over the past 15 years, Mr. Wallach has been
focused on technology-based companies in addition to consumer product businesses, the field in which he has spent most of his career.
Prior to founding Capstone Industries, Inc., he sold Systematic Marketing, Inc., which designed, manufactured, and marketed automotive
consumer products to mass markets, to Sagaz Industries, Inc., a leader in these categories. He served as President of Sagaz Industries,
Inc. for 10 years before forming Capstone Industries, Inc. In 1998, Mr. Wallach co-founded Examsoft Worldwide, Inc. ("Examsoft"),
which developed and delivered software technology solving security challenges of laptop-based examinations for major educational institutions
and state bar examiners.

 Mr. Wallach
remained chairman of Examsoft until it was acquired in late 2009. Mr. Wallach has designed and patented a number of innovations over
the span of his career and has been traveling to China establishing manufacturing and joint venture relationships since the early 1980s.

 Dr. Jeffrey Postal,
 Age 66. Director. He has served as a director of the Company since January of 2004. Dr. Postal presently is a businessman and entrepreneur
in the Miami, Florida region. Dr. Postal owns, founded or funded numerous successful businesses over the last few years, including but
not limited to: Sportacular Art, a company that was licensed by the National Football League, Major League Baseball and National Hockey
League to design and manufacture sports memorabilia for retail distribution in the U.S; Co-Owner of Natures Sleep, LLC, a major distributor
of Visco Memory Foam mattresses, both nationally and internationally; Dr. Postal is a Partner in Social Extract, LLC, a Social Media
company offering consulting services to many major companies in the U.S.; Dr. Postal is the principal investor of Postal Capital Funding,
LLC, a private investment fund whose mission is to find undervalued/under capitalized companies and extend funding to them in exchange
for equity and/or capital consideration; and Dr. Postal is the founder of Datastream Card Services, a company that provides innovative
billing solutions to companies conducting business on the internet.

 Jeffrey
Guzy, Age 71. Director. He was appointed to the Company's Board of Directors on May 3, 2007. He serves as Chairman and Chief
Executive Officer of CoJax Oil and Gas Corporation, an SEC reporting company. Mr. Guzy is an outside director of Leatt Corporation, an
SEC reporting company (OTCQB: LEAT). Mr. Guzy served, from October 2007 to August 2010 as President of Leatt Corporation. Mr. Guzy has
a MBA in Strategic Planning and Management from The Wharton School of the University of Pennsylvania; a M.S. in Systems Engineering from
the University of Pennsylvania; a B.S. in Electrical Engineering from Penn State University; and a Certificate in Theology from Georgetown
University. Mr. Guzy has served as an executive manager or consultant for business development, sales, customer service and management
in the telecommunications industry, specifically, with IBM Corp., Sprint International, Bell Atlantic Video Services, Loral CyberStar
and FaciliCom International. Mr. Guzy has also started his own telecommunications company providing Internet services in Western Africa.
He serves as an independent director and chairman of the audit committee of Purebase Corporation (OTC: PUBC) a public company.

 George Wolf, Age 73. Mr.
Wolf has provided sales and business development consulting services to the Company since 2014. Prior to Mr. Wolf providing these consulting
services, he served as President and Chief Executive Officer of Systematic Development Group, LLC from 2010 into 2014, President and
Chief Executive Officer of ExamSoft Worldwide, Inc. (1998 – 2009) and as Executive Vice President of Sagaz Industries, Inc. (1986
– 1997).

 Set forth below
is a tabular disclosure summarizing some of the specific qualifications, attributes, skills and experiences of our directors.

 Name

 Title

 Qualifications

 Stewart Wallach

 Chairman of the Board and Chief Executive Officer

 He has extensive experience in executive management of companies.

He has experience in growing operations and merger and acquisition transactions. He has extensive experience in arranging the design, development and production of products in foreign nations for shipment and sale in the U.S. and conducting business abroad.

His experience provides insight for the implementation of effective operational, financial and strategic leadership of the Company.

 Jeffrey Postal

 He has extensive experience in investing in companies.

He has extensive experience in management and business,

He has experience growing a company and mergers and acquisitions.

 Jeffrey Guzy

 Through his MBA in Strategic Planning & Management and his knowledge of U.S. capital markets, Mr. Guzy provides invaluable guidance and perspective to the Board.

He serves and has served as an officer and director of public companies and worked for large corporations in business development. He brings this experience to the Board.

 George Wolf

 He has extensive experience in sales and business development and has prior management experience. He is familiar with the Company's sales and business development strategies and operations and has worked closely with executive officers of the Company in sales and business development.

 POLICY REGARDING
BOARD ATTENDANCE

 Company
Directors are expected to attend all annual and special board meetings per Company policy. An attendance rate of less than 75% over any
12-month period is grounds for removal from the Board of Directors. In fiscal year 2023, all Directors attended the (1) one board meeting.

 ROLE OF THE BOARD OF DIRECTORS
IN CORPORATE GOVERNANCE

 The Board of Directors
is responsible for overseeing the Chief Executive Officer and other senior management in order to assure that such officers are competent
and ethical in running the Company on a day-to-day basis and to assure that the long-term interests of the stockholders are being served
by such management. The Directors must take a pro-active focus and approach to their obligation in order to set and enforce standards
to ensure that the Company is committed to business success through maintenance of the highest standards of responsibility and ethics.
The Company has adopted a Code of Ethics, which is posted on  The contents of the Company Website are
not incorporated herein by reference and that Website provided in this Report is intended to be an inactive textual reference only.

 AUDIT COMMITTEE

was established in accordance with Section 3(a)(58) (A) of the Exchange Act. It is primarily responsible for overseeing the services
performed by the Company's Independent Registered Public Accounting Firm, evaluating the Company's accounting policies and
its system of internal controls and reviewing significant financial transactions. The members of the Audit Committee in fiscal year 2022
were Jeffrey Guzy and Jeffrey Postal. The Company believes that Mr. Guzy is an Independent Director under SEC and NASDAQ applicable standards. The
Board of Directors has determined that Mr. Guzy qualifies as an "Audit Committee Financial Expert" as defined under applicable
SEC rules and also meets the additional criteria for independence of Audit Committee members set forth in Rule 10A-3(b)(1) under the
Exchange Act.

 REPORT OF
THE AUDIT COMMITTEE

is responsible for providing oversight to Company's accounting and financial reporting processes and the audit of the Company's
financial statements. The Audit Committee monitors the Company's external audit process, including auditor independence matters,
the scope and fees related to audits, and the extent to which the Independent Registered Public Accounting Firm may be retained to perform
non-audit services. The Audit Committee also reviews the results of the external audit with regard to the adequacy and appropriateness
of our financial, accounting and internal controls over financial reporting. It also generally oversees the Company's internal
compliance programs. The function of the Audit Committee is not intended to duplicate or to certify the activities of the management
and the Independent Registered Public Accounting Firm, nor can the Audit Committee certify that the independent registered public accounting
firm is "independent" under applicable rules. The Audit Committee members are not professional accountants or auditors. Under
its Charter, the Audit Committee has authority to retain outside legal, accounting or other advisors as it deems necessary to carry out
its duties and to require the Company to pay for such expenditures.

provides counsel, advice and direction to management and the Independent Registered Public Accounting Firm on matters for which it is
responsible, based on the information it receives from management and the independent registered public accounting firm and the experience
of its members in business, financial and accounting matters.

management is responsible for the preparation and integrity of its financial statements, accounting and financial reporting principles,
and internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations.

 In this
context, the Audit Committee hereby reports as follows:

 1)

 Company's management
 has represented to the Audit Committee that the 2023 audited financial statements were prepared in accordance with accounting principles
 generally accepted in the United States of America. The Audit Committee has reviewed and discussed the audited financial statements
 for year 2023 with Company's management and the independent registered public accounting firm.

 2)

 The Audit Committee has
 received written disclosures and a letter from the Independent Registered Public Accounting Firm, Assurance Dimensions, required
 by the PCAOB and has discussed with Assurance Dimensions, their independence.

 3)

 Based on the review and
 discussion referred to above, the Audit Committee recommended to the board, and the board has approved, that the audited financial
 statements be included in Company's Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Commission
 on March 29, 2024.

 The foregoing
report is provided by the undersigned Chairman of the Audit Committee.

 /s/Jeffrey
Guzy

 Jeffrey Guzy, Chairman
of Audit Committee

 COMPENSATION
AND NOMINATION COMMITTEE ("Compensation and Nomination Committee")

 Company's
Compensation and Nomination Committee is currently composed of two members (both Company directors): Mr. Jeffrey Guzy and Mr. Jeffrey
Postal. Only Mr. Guzy, who serves as Chairman of the Compensation and Nomination Committee, is "independent" within the meaning
of the NASDAQ Marketplace Rules.

 Company's
Compensation and Nomination Committee assists the Company Board of Directors in reviewing and approving the compensation structure of
executive officers, including all forms of compensation to be provided to the executive officers. The chief executive officer and chief
financial officer may not be present at any Compensation and Nomination Committee meeting during which the executive's compensation
is discussed and deliberated.

 The Compensation
and Nomination Committee is responsible for, among other customary duties, the following:

 Reviewing, overseeing and
 approving the compensation of Company's executive officers; and

 Periodically reviewing
 and making recommendations to the Company Board of Directors about incentive compensation, stock or equity compensation plans, annual
 bonus programs and grants, any employee pension or welfare benefit plans and any similar forms of benefit plans; and

 Periodically reviewing
 and approving corporate performance and corporate performance goals that are applicable to compensation of Company's chief
 executive officer and chief financial officer, evaluating the performance of those executives in light of corporate performance and
 corporate performance goals; and determining the compensation for the Company's chief executive officer and chief financial
 officer.

 CODE OF ETHICS

has a code of ethics that applies to all of the Company's employees, including its principal executive officer, and principal financial
officer, and its Board. A copy of this code is available on  The Company intends to disclose any
changes in or waivers from its code of ethics by posting such information on its website or by filing a Form 8-K Report.

 DIRECTOR MEETINGS IN FISCAL YEAR 2023

 The
Board of Directors had (1) one official meetings in
year 2023. During 2023, all Directors attended 75% or more of the Board meeting, which were held during the period of time that
such person served on the Board or such committee.

 Board Leadership
Structure and Board's Role in Risk Oversight

Board of Directors endorses the view that one of its primary functions is to protect stockholders' interests by providing independent
oversight of management, including the Chief Executive Officer. The Chief Financial Officer is allowed and encouraged to address the
Board of Directors on any issues affecting the Company or its stockholders. The Company also allows outside counsel to participate in
some of the board meetings in order to provide legal counsel and an outside perspective on corporate governance and risk issues.

 Board Structure.
 The Company believes that the Chief Executive Officer or "CEO" should also serve as Chairman of the Board of Directors
in order to have the person most knowledgeable about the Company heading the Board of Directors.

 The CEO is
responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the
Chairman of the Board of Directors provides guidance to senior management and sets the agenda for Board of Directors meetings and presides
over meetings of the full Board of Directors.

 Our CEO serves
on our Board of Directors, which we believe helps the CEO serve as a bridge between management and the Board of Directors, ensuring that
both groups act with a common purpose. We believe that the CEO's presence on the Board of Directors enhances his ability to provide
insight and direction on important strategic initiatives to both management and the independent directors and, at the same time, ensures
that the appropriate level of independent oversight is applied to all decisions by the Board of Directors.

 The Chairman
of the Board has no greater nor lesser vote on matters considered by the Board than any other director, and neither the Chairman nor
any other director votes on any related party transaction. All directors of the Company, including the Chairman, are bound by fiduciary
obligations, imposed by law, to serve the best interests of the stockholders. Accordingly, separating the offices of Chairman and Chief
Executive Officer would not serve to enhance or diminish the fiduciary duties of any director of the Company.

 Board of
Director – 2023 Compensation Table

 Name
 (1)

 Audit
 Committee

 Nomination
 and Compensation Committees

 Total

 Awards

 Wallach (2)

 —

 —

 —

 George
 Wolf (2)

 —

 —

 —

 Jeff
 Guzy

 $

 —

 —

 —

 Jeff
 Postal

 $

 —

 —

 —

 (1)

 The individuals listed
 were appointed to the Board of Directors for 2022-2023.

 (2)

 Mr. Wallach and Mr. Wolf
 as Company Employees did not receive compensation for participating as a Director on the Board.

 On July 5, 2022,
the Company approved the suspension of cash compensation for services as a director and services as a member of the Audit Committee,
Compensation and Nomination Committee for independent directors Jeffrey Postal and Jeffrey Guzy until further notice.

 On July 5, 2022,
the Board of Directors of the Company held a special meeting and approved the following corporate actions or proposals:

 The Board nominated the
 following incumbent directors to stand for election to the Board for a term commencing upon election and ending in 2023 and the election
 and assumption of office of successors: (a) Stewart Wallach; (b) James McClinton; (c) George Wolf; (d) Jeffrey Postal; and (e) Jeffrey
 Guzy approved a resolution to seek shareholders vote or consent to these nominees.

 July 8, 2022 was set as
 the record date for holders of record of issued shares of Company Common Stock entitled to vote for election of, or written consent
 to election of, directors in 2022 and for any other matters presented for shareholder approval.

 On September 30,
2022, the Board rescinded the approval of the record date of July 8, 2022 and approved the record date to be changed to September
30, 2022. The election of directors has been postponed until 2023.

 George
Wolf, who was appointed as a director on January 13, 2022, waived any compensation as a director for 2022.

 Independent Directors.
 The Board of the Company is typically comprised five directors, one of whom is an independent director under the listing standards
of quotation systems like The NASDAQ Stock Market. The Company has sought unsuccessfully to recruit qualified independent directors.
Although we have D&O insurance, we believe that past losses and low public stock market price discourages qualified candidates from
serving as independent directors. This is a problem commonly faced by micro-cap, "penny stock" companies like our Company.

 Our senior officers
are responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through its committees, has
responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy
itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this,
the Chairman of the Board and other non-officer directors met quarterly on average with management to discuss strategy and the risks
facing the Company. Senior management, each member being also a director, attends the Board meetings and is available to address any
questions or concerns raised by the Board on risk management and any other matters. The Chairman of the Board and members of the Board
work together to provide strong, independent oversight of the Company's management and affairs through its standing committees
and, when necessary, special meetings of directors. Since most of the directors live in the same area, informal meetings between directors
and officers also occur to discuss business risk and appropriate responses.

- Minimum Qualifications. The Compensation and Nominating Committee has adopted a set of criteria that it considers when it selects
individuals not currently on the Board of Directors to be nominated for election to the Board of Directors. A candidate must meet the
eligibility requirements set forth in the Company's Bylaws. A candidate must also meet any qualification requirements set forth
in any Board or committee governing documents. If the candidate is deemed eligible for election to the Board of Directors, the Compensation
and Nominating Committee will then evaluate the prospective nominee to determine if he or she possesses the following qualifications,
qualities or skills:

 contributions to the range
 of talent, skill and expertise appropriate for the Board.

 financial, regulatory and
 business experience, knowledge of the operations of public companies and ability to read and understand financial statements.

 familiarity with the Company's
 market.

 personal and professional
 integrity, honesty and reputation.

 the ability to represent
 the best interests of the shareholders of the Company and the best interests of the institution.

 the ability to devote sufficient
 time and energy to the performance of his or her duties; and

 independence under applicable
 Commission and listing definitions.

 The Compensation
and Nominating Committee will also consider any other factors it deems relevant. With respect to nominating an existing director for
re-election to the Board of Directors, the Compensation and Nominating Committee will consider and review an existing director's
Board and committee attendance and performance; length of Board service; experience, skills and contributions that the existing director
brings to the Board; and independence.

Nomination Process. The process that the Compensation and Nominating Committee follows when it identifies and evaluates individuals
to be nominated for election to the Board of Directors is as follows:

 For purposes
of identifying nominees for the Board of Directors, the Compensation and Nominating Committee relies on personal contacts of the committee
members and other members of the Board of Directors and will consider director candidates recommended by stockholders in accordance with
the policy and procedures set forth above. The Compensation and Nominating Committee has not used an independent search firm to identify
nominees.

 In evaluating potential
nominees, the Compensation and Nominating Committee determines whether the candidate is eligible and qualified for service on the Board
of Directors by evaluating the candidate under the selection criteria, which are discussed in more detail below. If such individual fulfills
these criteria, the Compensation and Nominating Committee will conduct a check of the individual's background and interview the
candidate to further assess the qualities of the prospective nominee and the contributions he or she would make to the Board of Directors.

 Consideration
of Recommendation by Stockholders. It is the policy of the Compensation and Nomination Committee of the Board of Directors of the
Company to consider director candidates recommended by stockholders who appear to be qualified to serve on the Company's Board
of Directors. The Compensation and Nominating Committee may choose not to consider an unsolicited recommendation if no vacancy exists
on the Board of Directors and the Compensation and Nomination Committee does not perceive a need to increase the size of the Board of
Directors. To avoid the unnecessary use of the Compensation and Nominating Committee's resources, the Compensation and Nomination
Committee will consider only those director candidates recommended in accordance with the procedures set forth below.

 Stockholder
Proposal Procedures. To submit a recommendation of a director candidate to the Compensation and Nomination Committee, a stockholder
should submit the following information in writing, addressed to the Chairperson of the Compensation and Nomination Committee, care of
the Corporate Secretary, at the main office of the Company:

 1.

 The name of the person
 recommended as a director candidate.

 2.

 All information relating
 to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A
 under the Securities Exchange Act of 1934.

 3.

 The written consent of
 the person being recommended as a director candidate to being named in the proxy statement as a nominee and to serving as a director
 if elected.

 4.

 The name and address of
 the stockholder making the recommendation, as they appear on the Company's books; provided, however, that if the stockholder
 is not a registered holder of the Company's common stock, the stockholder should submit his or her name and address along with
 a current written statement from the record holder of the shares that reflects ownership of the Company's common stock; and

 5.

 A statement disclosing
 whether such stockholder is acting with or on behalf of any other person and, if applicable, the identity such person.

 In order for a director
candidate to be considered for nomination at the Company's annual meeting of stockholders, when and if one is held, or to be considered
prior to a written consent vote on director nominees, the recommendation must be received by the Compensation and Nominating Committee
at least 30 days before the date of the annual meeting or, in the case of an information statement and no shareholder meeting being held,
prior to April 1st.

 MANAGEMENT
OF THE COMPANY

 CURRENT OFFICERS. The current officers
of the Company are:

 1.

 Stewart Wallach, age 72,
 was appointed as Chief Executive Officer and President of the Company on April 23, 2007. Mr. Wallach is also the senior executive
 officer and director of Capstone.

 2.

 Dana Eschenburg Perez,
 age 46, was engaged as a consultant to perform the duties of Chief Financial Officer on January 1, 2023. She was appointed as interim
 Chief Financial Officer on March 27, 2023.

 FAMILY RELATIONSHIP:
There is no family relationship between members of Company management.

 Delinquent
Section 16(a) Reports.

 Section
16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and owners of more than ten
percent of the Company's Common Shares ("10% stockholders"), to file with the Commission initial reports of ownership
and reports of changes in ownership of Common Shares of the Company. Executive officers, directors and 10% stockholders are required
by SEC regulations to furnish the Company with copies of all forms they file pursuant to Section 16(a).

 To the
Company's knowledge, based on review of the copies of such reports furnished to the Company, and with respect to the officers and
directors, representations that no other reports were required, during the year ended December 31, 2022, all Section 16(a) filing requirements
applicable to its executive officers, directors and 10% stockholders were complied with.

 Item 11. Executive Compensation.

 Role of Management

believes that it is important to have our Chief Executive Officer's input in the design of compensation programs for his direct
reports. The Chief Executive Officer reviews his direct reports' compensation programs annually with the Committee, evaluating
the adequacy relative to the marketplace, inflation, internal equity, external competitiveness, business and motivational challenges
and opportunities facing the Company and its executives. In particular, he considers base salary a critical component of compensation
to remain competitive and retain his executives. All final decisions regarding compensation for the Chief Executive Officer's direct
reports listed in the Summary Compensation Table are made by the Compensation Committee. The Chief Executive Officer does not make recommendations
with regard to his own compensation.

 Role of
the Compensation Consultant

 While we may
consult industry sources on compensation for executives, we have not engaged a consultant to analyze our compensation levels.

 Compensation Components

 For 2023, the principal components
of compensation for each named executive officer ("NEO(s)") were:

 base salary.

 annual incentive.

 long-term incentive compensation
 (restricted stock awards); and

 perquisites and other benefits.

 Due to the financial
condition of the Company, cash compensation has been deferred in fiscal years 2022 and 2023 and into first fiscal quarter of 2024 - See
 "Salary Deferrals" below.

 EXECUTIVE COMPENSATION

 Name
 & Principal Position

 Year

 Salary
 $

 Bonus
 $

 Stock
 Awards $

 Non-Equity
 Incentives $

 All
 Others $

 TOTAL

 Wallach,

 2023

 $

 $

 —

 $

 —

 $

 —

 $

 —

 $

 Chief
 Executive

 2022

 $

 $

 —

 $

 —

 $

 —

 $

 —

 $

 (1,2,3,7,8,9,10,11,12)

 2021

 $

 $

 —

 $

 —

 $

 —

 $

 —

 $

 James
 G. McClinton,

 2023

 $

 —

 $

 —

 $

 —

 $

 —

 $

 —

 $

 —

 Chief
 Financial

 2022

 $

 $

 —

 $

 —

 $

 —

 $

 —

 $

 & COO (4,5,6,7,8,9,10,11)

 2021

 $

 $

 —

 $

 —

 $

 —

 $

 —

 $

 Dana

 2023

 $49,700

 —

 —

 —

 —

 —

 Chief
 Financial Officer

 2022

 —

 —

 —

 —

 —

 —

 2021

 —

 —

 —

 —

 —

 —

 Footnotes:

 (1) On
February 5, 2023, the Company extended Stewart Wallach's Employment Agreement, whereby Mr. Wallach will be paid $301,521 per annum.

 (4) On
February 5, 2020, the Company entered into a new Employment Agreement with James McClinton,, whereby Mr. McClinton would be paid $191,442
per annum.

 (7) The
Company has no non-equity incentive plans.

 (8) The
Company has no established bonus plan. Any bonus payments are made ad hoc upon recommendation of the Compensation Committee. Bonuses
are only paid on a performance basis.

 (9) On September
1, 2020, fifty percent of both Mr. Wallach and Mr. McClinton's salary for the period September 1, 2020 through December 31, 2020
was accrued and deferred for payment until further notice.

 (10) On January
1, 2021, fifty percent of both Mr. Wallach and Mr. McClinton's salary for the period January 1, 2021 through March 31, 2021 was
deferred for payment until further notice.

 (11) On January
1, 2022, fifty percent of both Mr. Wallach and Mr. McClinton's salary was deferred for payment until further notice.

 (12) On October
1, 2022, one hundred percent of Mr. Wallach's salary was deferred for payment until further notice.

 Key Developments
impacting Executive Compensation

 The financial
condition of the Company as of 2023 and into the first fiscal quarter of 2024 has caused the Company to defer cash compensation of senior
executives. The Company did not replace the retired chief financial officer with a full-time chief financial officer. There were no grants
of incentive compensation to senior executives. The deferral of compensation for senior executive officers is anticipated to continue
in fiscal year 2024 if the financial condition of the Company does not significantly improve. See "Salary Deferrals"
below.

 Compensation Objectives

 The overall objectives of the Company's
compensation program for NEO's are as follows:

 Motivate executives to achieve and maintain a high level of performance and foster company performance that attains sustained profitability

 align the interests of our executives with the interests of our shareholders;

 provide for market-competitive levels of compensation to the extent that can be supported by our financial condition and performance; and

 Retain key executives and employees of outstanding ability.

 CEO Pay Ratio

 As required
by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are
providing the following information regarding the ratio of the annual total compensation of the Company's median employee to the
annual total compensation of Stewart Wallach, the Company's Chief Executive Officer and President. We consider the pay ratio specified
below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements of Item 402(u)
of Regulation S-K. For the fiscal year ended December 31, 2023:

 The
 median of the annual total compensation of all employees of the Company, except the Chief Executive Officer and President, was $70,000;

 The
 annual total compensation of the Company's Chief Executive Officer and President was $301,521; and

 The
 ratio of the median of the annual total compensation of all Company employees, other than the Company's President and Chief
 Executive Officer, to the annual total compensation of the Company's President and Chief Executive Officer was approximately
 4 to 1.

 Pay versus Performance
Table

 Name

 Year

 Summary Compensation Table Total for Principle Executive Officer ("PEO")

 Compensation Actually Paid to PEO

 Average Compensation actually paid to Non-PEO named executive officers

 Total Shareholder Return

 Stewart Wallach, Chief Executive Officer

 2023

 $

 $

 $

 -3
 %

 $
 (1,696,439
)

 Stewart Wallach, Chief Executive Officer

 2022

 $

 $

 $

 -1
 %

 $
 (2,663,751
)

 The Company chose
December 31, 2023, as the date for determining the employee population used to identify the median employee. The Company used base
salaries to identify the median employee because the Company does not widely distribute annual equity awards to employees and because
this measure approximately reflects the total annual compensation of employees. The Company calculated the median employee's and
the Chief Executive Officer's annual total compensation consistent with the disclosure requirements for the Summary Compensation
Table. For purposes of this calculation, the median employee's annual total compensation consisted of wages, premium pay (including
overtime and holiday pay), paid time off, non-equity incentive plan compensation, change in pension value and retirement plan contributions.

Peer Review

 To better review
the compensation practices of similar companies ("peer group companies"), the Company has from time to time in the past reviewed
the median compensation levels of companies of peer group companies as a reference point for determining the competitiveness of the Company's
compensation of its principal executive officers. No peer group companies review was conducted in 2023 due to the financial condition
of the Company and the deferral of cash compensation of the principal executive officers.

 Executive
Compensation Best Practices the Company Follows

 What
 we will provide

 What
 we do not provide

 Provide
 limited executive perquisites

 No
 grants of Stock Appreciation Rights

 Align
 total executive compensation with shareholders' interests

 No
 repricing of granted stock options

 Bonuses
 based on performance

 No
 agreements guaranteeing employment

Philosophy

guiding philosophy in setting executive compensation is that the compensation of executive officers should reflect the scope of their
job responsibilities and the level of individual and corporate performance achieved. With the declining financial condition of the Company
in 2023 and into the first fiscal quarter of 2024, the compensation of senior executives has been deferred to conserve cash for basic
operating overhead.

 The Company endeavors
to strike an appropriate balance between long-term and current cash compensation. The current executives are key to the ability of the
Company to conduct its business because of their individual experience and relationships in our current business line. Their compensation
reflects their individual value to the ability of the Company to conduct its current business.

 EMPLOYMENT
AGREEMENTS

Wallach, Chief Executive Officer and President

 On February
5, 2020, the Company entered into an Employment Agreement with Stewart Wallach, whereby Mr. Wallach would be paid $301,521 per annum.
The term of this new agreement began February 5, 2020, and ends February 5, 2023. The parties may extend the employment period of this
agreement by mutual consent with approval of the Company's Board of Directors, but the extension may not exceed two years in length.

 On February
5, 2023, was extended through February 5, 2025.

 The February 5, 2020,
Employment Agreement with Mr. Wallach was filed by the Company as an exhibit to Report Form 10-K for fiscal year ended December 31, 2019
- (as filed by the Company with the Commission on March 30, 2020).

 Dana Eschenburg Perez Chief Financial

 The February 5, 2020, Consulting Agreement
with Ms. Perez was filed by the Company as an exhibit to Report Form 8-K on March 28, 2023. The Consulting Agreement
was extended and filed by the Company as an exhibit to Report Form 10-K for fiscal year ended December 31, 2023.

 Salary Deferrals

 Effective September
1, 2020 through December 31, 2020, payments equivalent to fifty percent of Mr. Wallach's salary or approximately $48,707 was deferred
until further notice.

 Effective January
1, 2021 through March 31, 2021, payments equivalent to fifty percent of Mr. Wallach's salary or approximately $40,589 was deferred
until further notice.

 On January
1, 2022, fifty percent of Mr. Wallach's salary was deferred for payment until further notice.

 On October
1, 2022, one hundred percent of Mr. Wallach's salary was deferred for payment until further notice.

 Total salary
deferral for Mr. Wallach amounted to $371,103 through December 31, 2023.

 Common Provisions
in both new Employment Agreements:

provisions are contained in each of the above employment agreements: If the officer's employment is terminated by death or disability
or without cause, the Company is obligated to pay to the officer's estate or the officer, an amount equal to accrued and unpaid
base salary as well as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal
to (a) the sum of twelve (12) months base salary at the rate the Executive was earning as of the date of termination and (b) the sum
of "merit" based bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by
the Company shall be paid from a normal payroll account on a bi-weekly basis in accordance with the normal payroll policies of the Company.
The amount owed by the Company to the Executive, from the effective Termination date, will be paid out bi-weekly over the course of the
year but at no time will be no more than twenty (26) installments. The Company will also continue to pay the Executive's health
and dental insurance benefits for 6 months starting at the Executives date of termination. If the Executive had family health coverage
at the time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive's
severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment.

 The above summary
of the employment agreements is qualified by reference to the actual employment agreements, which were filed as exhibits to the Form
10-K by the Company for fiscal year ended December 31, 2019 (as filed by the Company with the Commission on March 30, 2020).

 These amended agreements
supersede any existing employment agreements and are the only employment agreements with Company officers:

 SUMMARY TABLE OF
OPTION GRANTS TO OFFICERS OF COMPANY (1)

31, 2023

 Name

 No.
 of Shares Underlying

 %
 of Total Options Granted Employees

 in 2023

 Expiration
 Date

 Restricted
 Stock Grants

 No.
 Shares underlying Options Granted

 in 2023

 —

 —

 —

 —

 —

 Dana

 —

 —

 —

 —

 —

 OTHER COMPENSATION (1)

 NAME/POSITION

 YEAR

 SEVERANCE
 PACKAGE

 CAR
 ALLOWANCE

 CO.
 PAID SERVICES

 TRAVEL
 LODGING

 TOTAL
 ($)

 2023

 —

 —

 —

 —

 —

 Chief
 Executive

 2022

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Gerry
 McClinton

 2023

 —

 —

 —

 —

 —

 Chief

 2022

 —

 —

 —

 —

 —

 & Chief

 —

 —

 —

 —

 —

 Financial

 Dana

 2023

 Chief
 Financial Officer

 Footnotes:

 (1)

 There were no equity awards,
 no 401(k) matching contributions by the Company and no medical supplemental payments by the Company in any of the years specified.

 OUTSTANDING EQUITY
AWARDS FOR YEAR END 2023 TABLE

 OPTIONS (1)

 NAME

 Securities
 Underlying Unexercised Options

 Option
 Exercise

 Price

 Option

 Expiration Date

 —

 —

 —

 Dana

 —

 —

 —

 Footnotes:

 (1)

 The Company does not have
 any stock awards for the years specified for the above named senior officers.

 2023 OPTION EXERCISES AND VESTED
OPTIONS

 Name

 Number
 of Shares

 Acquired on Exercise

 Value
 Realized on

 Exercise

 —

 —

 Dana

 —

 —

 POTENTIAL PAYMENTS
UPON TERMINATION OF EMPLOYMENT

 SALARY SEVERANCE

 BONUS SEVERANCE

 GROSS UP TAXES

 BENEFIT COMPENSATION

 GRAND TOTAL

 $

 $

 —

 $

 12,600

 $

 6,600

 $

 320,721

 Indemnification.

 The Company maintains
directors and officer's liability insurance or "D&O insurance" coverage to reduce its exposure to such obligations,
and payments made under these agreements historically have not been material. Further, the Company's articles of incorporation
and bylaws provide for indemnification of directors and officers.

 Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 VOTING RIGHTS
AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:

 The sole class
of voting Common Stock of the Company as of March 29, 2024, that are issued and outstanding is the Common Stock, $0.0001 par value
per share, or "Common Stock". The table below sets forth, as of March 29, 2024, ("Record Date"), certain information
$0.0001 par value per share, or "Common Stock" information with respect to the Common Stock beneficially owned
by (i) each Director, nominee and executive officer of the Company; (ii) each person who owns beneficially more than 5% of the Common
Stock; and (iii) all Directors, nominees and executive officers as a group. There were 48,826,864 shares of Common Stock outstanding
as of March 29, 2024.

 NAME,
 ADDRESS & TITLE

 STOCK
 OWNERSHIP

 %
 OF STOCK OWNERSHIP

 SHARES
 - COMMON STOCK ISSUABLE UPON CONVERSION

 STOCK
 OWNERSHIP AFTER CONVERSION -ALL OPTIONS, WARRANTS & THOSE EXERCISEABLE WITHIN NEXT 60 DAYS

 %
 OF STOCK OWNED AFTER CONVERSION – OPTIONS, WARRANTS INCLUDES EXERCISEABLE WITHIN THE 60 DAYS

 OPTIONS
 & WARRANTS VESTED

 OPTIONS
 & WARRANTS EXPIRED

 OPTIONS,
 WARRANTS NOT VESTED

 Stewart Wallach, CEO, 144-V 10 Fairway
 Drive, Suite 100, Deerfield Beach, FL 33441

 9,831,745

 20.1

 %

 499,950

 9,831,745

 19.9

 %

 —

 1,515,556

 —

 Dana Eschenburg Perez, CFO, 144-V 10 Fairway
 Drive, Suite 100, Deerfield Beach, FL 33441

 —

 —

 %

 —

 —

 —

 %

 —

 —

 —

 Jeff Postal, Director, 144-V 10 Fairway Drive, Suite
 100, Deerfield Beach, FL 33441

 9,034,120

 18.5

 %

 499,950

 9,238,264

 20.1

 %

 204,144

 700,000

 —

 Jeff Guzy, Director, 3130 19th Street North, Arlington,
 VA 22201

 152,800

 0.03

 %

 —

 356,944

 0.7

 %

 204,144

 700,000

 —

 George Wolf Director, 144-V 10 Fairway Drive, Suite
 100, Deerfield Beach, FL 33441

 —

 —

 66,667

 —

 ALL OFFICERS & DIRECTORS AS A GROUP

 19,018,665

 %

 999,900

 19,426,953

 39.8

 %

 2,982,223

 —

 Notes to Table.

 (1)

 Unless otherwise indicated,
 the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially
 owned by them.

 (2)

 Mr. Wallach's ownership
 of common stock in the table does not include 499,950 shares issuable upon conversion of Series B-1 Convertible Preferred Stock and
 does not include 500,000 shares of common stock that may be issued, upon occurrence of a trigger event under a January 4, 2021 Loan
 agreement but that has not occurred.

 (3)

 Mr. Postal's ownership
 of common stock in the table does not include 499,950 shares issuable upon conversion of Series B-1 Convertible Preferred Stock and
 does not include 500,000 shares of common stock that may be issued, upon occurrence of a trigger event under a January 4, 2021 Loan
 agreement but that has not occurred.

 I tem 13. Certain Relationships
and Related Transactions, and Director Independence.

is a "controlled company" under typical stock exchange corporate governance rules, that is a company where 50% or more of
the voting power is owned by a person or a group and does not currently have to meet requirements for a board of directors with a majority
of "independent directors." Currently, only Jeffrey Guzy qualifies as an "independent director" under the listing
standards of most stock exchanges or quotation systems. No other director qualifies as an "independent director" under those
rules because they are officers of the Company or have business relationships with the Company. The CAPC Board adopted a written policy
for approval of transactions between the Company and its directors, director nominees, executive officers, greater than 5% beneficial
owners and their respective immediate family members. The policy governs transactions in which the value exceeds or is expected to exceed
$120,000 in a single calendar year.

 A "related-person
transaction" will be a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships)
in which we and any "related person" are participants involving an amount that exceeds $120,000. Transactions involving compensation
for services provided to us as an employee, director, consultant or similar capacity by a related person will not be covered by this
policy. A related person will be any executive officer, director or a holder of more than five percent of our common stock, including
any of their immediate family members and any entity owned or controlled by such persons.

 The policy
provides that the Audit Committee reviews transactions subject to the policy and determines whether to approve or ratify those transactions.
The Audit Committee considers, among other factors it deems appropriate, the following factors:

 Benefits derived by the
 related person from the transaction versus the benefits derived by the Company.

 Total value of the transaction.

 Whether the transaction
 was undertaken in the ordinary course of business of the Company; and

 Were the terms and conditions
 of the transaction usual and customary and commercially reasonable.

does not have any policies on expedited or pre-approval of certain routine related person transactions.

 From time to
time, the Company borrows working capital on a short-term basis, usually with maturity dates of less than a year, from Company directors
and officers. The Company believes that these working capital loans are commercially reasonable, especially in light of the inability
of the Company to obtain such short-term financing from traditional funding sources.

 During 2023,
the Company negotiated working capital funding agreements with Directors S. Wallach for $632,500 of proceeds to provide funding for daily
operations. The agreement matures June 15, 2024 and principal accrues simple interest at a rate of 5 percent per annum. The loan may
be prepaid in full or partially without any penalty.

 Process for Identifying Related
Person Transactions.

 To identify related-person transactions
in advance, we are expected to rely on information supplied by our executive officers, directors and certain significant stockholders.
In considering related-person transactions, our board of directors will take into account the relevant available facts and circumstances
including, but not limited to:

 the risks, costs and benefits
 to us.

 the impact on a director's
 independence in the event the related person is a director, immediate family member of a director or an entity with which a director
 is affiliated.

 the terms of the transaction.

 the availability of other
 sources for comparable services or products; and

 the terms available to
 or from, as the case may be, unrelated third parties or to or from our employees generally.

 Promoters and Certain Control
Persons

 We did not have any promoters at
any time during the past five fiscal years.

 Director Independence

 Our Board of Directors has determined
that our director, Mr. Jeffery Guzy, is an independent director, as the term "independent" is defined by the rules of the
Nasdaq Stock Market. The Company was not successful in recruiting additional, qualified and interested independent directors in fiscal
year 2023.

 Item 14. Principal Accountant
Fees & Services

is a summary of the fees billed to date by Assurance Dimensions CPA, for professional services rendered for the years ended December
31, 2023 and 2022:

 2023

 2022

 Audit Fees

 $
 45,000

 $
 —

 Other Fees

 —

 —

 Total

 $
 45,000

 $
 —

is a summary of the fees billed to date by D. Brooks & Associates CPA's, P.A., for professional services rendered for the years
ended December 31, 2023 and 2022:

 2023

 2022

 Audit
 Fees

 $
 52,025

 $
 85,000

 Tax
 Fees

 —

 —

 Total

 $
 52,025

 $
 85,000

is a summary of the fees billed to us by Kaufman, Rossin & Co., for professional services rendered for the years ended December 31,
2023 and 2022:

 2023

 2022

 Audit Fees

 $
 —

 $
 12,600

 Tax Fees

 25,725

 10,500

 Total

 $
 25,725

 $
 23,100

 Audit Fees.
Consists of fees billed for professional services rendered for the audits of our consolidated financial statements, reviews of our interim
consolidated financial statements included in quarterly reports, services performed in connection with filings with the Commission and
related comfort letters and other services that are normally provided by the Independent Registered firm in connection with statutory
and regulatory filings or engagements.

 Tax Fees. Consists of fees
billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal,
state and local tax compliance and consultation in connection with various transactions and acquisitions.

 AUDIT COMMITTEE PRE-APPROVAL
OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS

is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related
services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and
any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved
amount. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services
provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Audit Committee may also
pre-approve particular services on a case-by-case basis.

pre-approved 100% of the Company's 2023 audit fees, audit-related fees, tax fees, and all other fees to the extent the services
occurred after the effective date of the SEC's final pre-approval rules.

 Item 15. Exhibits, and Financial
Statement Schedules Reports

 (a) The following documents are
filed as part of this Report.

 1. FINANCIAL STATEMENTS

 Report
 of Independent Registered Public Accountants for the Years Ended December 31, 2022 and 2021 (PCAOB Firm ID: 4048)

 Consolidated Balance
 Sheets as of December 31, 2022 and 2021

 Consolidated Statements
 of Operations for the Years Ended December 31, 2022 and 2021

 Consolidated Statements
 of Stockholders' Equity for the Years Ended December 31, 2021 and 2021

 Consolidated Statements
 of Cash Flows for the Years Ended December 31, 2022 and 2021

 Notes to Consolidated
 Financial Statements

 2. FINANCIAL STATEMENT SCHEDULES

 All schedules
are omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto.

 3. EXHIBITS

 Exhibits Required
by Item 601 of Regulation S-K. Pursuant to the Instructions to Exhibits, certain instruments defining the rights of holders of long-term
debt securities of the Company and its consolidated subsidiaries are not filed because the total amount of securities authorized under
any such instrument does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. A copy
of such instrument will be furnished to the Securities and Exchange Commission upon request.

 3.1

 Articles
 of Incorporation of CHDT Corp. Incorporated by reference to Annex G to the Special Meeting Proxy Statement, Dated April 15, 2004,
 filed by CHDT Corporation with the Commission on April 20, 2004.

 3.1.1

 Amended
 and Restated Articles of Incorporation of Capstone Companies, Inc. Incorporated by reference to Exhibit 3.1 to Form 8-K filed by
 Capstone Companies, Inc. with the Commission on July 14, 2009.

 3.1.1.1

 Amendment
 to Amended and Restated Articles of Incorporation of Capstone Companies, Inc., as filed with Florida Secretary of State on June 8,
 2016. Incorporated by reference to Exhibit 3.1 to the Form 8-K filed by Capstone Companies, Inc. with the Commission on June 8, 2016.

 3.2

 By-laws
 of Capstone Companies, Inc. Incorporated by reference to Annex H the Special Meeting Proxy Statement, Dated April 15, 2004, filed
 by CHDT Corporation with the Commission on April 20, 2004.

 4.6

 of Capstone Companies, Inc. Securities^ as of December 31, 2021

 10.01

 Employment
 Agreement by Capstone Companies, Inc. and Stewart Wallach, dated February 5, 2020 filed by Capstone Companies, Inc with the Commission
 on March 30, 2020.

 10.02

 Consulting Agreement by Capstone Companies, Inc. and Eschenburg Perez CPA, LLC, dated March 27, 2023.

 10.08

 Financial
 Services Agreement dated March 1, 2017, by Capstone Companies, Inc. and Wilmington Capital Securities, LLC. Incorporated by reference
 to Exhibit 10.18 to Form 10-K filed by Capstone Companies, Inc with the Commission on March 28, 2018.

 Code
 of Ethics Policy. Exhibit 14 of the Capstone Companies, Inc. Form 8-K, as filed with the Commission on March 22, 2018.

 21.1

 Subsidiaries
 of Capstone Companies, Inc. ^

 31.1

 Certification
 Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Stewart Wallach, Chief Executive Officer^

 31.2

 Certification
 Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Gerry McClinton, Chief Financial Officer and Chief Operating Officer^

 32.1

 Certification
 Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Stewart Wallach, Chief Executive Officer. ^

 32.2

 Certification
 Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Gerry McClinton, Chief Financial Officer & Chief Operating Officer^

 101.INS

 101.SCH

 Schema Document

 101.CAL

 Calculation Linkbase Document

 101.DEF

 Definition Linkbase Document

 101.LAB

 Label Linkbase Document

 101.PRE

 Presentation Linkbase Document

 Note: CHDT Corp. is a prior name
of Capstone Companies, Inc.

 ^ Filed
Herein.

 Item 16. Form 10-K Summary. Not
Applicable.

 In accordance with Section 13 or 15(d)
of the Securities Exchange Act of 1934, Capstone Companies, Inc. has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in Broward County, Florida on this 29th day of March 2024.

 CAPSTONE COMPANIES, INC.

 Dated: March 29, 2024

 By: /s/ Stewart Wallach

 Stewart Wallach

 Chief Executive Officer and Director

 In accordance with
the Exchange Act, this report has been signed below by the following persons on behalf of Capstone Companies, Inc. and in the capacities
and on the dates indicated.

 /s/ Stewart Wallach

 Stewart Wallach

 Principal Executive Officer

 Director and Chief Executive Officer

 March 29, 2024

 /s/ Jeffrey Guzy

 Jeffrey Guzy

 March 29, 2024

 /s/ Jeffrey Postal

 Jeffrey Postal

 March 29, 2024

 /s/ George Wolf

 George Wolf

 March 29, 2024

 INDEX TO FINANCIAL
STATEMENTS

 Contents

 Page
 No.

 Reports
 of Independent Registered Public Accounting Firm (PCAOB ID: 5036 and PCAOB ID: 4048)

 Consolidated
 Balance Sheets as of December 31, 2023 and 2022

 Consolidated
 Statements of Operations for the Years Ended December 31, 2023 and 2022

 Consolidated
 Statements of Stockholders' Deficit for the Years Ended December 31, 2023 and 2022

 Consolidated
 Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

 Notes
 to the Consolidated Financial Statements

 REPORT
 OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Board of Directors and

Stockholders of Capstone Companies, Inc.

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheet of Capstone Companies, Inc. and Subsidiaries (the Company) as of December 31,
2023, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year ended December
31, 2023, and the related consolidated notes (collectively referred to as the financial statements). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and the
results of its operations and its cash flows for year ended December 31, 2023, in conformity with accounting principles generally accepted
in the United States of America.

 Explanatory
Paragraph – Going Concern

 The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has incurred recurring operating losses, has incurred negative cash flows
from operations and has an accumulated deficit. These and other factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plan regarding these matters is also described in Note 1 to the consolidated financial
statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.

 F- 1

 Critical
Audit Matters

 The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

of the Matter

 The
Company is required to test the carrying amount of goodwill at least annually, or more frequently upon the occurrence of certain events.
The Company is also required to assess if certain events occur or circumstances change that may be indicators of impairment. We identified
this area as a critical audit matter because the annual goodwill impairment test requires significant judgment regarding the evaluation
of qualitative factors. Additionally, these assessments also require appropriate determination of reporting units.

 How
we addressed the matter in our audit

 Our
audit procedures to address the risk of material misstatement relating to goodwill included, among others, evaluating the appropriateness
of the reporting unit level. Our audit procedures focused
on evaluating the appropriateness of management's assumptions and methodologies used in assessing goodwill impairment and have addressed
the matter by evaluating management's quantitative analysis. We also tested the Company's
calculation for mathematical accuracy; testing the estimated fair value of the reporting unit; testing the carrying value of the
reporting unit; validating the appropriateness and reliability of inputs and amounts used; performing
a sensitivity analysis to evaluate the impact of changes in key assumptions and evaluating
the adequacy of the financial statement disclosures relating to goodwill, including key assumptions and judgments. As a result of our
testing we did not take exception to management's conclusion that no impairment should be recognized related to goodwill for the
year ended December 31, 2023.

 Based
on our audit procedures and evaluations, we concluded that the assumptions and methodologies applied by management in assessing goodwill
impairment were reasonable and in accordance with generally accepted accounting principles.

 We
 have served as the Company's auditor since 2023.

 Margate,
 Florida

 March
 29, 2024

 F- 2

 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Board of Directors of

 Capstone
Companies, Inc.

 Opinion
on the Consolidated Financial Statements

 We
have audited the accompanying consolidated balance sheets of Capstone Companies, Inc. and Subsidiaries (the Company) as of December 31,
2022 and the related consolidated statement of operations, stockholders' equity, and cash flows for the years ended December 31,
2022, and the related notes to the consolidated financial statements (collectively referred to as the consolidated financial statements).

 In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2022 and the results of its operations and its cash flows for the years ended December 31, 2022, in conformity with accounting
principles generally accepted in the United States of America.

 Substantial
Doubt Regarding Going Concern

 The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has incurred operating losses, has incurred negative cash flows from
operations and has an accumulated deficit. These and other factors raise substantial doubt about the Company's ability to continue
as a going concern. Management's plan regarding these matters is also described in Note 1 to the consolidated financial statements.
The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 Basis
for Opinion

 These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.

 Critical
Audit Matter

 The
critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material
to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments.

 F- 3

of the Matter

 As
described in footnote 1 "Inventory", to the consolidated financial statements, inventory is valued at the lower of landed
cost or net realizable value. Management estimates an inventory reserve as necessary for excess or slow-moving inventory. Changes in
the inventory reserve are recorded in cost of goods sold.

 As
of December 31, 2022, the Company's consolidated net inventory balance was $412,261, inclusive of the inventory reserve of $533,254.
The amount of the inventory reserve is equal to the difference between the cost of the inventory and its estimated net realizable value
based on assumptions about future demand, selling prices, and market conditions.

 The
principal considerations for our determination that performing procedures relating to the inventory reserve is a critical audit matter
are the significant judgment by management in determining the estimated net realizable value of inventories that are in excess or slow-moving,
which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence
relating to the estimate.

 How
the Critical Audit Matter Was Addressed in the Audit

 Addressing
the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included, among others: (i) evaluated the appropriateness of management's process for developing
the estimates of net realizable value; (ii) tested the reliability of reports used by management by agreeing to underlying records; (iii)
tested the reasonableness of the assumptions about future demand, selling prices and market conditions by considering historical trends
and consistency with evidence obtained in other areas of the audit.

 D.
Brooks and Associates CPAs, P.A.

 We have served as the Company's
 auditor since 2020.

 4048

 Palm
Beach Gardens, Florida

 March 31, 2023

 F- 4

 CONSOLIDATED BALANCE
 SHEETS

 2023

 2022

 Assets:

 Current Assets:

 Cash

 $
 36,466

 $
 61,463

 Accounts receivable

 —

 7,716

 Inventories,
 net of allowances of $ 0 and
 $ 533,254,
 respectively

 —

 412,261

 Prepaid expenses

 22,120

 37,090

 Due
 from related party

 9,570

 —

 Total
 Current Assets

 68,156

 518,530

 Property and equipment,
 net

 42,970

 —

 Operating lease- right
 of use asset, net

 —

 34,151

 Deposit

 —

 24,039

 Goodwill

 1,312,482

 1,312,482

 Total
 Assets

 $
 1,423,608

 $
 1,889,202

 Liabilities
 and Stockholders' Deficit:

 Current Liabilities:

 Accounts payable
 and accrued liabilities

 $
 804,623

 $
 309,439

 Notes payable
 related parties and accrued interest-current

 1,946,315

 413,425

 Notes payable
 unrelated party and accrued interest-current

 594,161

 206,712

 lease- current portion

 —

 37,535

 Total
 Current Liabilities

 3,345,099

 967,111

 Long-Term Liabilities:

 Notes payable
 related parties and accrued interest-less current portion

 —

 821,647

 Notes payable
 unrelated parties and accrued interest-less current portion

 —

 360,446

 Deferred
 tax liabilities -long-term

 320,329

 285,379

 Total
 Long-Term Liabilities

 320,329

 1,467,472

 Total
 Liabilities

 3,665,428

 2,434,583

 Commitments and Contingencies: (
 Note 5)

 Stockholders' Deficit:

 Preferred Stock, Series B-1, par
 value $.0001
 per share, authorized 5,000,000
 shares, issued and outstanding- 15,000
 shares at December 31, 2023, and December 31, 2022 (Liquidation Preference
 $15,000)

 Preferred Stock, Series C, par
 value $ 1.00
 per share, authorized 67
 shares, issued and outstanding - 0 -
 shares

 —

 —

 Common Stock, par value $.0001
 per share, authorized 295,000,000
 shares, issued and outstanding 48,826,864
 shares at December 31, 2023 and December 31, 2022.

 4,884

 4,884

 Additional paid-in capital

 8,550,510

 8,550,510

 Accumulated
 deficit

 ( 10,797,216
)

 ( 9,100,777
)

 Total
 Stockholders' Deficit

 ( 2,241,820
)

 ( 545,381
)

 Total
 Liabilities and Stockholders' Deficit

 $
 1,423,608

 $
 1,889,202

 The accompanying notes
are an integral part of these consolidated financial statements.

 F- 5

 CONSOLIDATED
 STATEMENTS OF OPERATIONS

 For the Years Ended

 2023

 2022

 Revenues, net

 $
 192,176

 $
 346,474

 Increase in inventory reserve
 and write offs

 ( 133,775
)

 ( 692,154
)

 Cost of sales

 ( 324,041
)

 ( 256,868
)

 Gross
 Loss

 ( 265,640
)

 ( 602,548
)

 Operating Expenses:

 Sales and marketing

 75,890

 359,535

 469,599

 817,409

 Professional fees

 426,157

 457,500

 Product development

 101,409

 203,751

 Other
 general and administrative

 296,159

 480,771

 Total
 Operating Expenses

 1,369,214

 2,318,966

 Loss

 ( 1,634,854
)

 ( 2,921,514
)

 Other Income (Expense):

 Other income, net

 77,106

 394,952

 Interest
 expense, net

 ( 103,741
)

 ( 69,686
)

 Total Other
 Income (Expense), net

 ( 26,635
)

 325,266

 Loss Before Income Taxes

 ( 1,661,489
)

 ( 2,596,248
)

 Income Tax
 Expense

 67,503

 $
 ( 1,696,439
)

 $
 ( 2,663,751
)

 Net Loss per Common Share

 Basic and
 Diluted

 $
 ( 0.03
)

 $
 ( 0.05
)

 Weighted Average Shares Outstanding

 Basic and
 Diluted

 48,826,864

 48,852,204

 The accompanying notes
are an integral part of these consolidated financial statements.

 F- 6

 CONSOLIDATED STATEMENTS
 OF STOCKHOLDERS' DEFICIT

 YEARS ENDED DECEMBER
 31, 2023 AND 2022

 Preferred Stock

 Preferred Stock

 Additional

 Series
 B

 Series
 C

 Common
 Stock

 Paid-In

 Accumulated

 Total

 Shares

 Par Value

 Shares

 Par Value

 Shares

 Par Value

 Capital

 Deficit

 Equity

 Balance at December 31, 2021

 15,000

 —

 —

 48,893,031

 4,892

 8,554,320

 ( 6,437,026
)

 $
 2,122,188

 Stock options for compensation

 —

 —

 —

 —

 —

 —

 7,844

 —

 7,844

 Repurchase of shares

 —

 —

 —

 —

 ( 66,167
)

 ( 8
)

 ( 11,654
)

 —

 ( 11,662
)

 —

 —

 —

 —

 —

 —

 —

 ( 2,663,751
)

 ( 2,663,751
)

 Balance at December 31, 2022

 15,000

 $

 —

 $
 —

 48,826,864

 $
 4,884

 $
 8,550,510

 $
 ( 9,100,777
)

 $
 ( 545,381
)

 —

 —

 —

 —

 —

 —

 —

 ( 1,696,439
)

 ( 1,696,439
)

 Balance at December 31, 2023

 15,000

 $

 —

 $
 —

 48,826,864

 $
 4,884

 $
 8,550,510

 $
 ( 10,797,216
)

 $
 ( 2,241,820
)

 The accompanying notes
are an integral part of these consolidated financial statements.

 F- 7

 CONSOLIDATED STATEMENTS
 OF CASH FLOWS

 For the Twelve Months Ended

 2023

 2022

 CASH FLOWS FROM OPERATING ACTIVITIES:

 Net
 Loss

 $
 ( 1,696,439
)

 $
 ( 2,663,751
)

 Adjustments to reconcile net loss
 to net cash used in operating activities:

 Depreciation

 —

 25,643

 Stock
 based compensation expense

 —

 7,844

 Deferred
 tax expense

 —

 Lease
 amortization expense

 34,151

 64,500

 Impairment of
 equipment

 —

 51,285

 Increase in inventory allowance

 133,775

 533,524

 Write off of prepaid inventory
 deposit

 —

 158,900

 Accrued
 interest added to note payable related parties

 105,746

 71,890

 Increase
 in deferred income tax liabilities- long term

 —

 11,425

 (Increase)
 decrease in accounts receivable, net

 7,716

 ( 6,235
)

 (Increase)
 decrease in inventories

 278,486

 ( 436,595
)

 Decrease in
 prepaid expenses

 14,970

 304,758

 (Increase)
 in due from related party

 ( 9,570
)

 —

 (Increase) decrease
 in deposits

 24,039

 ( 12,891
)

 (Decrease)
 increase in accounts payable and accrued liabilities

 495,184

 ( 229,112
)

 Decrease
 in tax refundable

 —

 284,873

 Decrease
 in operating lease liabilities

 ( 37,535
)

 ( 70,155
)

 Net
 cash used in operating activities

 ( 614,527
)

 ( 1,904,367
)

 CASH FLOWS FROM INVESTING ACTIVITIES:

 Purchases
 of property and equipment

 ( 42,970
)

 —

 Net cash
 used in investing activities

 ( 42,970
)

 —

 CASH FLOWS FROM FINANCING ACTIVITIES:

 Proceeds
 from notes payable related parties

 632,500

 500,000

 Proceeds
 from notes payable unrelated party

 —

 Repurchase
 of shares

 —

 ( 11,662
)

 Net cash provided by financing
 activities

 632,500

 688,338

 Net Increase (Decrease) in Cash

 ( 24,997
)

 ( 1,216,029
)

 Cash at Beginning
 of Year

 61,463

 1,277,492

 Cash at
 End of Year

 $
 36,466

 $
 61,463

 SUPPLEMENTAL DISCLOSURE OF CASH
 FLOW INFORMATION:

 Interest
 cash paid

 $
 —

 $
 —

 taxes paid

 $
 —

 $
 —

 The accompanying notes
are an integral part of these consolidated financial statements.

 F- 8

 CAPSTONE COMPANIES,
INC. AND SUBSIDIARIES

 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

 NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Principles
of Consolidation

 The consolidated
financial statements for the years ended December 31, 2023 and 2022, include the accounts of the parent entity and its wholly-owned subsidiaries.
All intra-entity transactions and balances have been eliminated in consolidation.

 This summary
of accounting policies for Capstone Companies, Inc. ("CAPC"), a Florida corporation (formerly, "CHDT Corporation")
and its wholly-owned subsidiaries (collectively referred to as the "Company", "we", "our" or "us"),
is presented to assist in understanding the Company's consolidated financial statements. The accounting policies conform to accounting
principles generally accepted in the United States of America ("U.S. GAAP") and have been consistently applied in the preparation
of the consolidated financial statements.

 Organization
and Nature of Business

 Capstone Companies,
Inc. is headquartered in Deerfield Beach, Florida and is incorporated under the laws of the State of Florida.

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

 From 2007 until
2022, the Company, through Capstone Industries, Inc "CAPI", was primarily engaged in the business of developing, marketing,
and selling home LED products ("Lighting Products") through national and regional retailers in North America and in certain
overseas markets. The Lighting Products are targeted for applications such as home indoor and outdoor lighting and have different functionalities
to meet consumer's needs. Over the last few years there has been significant LED price erosion, which has commoditized LED consumer
products. The LED category has matured and is no longer the innovative "must have" consumer product as in previous years.
As such, the Company entered into another home goods product segment by developing a smart interactive mirror ("Smart Mirror")
for residential use. The Company planned for the Smart Mirror product launch in 2021, but its release to the retail market was delayed
until March 2022 due to product development delays at the Company's suppliers, resulting from the impact of COVID-19. The development
of the Smart Mirrors was part of the Company's strategic effort to find new product lines to replace the Lighting Products. The
Smart Mirrors have not provided sufficient sustained revenues to support the Company operations.

products have been typically manufactured in Thailand and China by contract manufacturing companies. As of the date of these consolidated
financial statements, the Company's future product development effort is focused on the development of a "Connected Surfaces"
portfolio. The Connected Surfaces portfolio is designed to tap into consumer's ever-expanding Internet of Things, wireless connected
lifestyles prevalent today. The Company has finalized development of a kitchen appliance, the "Connected Chef", which is
the world's first purpose-built tablet form factor with an integrated platform for cooking accessories, i.e.: cutting board, and
designed to safely deliver and access content on mobile and web based platforms. The Connected Chef is not yet in production and has
not produced any pre-production sales orders or revenues as of the year ended December 31, 2023.

 F- 9

 NOTES

 NOTE

In addition to efforts to develop the Connected Chef, the Company has explored development or acquisition of a new business line. As
of the filing of this report, the Company has not identified a new business line that could, in the judgment of the Company, attract
working capital funding to sustain company operations, or provide sufficient operating revenues to sustain Company operations through
2024. The Company is continuing efforts to locate a new business line in case efforts to internally establish a new product line do not
succeed. The financial condition of the Company and low market price of its Common Stock adversely affects the Company's ability
to acquire or fund a new business line.

operations consist of one reportable segment for financial reporting purposes: Consumer Home Goods.

 Liquidity
and Going Concern

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

 During the year ended
December 31, 2023, the Company used cash in operations of $614,527 and generated net operating losses of approximately $1,634,854.
As of December 31, 2023, the Company had a working capital deficit of approximately $3,276,943 and an accumulated deficit $10,797,216.
The Company's cash balance decreased by $24,997 from $61,463 as of December 31, 2022 to $36,466 as of December 31, 2023. As of
December 31, 2023, the Company does not have sufficient cash on hand to finance its plan of operations and will need to seek additional
capital through debt and/or equity financing. These factors raise substantial doubt about the Company's ability to continue as
a going concern.

 We are seeking alternative
sources of liquidity, including but not limited to accessing the capital markets, or other alternative financing measures and strategic
partnerships. However, instability in, or tightening of the capital markets, could adversely affect our ability to access the capital
markets on terms acceptable to us. An economic recession or a slow recovery could adversely affect our business and liquidity. The lack
of operating income from products and the financial condition of the Company are also hindering efforts to locate working capital funding.

 Certain directors
have provided necessary funding including a working capital line to support the Company's cash needs through this period of revenue
development, but this funding is limited in amount and frequency. Unless the Company succeeds in raising additional capital or successfully
increases cash generated from operations, management 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 report.

 Concentrations
of Credit Risk

 Cash is deposited
with major banks in the United States. From time to time, such deposits may be in excess of insured limit. Generally, the FDIC limit
per bank is $250,000. Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact
on the Company's financial condition, results of operations and cash flows.

 F- 10

 NOTES

 NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued

 Accounts
Receivable

 For product revenue,
the Company invoices its customers at the time of shipment for the sales value of the product shipped. Accounts receivables are recognized
at the amount expected to be collected and are not subject to any interest or finance charges. The Company does not have any off-balance
sheet credit exposure related to any of its customers.

 The Company evaluates
the collectability of accounts receivable based on a combination of factors. In cases where the Company becomes aware of circumstances
that may impair a specific customer's ability to meet its financial obligations subsequent to the original sale, the Company will
recognize an allowance against amounts due, and thereby reduce the net recognized receivable to the amount the Company reasonably believes
will be collected. For all other customers, the Company recognizes an allowance for credit losses based on the length of time the receivables
are past due and consideration of other factors such as industry conditions, the current business environment and the Company's
historical payment experience. An allowance for credit losses is established as losses are estimated to have occurred through a provision
for bad debts charged to earnings. This evaluation is inherently subjective and requires estimates that are susceptible to significant
revisions as more information becomes available.

31, 2023 and 2022, management has not recorded an allowance for doubtful accounts.

 I nventory

inventory, which consists of finished Thin Cast Smart Mirror products for resale to consumers by Capstone, is recorded at the lower of
landed cost (first-in, first-out) or net realizable value. The Company writes down its inventory balances for estimates of excess and
obsolete amounts. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when the expected realizable
value of a specific inventory item falls below its original cost. Management regularly reviews the Company's investment in inventories
for such declines in value. The write-downs are recognized as a component of cost of sales.

 During 2022, Management
reviewed the valuation of inventory on hand as of the year ended December 31, 2022, and considered the need for a reserve for slow moving
inventory due to sales not meeting projected forecasts during 2022. Management estimated a 50% reserve for inventory held in domestic
warehouses and a 100% reserve for inventory held in international warehouses, which resulted in an inventory reserve of $533,254.

 During the fourth
quarter of 2023, Management reviewed the valuation of inventory on hand and decided to write off all Smart Mirror inventory as of December
31, 2023, resulting in a $133,775 reduction in inventory to bring the balance to $0 and a corresponding expense to cost of sales. The
write off of the remaining inventory was due to lower than expected sales of the Smart Mirrors coupled with limited working capital to
advance marketing efforts.

 Prepaid
Expenses

prepaid expenses consist primarily of prepaid insurance and investor relation services. As of December 31, 2023 and 2022, respectively,
prepaid expenses were $22,120 and $37,090, respectively. During the year ended December 31, 2022, the Company wrote off a deposit on
inventory in the amount of $158,900, which was included in increase in inventory reserve as the Company did not complete the manufacturing
of the product.

 F- 11

 NOTES

 NOTE

 Due
from Related Party

 During 2023, the Company
offered supplemental health care benefits for employees. Employees may add dependents to the health plan where the employee would pay
for the additional dependent's coverage through payroll deductions. Due to the deferral of wages from the CEO, Stewart Wallach,
the portion of health insurance benefits paid by the Company for his dependents were not paid for via employee payroll deductions. As
a result, the Company recorded a $9,570 receivable from a related party for the amounts owed for Mr. Wallach's dependents health
insurance coverage.

 Property
and Equipment

 Property and equipment
are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives
of the related assets as follows:

of Useful Lives, Depreciation of Property and Equipment

 Useful
 Life

 December
 31, 2023

 December
 31, 2022

 Computer
 equipment and software

 years

 $

 —

 $

 53,819

 Machinery
 and equipment

 3 - 7
 years

 42,970

 76,928

 Furniture
 and fixtures

 3 - 7
 years

 —

 6,828

 Less:
 Accumulated depreciation

 —

 ( 86,290

)

 Less:
 Impairment of equipment

 —

 ( 51,285

)

 Property
 and Equipment, Net

 $

 42,970

 $

 —

 Long-lived assets
are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable.
When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. Long-lived assets
to be disposed of, if any, are reported at the lower of carrying amount or fair value less cost to sell. Upon sale or other disposition
of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or
loss is included in the determination of income or loss.

 In 2022, the Company
began a re-engineering of the Smart Mirror for its next rollout for version two and decided the current tooling and product molds would
not manufacture the mold for version two. The Company determined its Smart Mirror tooling machine was impaired as of December 31, 2022
and recorded an impairment loss of $51,285, included in product development expenses on the consolidated statements of operations. The
Company wrote off fully depreciated fixed assets with a net book value of $74,323 during the year ended December 31, 2022.

 In 2023, the Company
invested $42,970 in a manufacturing mold for the new product, the Connected Chef. The mold was not ready for production in 2023, and
therefore was not depreciated during 2023.

 Depreciation and
amortization expense was $ 0 and $ 25,643
 for the years ended December 31, 2023 and 2022,
respectively.

 Leases

 The Company accounts for leases under
ASU 2016-02 which requires leases with durations greater than twelve months to be recognized on the balance sheet and disclose key information
about the leasing arrangements. Operating leases are included in operating lease right-of-use ("ROU") assets and operating
lease liabilities on the consolidated balance sheets. See Note 6 "Operating Leases" for additional disclosures as required
by the new standard.

 Goodwill

 On September 13, 2006,
the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation ("CAPI"). Capstone
was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products
to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding
shares of 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.

 The total impairment
charges for the year ended December 31, 2023 and 2022 was $0, respectively, as the fair value exceeded carrying value.

 F- 12

 NOTES

 NOTE

 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

 Basic earnings per
common share is computed by dividing net income(loss) by the weighted average number of shares of common stock outstanding as of December
31, 2023 and 2022. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. For calculation of the diluted earnings per share, the basic weighted average
number of shares is increased by the dilutive effect of stock options and warrants using the treasury stock method. In periods where
losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion
would be anti-dilutive. As of December 31, 2023 and 2022, the total number of potentially dilutive common stock equivalents excluded
from the diluted earnings per share calculation was 408,288 options and 199,733 warrants for 2023, and 608,288 options and 199,733 warrants
for 2022.

 Revenue
Recognition

 The Company generates
revenue from developing, marketing and selling consumer products through national and regional retailers. The Company's products
are targeted for applications such as home indoor and outdoor lighting as well as Internet-of-Thing devices and will have different functionalities.
Capstone currently operates in the consumer electronic products category in the Unites States and in specific overseas markets. These
products may be offered either under the Capstone brand or a private brand.

 A sales contract
occurs when the customer-retailer submits a purchase order to buy a specific product, a specific quantity, at an agreed-fixed price,
within a ship window, from a specific location and on agreed payment terms. The selling price in all of our customers' orders has
been previously negotiated and agreed to including any applicable discount prior to receiving the customer's purchase order. The
stated unit price in the customer's order has already been determined and is fixed at the time of invoicing.

 F- 13

 NOTES

 NOTE

 Revenue Recognition

 The Company recognizes
lighting product revenue when the Company's performance obligations as per the terms in the customers purchase order have been
fully satisfied, specifically, when the specified product and quantity ordered has been manufactured and shipped pursuant to the customers
requested ship window, when the sales price as detailed in the purchase order is fixed, when the product title and risk of loss for that
order has passed to the customer, and collection of the invoice is reasonably assured. This means that the product ordered and to be
shipped has gone through quality assurance inspection, customs and commercial documentation preparation, the goods have been delivered,
title transferred to the customer and confirmed by a signed cargo receipt or bill of lading. Only at the time of shipment when all performance
obligations have been satisfied will the judgement be made to invoice the customer and complete the sales contract.

 Marketing allowances
include the cost of underwriting an in-store instant rebate coupon or a target markdown allowance on a specific product. The Company
retains these allowances for a period of 3 to 5 years in the event the customer chargebacks for a promotional allowance against an open
invoice or submits an invoice for their claim. Cash discounts represent discounts offered to the retailer off outstanding accounts receivable
in order to initiate early payment. These allowances are evaluated when our relationship with a customer is terminated, or we cease selling
a specific product to a customer and may be released as other income if deemed not required. During the year ended December 31, 2023
and 2022, the Company reversed into other income approximately $0 and $39,300 of previously accrued marketing and promotional allowances
for previous product sales that are deemed highly unlikely for the customer to chargeback the Company due to the age of the allowance
and the sales of the specific item ceasing.

 With the launch of
the Connected Surfaces Smart Mirror program, the direct-to-consumer orders are sold initially through e-commerce platforms. The Company
also sells the Connected Surfaces Smart Mirror program through independent retailers. The Company will only bill the customer and recognize
revenue upon the customer obtaining control of the Smart Mirror order which generally occurs upon delivery.

 The Company expenses
license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale is recorded.
These costs are recorded within sales and marketing expenses.

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

of Net Revenue by Major Source

 For the
 Year Ended
 December 31, 2023

 For the
 Year Ended
 December 31, 2022

 Capstone
 Brand

 % of

 Revenue

 Capstone
 Brand

 % of

 Revenue

 Lighting Products-
 U.S.

 $
 65,025

 %

 $
 228,680

 %

 Smart Mirror Products- U.S.

 127,151

 %

 73,154

 %

 Lighting
 Products-International

 —

 —
 %

 44,640

 %

 Total
 Revenue

 $
 192,176

 %

 $
 346,474

 %

 We provide our Smart
Mirror and Lighting Product customers with limited rights of return for non-conforming product warranty claims. As a policy, the Company
does not accept product returns from customers, however occasionally we may receive back residual inventory.

 F- 14

 NOTES

 NOTE

 Revenue, continued

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

 Our Smart Mirror customers
are charged when executing the e-commerce purchase. We do not have extended payment terms for our Smart Mirror customers. Our Lighting
Product payment terms may vary by the type of customer, the 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.

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 $17,000 and $26,700 for the years ended
December 31, 2023 and 2022, respectively.

 Warranties

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

 Certain retail customers
may receive an off-invoice based discount such as a defective/warranty allowance, that will automatically reduce the unit selling price
at the time the order is invoiced. This allowance will be used by the retail customer to defray the cost of any returned units from consumers
and therefore negate the need to ship defective units back to the Company. Such allowances are charged to cost of sales at the time the
order is invoiced. For those customers that do not receive a discount off-invoice, the Company recognizes a charge to cost of sales for
anticipated non-conforming returns based upon an analysis of historical product warranty claims and other relevant data.

 For the online Smart
Mirror customers the product has a One Year Limited Warranty. The purchaser must register the product within 30 days from date of purchase
with specific product information to activate the warranty. Capstone warrants the product to be free from defects in workmanship and
materials for the warranty period. If the product fails during normal and proper use within the warranty period, Capstone at its discretion,
will repair or replace the defective parts of the product, or the product itself.

 We evaluate our warranty
reserves based on various factors including historical warranty claims assumptions about frequency of warranty claims, and assumptions
about the frequency of product failures derived from our reliability estimates. Actual product failure rates that materially differ from
our estimates could have a significant impact on our operating results. Product warranty reserves are reviewed each quarter and recognized
at the time we recognize revenue.

 F- 15

 NOTES

 NOTE

 Warranties, continued

table summarizes the changes in the Company's product warranty liabilities which are included in accounts payable and accrued liabilities
in the accompanying December 31, 2023 and 2022 balance sheets:

of Changes in Product Warranty Liabilities Included in Accounts Payable and Accrued Liabilities

 2023

 2022

 Balance at the beginning
 of the year

 $
 1,926

 $
 46,322

 Amount accrued

 1,926

 Payments and credits

 ( 1,579
)

 ( 4,580
)

 Reversal
 of prior years' accrual unclaimed

 —

 ( 41,742
)

 Balance
 at year-end

 $
 1,200

 $
 1,926

 Advertising
and Promotion

 Advertising and promotion
costs, including advertising, social media, and trade show expenses, are expensed as incurred and included in sales and marketing expenses.
Advertising and promotion expenses were $ 11,903
 and $ 284,659
 for the years ended December 31, 2023, and 2022,
respectively.

 Product
Development

 Our research and
development team located in Thailand working with our designated factories, are responsible for the design, development, testing, and
certification of new product releases. Our engineering efforts support product development across all products, as well as product testing
for specific overseas markets. All research and development costs are charged to results of operations as incurred.

 For the year ended
December 31, 2023 and 2022, product development expenses were $ 101,409
 and $ 203,751,
respectively. Product development expenses for 2023 were related to the development of the Connected Chef. Product development expenses
for 2022 were related to the development of the Company's Smart Mirror. Also included in product development expenses during the
year ended December 31, 2022 was an impairment loss of $ 51,285
 due to an impairment of the Smart Mirror tooling
machine.

 Shipping
and Handling

shipping and handling costs are included in sales and marketing expenses and are recognized as an expense during the period in which
they are incurred and amounted to $62,923 and $50,150 for the years ended December 31, 2023 and 2022, respectively.

 Accounts
Payable and Accrued Liabilities

 The following table
summarizes the components of accounts payable and accrued liabilities at December 31, 2023 and 2022:

of Components of Accounts Payable and Accrued Liabilities

 2023

 2022

 Accounts payable

 $
 69,267

 $
 38,056

 Accrued warranty reserve

 1,200

 1,926

 Accrued compensation
 and deferred wages, marketing allowances, customer deposits and other liabilities

 734,156

 269,457

 Total

 $
 804,623

 $
 309,439

 F- 16

 NOTES

 NOTE

Taxes

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

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

 The Company recognizes
the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by
the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such
positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

 Tax regulations within
each jurisdiction are subject to the interpretation of the relaxed tax laws and regulations and require significant judgement to apply.
The Company is 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

 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 consolidated statements of operations.

 Stock-based compensation
expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to
vest during the period. In conjunction with the adoption of ASC 718, the Company adopted the straight-line single option method of attributing
the value of stock-based compensation expense. The Company accounts for forfeitures as they occur.

 Stock-based compensation
expense recognized during the years ended December 31, 2023 and 2022 was $ 0
 and $ 7,844,
respectively.

 Other
Income (Expense)

 For fiscal 2023
other income was approximately $77,000 compared to $395,000 in 2022, a decrease of $318,000 over 2022. The other income
for the year ended December 31, 2022 resulted from $152,000 in employee retention tax credit received under Cares act 2020-2021, versus
$49,000 received in 2023.

 Interest expense
for 2023 amounted to approximately $104,000 compared to $70,000 in 2022, an increase of $34,000 or 49%, due to the increase of
$632,500 in notes payable held by the Company, accruing interest at 5% per annum.

 Use
of Estimates

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

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

 F- 17

 NOTES

 NOTE

 Recently
Issued Accounting Pronouncements

 In June 2016 and
subsequently amended in March 2022, the FASB issued ASC 326, Financial Instruments – Credit Losses (Topic 326): Measurements of
Credit Losses on Financial Instruments ("ASC 326"), which replaces the existing incurred loss model with a current expected
credit loss ("CECL") model that requires consideration of a broader range of reasonable and supportable information to inform
credit loss estimates. The Company would be required to use a forward-looking CECL model for accounts receivables, guarantees and other
financial instruments. The Company adopted ASC 326 on January 1, 2023 and ASC 326 did not have a material impact on its consolidated
financial statements.

 Recently Issued
Accounting Pronouncements Not Yet Adopted

 In November 2023,
the FASB issued Accounting Standards Update 2023-07 – Segment Reporting (Topic ASC 280) Improvements to Reportable Segment Disclosures.
The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosure about significant segment expenses.
The enhancements under this update require disclosure of significant segment expenses that are regularly provided to the Chief Operating
Decision Maker ("CODM") and included within each reported measure of segment profit or loss, require disclosure of other
segment items by reportable segment and a description of the composition of other segment items, require annual
disclosures under ASC 280 to be provided in interim periods, clarify use of more than one measure of segment profit or loss by the CODM,
require that the title of the CODM be disclosed with an explanation of how the CODM uses the reported measures of segment profit or loss
to make decisions, and require that entities with a single reportable segment provide all disclosures required by this update and required
under ASC 280. ASU 2023-07 is effective for public business entities for fiscal years beginning after December 15, 2023, with early adoption
permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations.

 In December 2023,
the FASB issued Accounting Standards Update 2023-09 – Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the transparency
of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation
and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income
tax disclosures. The amendments in ASU 2023-09 will become effective beginning of our 2025 fiscal year. Early adoption is permitted for
annual financial statements that have not yet been issued or made available for issuance. We do not expect that this guidance will have
a material impact upon our financial position and results of operations.

 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.

 NOTE
2 - CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE

 Financial instruments
that potentially subject the Company to credit risk consist principally of cash and accounts receivable. The Company has no significant
off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.

 Cash

 The Company at times
has cash with its financial institution in excess of Federal Deposit Insurance Corporation ("FDIC") insurance limits. The
Company places its cash with high credit quality financial institutions which minimize the risk of loss. To date, the Company has not
experienced any such losses. As of December 31, 2023, the Company did not have cash balances in excess of FDIC insurance limits.

 F- 18

 NOTES

 NOTE 2 -
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE (continued)

 Accounts Receivable

 The Company grants
credit to its customers, substantially all of whom are retail establishments located throughout the United States and their international
locations. The Company typically does not require collateral from customers. Credit risk is limited due to the financial strength of
the customers comprising the Company's customer base and their dispersion across different geographical regions. The Company monitors
exposure of credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. As the Company's
ecommerce revenue starts to increase the makeup of the accounts receivable change significantly. Stripe is the company that processes
online payments for our website, we should receive payment from them within 3 days of the product shipment. If the product is shipped
through Amazon it could take between 20 and 30 days for collection.

 For the years ended
December 31, 2023 and 2022, approximately 0% and 13% respectively, of the Company's consolidated net revenue resulted from international
sales.

 Major Customers

of Concentration of Credit Risk of Major Customers And Major Vendors

 Net Revenue
 %

 Net Accounts
 Receivable

 Year
 Ended December 31,

 Year
 Ended December 31,

 2023

 2022

 2023

 2022

 Customer
 A

 %

 %

 —

 —

 Customer B

 %

 —

 —

 —

 Customer
 C

 —

 %

 —

 —

 Total

 %

 %

 $
 —

 —

 Major Vendors

 The Company had one
vendor from which it purchased 19% of merchandise sold during the year ended December 31, 2023, and 61% of merchandise sold during the
year ended December 31, 2022. The loss of this supplier could adversely impact the business of the Company.

 As of December 31,
2023, and 2022, approximately 22 %
and 8 %,
respectively, of accounts payable were due to one vendor.

 NOTE
3 – NOTES PAYABLE TO RELATED AND UNRELATED PARTIES

 Working Capital
Loan with Directors

 On January
4, 2021, the Company entered a $750,000 working capital loan agreement with Directors, Stewart Wallach and Jeffrey Postal. The short-term
facility ended June 30, 2021 ("Initial Period'). There were no advances taken by the Company on this working capital loan
agreement.

 F- 19

 NOTES

 NOTE
3 – NOTES PAYABLE TO RELATED AND UNRELATED PARTIES (continued)

 In consideration for
the Lenders providing the loan under this Agreement for the Initial Period and agreeing to a below market rate of interest, and as payment
of a finance fee for the loan on an unsecured basis, the Company issued to the Lenders the following securities 7,500 shares of the Company's
Series B-1 Convertible Preferred Stock ("Preferred Shares") issued to each Lender. The Preferred Shares shall have the appropriate
restrictive legends. Each Preferred Share converts into 66.66 shares of Common Stock at option of Lender. The Preferred Shares and any
shares of Common Stock issued under the loan agreement are "restricted" securities under Rule 144 of the Securities Act of
1933, as amended. The Preferred Shares have no further rights, preferences, or privileges. The fair value of the Preferred Shares was
determined to be $48,996 based on the number of shares of Common Stock to be issued upon conversion and the market price of the Common
Stock on the date the working capital loan agreement was executed. The Company amortized the $48,996 Finance Fee into interest expense
over the six months of the agreement. See Note 5.

 Purchase Funding
Agreement with Directors and Unrelated Party

 On
July 2, 2021, the Board of Directors ("Board") resolved that the Company required a purchase order funding facility to procure
additional inventory to support the online Smart Mirror business. The Board resolved that certain Directors could negotiate the terms
of a Purchase Order Funding Agreement for up to $1,020,000 with Directors S. Wallach and J. Postal and E. Fleisig, a natural person who
is not affiliated with the Company. This agreement was finalized on October 18, 2021, and the Company received the funding of $1,020,000
on October 18, 2021 with an original maturity of April 2023 which was extended an additional 12 months. Under this agreement the interest
terms are 5% based on a 365- day year. The note payable is due on September 13, 2024. As of December 31, 2023 and 2022, the principal
outstanding is $1,020,000 respectively. The accrued interest is $112,340 and $61,340 as of December 31, 2023 and 2022, respectively.
See Note 7.

 Working Capital
Loan with Directors and Unrelated Party

 On
May 1, 2022, the Company negotiated three $200,000 working capital funding agreements, to provide $600,000 in funding for daily operations.
The Board resolved that certain Directors could negotiate the terms of a Working Capital Funding Agreement for up to a total of $600,000,
with Directors S. Wallach (through Group Nexus, a company controlled by Mr. Wallach) and J. Postal and Mouhaned Khoury, a natural person.
Under these agreements the interest terms are 5% based on a 365-day year, maturing May 1, 2024. These loans may be prepaid in full or
partially without any penalty. As of December 31, 2023
and 2022, the principal outstanding is $600,000, respectively. The accrued interest is $50,139 and $20,137 as of December 31, 2023 and
2022, respectively.

 On
October 13, 2022, the Company negotiated a $50,000 Working Capital Funding agreement with Jeffrey Postal, a director, to provide funding
for daily operations. The term of this agreement is 18 months and principal accrues simple interest at a rate of 5 percent per annum,
maturing April 13, 2024. As of December 31, 2023 and 2022, the principal outstanding is $50,000 respectively. The accrued interest is
$3,041 and $541 as of December 31, 2023 and 2022, respectively.

 On
December 1, 2022, the Company negotiated a $50,000 Working Capital Funding agreement with Jeffrey Postal, a director, to provide funding
for daily operations. The term of this agreement is 18 months and principal accrues simple interest at a rate of 5 percent per annum,
maturing June 1, 2024. The loan may be prepaid in full or partially without any penalty. As of December 31, 2023 and 2022, the principal
outstanding is $50,000 respectively. The accrued interest is $2,712 and $212 as of December 31, 2023 and 2022, respectively.

 On
January 3, 2023, the Company negotiated a $40,000 Working Capital Funding agreement with Director S. Wallach (through Group Nexus, a
company controlled by Mr. Wallach), to provide funding for daily operations. Principal accrues simple interest at a rate of 5 percent
per annum, maturing June 15, 2024. The loan may be prepaid in full or

 F- 20

 NOTES

 NOTE
3 – NOTES PAYABLE TO RELATED AND UNRELATED PARTIES, continued

 partially
without any penalty. As of December 31, 2023, the principal outstanding and accrued interest is $40,000 and $1,984, respectively.

 On
March 27, 2023, the Company negotiated a Working Capital Funding agreement with Director S. Wallach to provide funding for daily operations.
Total funding under the agreement amounted to $592,500 as of December 31, 2023. Principal accrues simple interest at a rate of 5 percent
per annum, maturing June 15, 2024. The loan may be prepaid in full or partially without any penalty. Accrued interest amounted to $17,759
as of December 31, 2023.

 As
of December 31, 2023 and 2022, the Company had a total of $2,540,476 and $1,802,230, of outstanding balance respectively, on the
above referenced funding agreements, which includes accrued interest of $187,974 and $82,230, respectively. The outstanding principal
balances and accrued interest has been presented on the condensed and consolidated balance sheet as follows:

for notes payable to related party

 Notes
 Payable

 Year
 Ended December 31,

 2023

 2022

 Current
 portion of notes payable and accrued interest, related parties

 $

 1,946,315

 $

 413,425

 Current
 portion of notes payable and accrued interest, unrelated parties

 594,161

 206,712

 Long-term
 portion of notes payable and accrued interest, related parties

 —

 821,647

 Long-term
 portion of notes payable and accrued interest, unrelated parties

 —

 360,446

 Less
 accrued interest

 ( 187,974

)

 ( 82,230

)

 Total
 notes payable

 $

 2,352,500

 $

 1,720,000

 Management
believes that without additional capital or increased cash generated from operations, 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 report.

 NOTE
4 – COMMITMENTS AND CONTINGENCIES

 Operating Leases

 The Company had operating
lease agreements for its principal executive offices in Fort Lauderdale, Florida that expired June 30, 2023. The Company's principal
executive office were located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida 33441. The Company did not renew the expiring
operating lease.

 On April 26, 2023,
the landlord amended the terms for the operating lease and related common area management expenses ("CAM") owed by the Company
for its principal executive office to extend the payment terms for the remaining three months of the lease term, ended June 30, 2023,
over the following nine months through December 31, 2023. In addition to the monthly rent expense, the landlord included an estimate
for additional CAM charges for the 2023 operating lease year of $5,435 and $17,124 for additional CAM charges for the 2022 operating
lease year. The Company paid a total of $58,500 with monthly payments of $6,500 per month for nine months commencing April 1, 2023 and
ending December 31, 2023, to satisfy the aforementioned operating lease liabilities for the executive office lease.

 F- 21

 NOTES

 NOTE 4 –
COMMITMENTS AND CONTINGENCIES (continued)

 On July 1, 2023,
the Company commenced an office space license to use designated office space at #144-V, 10 Fairway Drive, Suite 1000, Deerfield Beach,
Florida 33441. The short-term lease is a month-to-month agreement for professional office space for a monthly fee of $75 with a security
deposit of $75. The agreement may be terminated by the Company or the licensor of the office space upon a written notice provided thirty
(30) days in advance.

rent expense is recorded on a straight-line basis over the term of the lease. The rent expense for the year ended December 31, 2023 amounted
to $95,936 and $145,512 including the monthly CAM charges and storage facility rent expense.

 Employment Agreements

 On February 5, 2020,
the Company entered into a new Employment Agreement with Stewart Wallach, whereby Mr. Wallach will be paid $301,521 per annum. The initial
term of this new agreement began February 5, 2020 and ended February 5, 2023. The parties may extend the employment period of this agreement
by mutual consent with approval of the Company's Board of Directors, but the extension may not exceed two years in length. On February
5, 2023, the employment agreement was extended for the additional two year period through February 5, 2025.

 Beginning in 2020 and
through 2023, executive salaries and consulting fees have been deferred from time to time to conserve cash flow. Deferrals amounted to
approximately $734,000 and $252,000, as of December 31, 2023 and 2022, respectively, and are included in accounts payable and accrued
liabilities.

 There is a provision
in Mr. Wallach's employment agreement, if the officer's employment is terminated by death or disability or without cause,
the Company is obligated to pay to the officer's estate or the officer, an amount equal to accrued and unpaid base salary as well
as all accrued but unused vacation days through the date of termination. The Company will also pay sum payments equal to:

 Employment Agreements,
continued

 (a)

 the sum of twelve (12)
 months base salary at the rate the Executive was earning as of the date of termination and (b) the sum of "merit" based
 bonuses earned by the Executive during the prior calendar year of his termination. Any payments owed by the Company shall be paid
 from a normal payroll account on a bi-weekly basis in accordance with the normal payroll policies of the Company. The amount owed
 by the Company to the Executive, from the effective Termination date, will be payout bi-weekly over the course of the year but at
 no time will be no more than twenty (26) installments. The Company will also continue to pay the Executive's health and dental
 insurance benefits for 6 months starting at the Executives date of termination. If the Executive had family health coverage at the
 time of termination, the additional family premium obligation would remain theirs and will be reduced against the Executive's
 severance package. The employment agreements have an anti-competition provision for 18 months after the end of employment.

 The following table
summarizes potential payments upon termination of employment:

 Summary
of Potential Payments upon Termination of Employment

 Salary

 Severance

 Bonus

 Severance

 Gross
 up

 Taxes

 Benefit

 Grand
 Total

 $

 $

 —

 $

 12,600

 $

 6,600

 $

 320,721

 F- 22

 NOTES

 NOTE 4 –
COMMITMENTS AND CONTINGENCIES (continued)

 The
Company did not accrue for benefits owed at the time of death or disability as it is not probable as of the period ended December 31,
2023.

 Directors

 On July 5,
2022, The Board of Directors voted to suspend compensation to the independent directors for the remainder of the fiscal year 2022 and
2023.

 Legal Matters

is not a party to any other pending or threatened legal proceedings and, to the best our knowledge, no such action by or against us has
been threatened. From time to time, we are subject to legal proceedings and claims that arise in the ordinary course of our business.
Although occasional adverse decisions or settlements may occur in such routine lawsuits, we believe that the final disposition of such
routine lawsuits will not have material adverse effect on its financial position, results of operations or status as a going concern.

 NOTE
5 - STOCK TRANSACTION S

 Stock Purchase Agreements

 On April 5,
2021, the Company entered into a Private Equity Placement with five separate securities purchase agreements ("SPAs") whereby
the Company privately placed an aggregate of 2,496,667 shares ("Shares") of its common stock, $0.0001 par value per share,
("common stock") for an aggregate purchase price $1,498,000. The five unrelated investors in the Private Placement consisted
of four private equity funds and one individual – all being "accredited investors" (under Rule 501(a) of Regulation
D under the Securities Act of 1933, as amended, ("Securities Act"). The $1,498,000 in proceeds from the Private Placement
was used to purchase start up inventory for the Company's Smart Mirror product line, as well as for advertising and working capital.
Under the SPA, each investor is granted five-year piggyback, 'best efforts' registration rights with no penalties. The Shares
are 'restricted securities" under Rule 144 of the Securities Act and are subject to a minimum six month hold period. Based
on representations made to the Company, the five investors do not constitute a "group" under 17 C.F.R. 240.13d-3 and have
purchased the Shares solely as an investment for each investor's own account. No individual investor owns more than 2% of the issued
and outstanding shares of common stock.

 Warrants

 On April 28,
2021, Company issued common stock warrants to purchase 199,733 shares of common stock at an exercise price of $0.66 and exercisable for
five years from the issuance date. The warrants were issued to Wilmington Capital Securities, LLC, a FINRA and SEC registered broker
under a financial services and placement agreement with a broker-dealer in connection with the Company's placement of $1,498,000
of restricted shares of common stock to five investors on April 5, 2021. The issuance of these warrants were made an exemption from
registration under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act.

31, 2023, and 2022, the Company had 199,733 warrants outstanding.

 Series "B-1" Preferred
Stock

 On June 7,
2016, the Company authorized 3,333,333 of the B-1 preferred stock("B-1"). The B-1 preferred stock are convertible into common
shares, at a rate of 66.66 of common stock for each share of B-1 convertible preferred stock. The par value of the B-1 preferred shares
is $0.0001. The B-1 shares shall not be entitled to any dividends and have no voting rights. In the event of a liquidation, the B-1 holders
are entitled to distribution prior to common stockholders but not before any other preferred stockholders.

 F- 23

 NOTES

 NOTE
5 -STOCK TRANSACTIONS, continued

 On January
4, 2021, the Company entered a $750,000 working capital loan agreement with Directors, Stewart Wallach and Jeffrey Postal ("Lenders").
In consideration for the Lenders allowing for loan advances under the loan agreement, a below market rate of interest and the loan made
on an unsecured basis, as payment of a finance fee for the loan, the Company issued a total of 7,500 shares of Company's Series
B-1 Convertible Preferred Stock, $0.0001 par value per share, ("Preferred Shares") to each of the Lenders. Each preferred
share converts into 66.66 shares of common stock at option of Lender. The Preferred Shares and any shares of common stock issued under
the loan agreement are "restricted" securities under Rule 144 of the Securities Act of 1933, as amended. See Note 3.

 The B-1 shares
have a liquidation preference of $1.00 per share or $15,000 as of December 31, 2023 and 2022.

 Options

 In 2005, the
Company authorized the 2005 Equity Plan that made available shares of common stock for issuance through awards of options, restricted
stock, stock bonuses, stock appreciation rights and restricted stock units.

 As
of December 31, 2023, there were 408,288 stock options outstanding and vested held by directors of the Company. The stock options have
a weighted average exercise price of $ 0.456 and have a weighted average contractual term remaining of 1.13 years. During the year ended
December 31, 2023, there were no stock option grants, exercises and 200,000 options were forfeited.

 Stock options
were issued under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933.

 For the
years ended December 31, 2023 and 2022, the Company recognized stock-based compensation expense of $0 and $7,844, respectively, related
to stock options. Such amounts are included in compensation expense in the accompanying consolidated statements of income. All options
are fully vested as of the year ended December 31, 2023.

 F- 24

 NOTES

 NOTE
5 - STOCK TRANSACTIONS (continued)

table sets forth the Company's stock options outstanding as of December 31, 2023 and 2022 and activity for the years then ended.

of Stock Options Outstanding and Activity

 Shares

 Weighted
 Average Exercise Price

 Weighted
 Average Fair Value

 Weighted
 Average Remaining Contractual Term (Years)

 Intrinsic
 Value

 Outstanding,
 January 1, 2022

 888,288

 0.444

 0.249

 2.40

 —

 Granted

 —

 —

 —

 —

 —

 Exercised

 —

 —

 —

 —

 —

 Forfeited/expired

 ( 280,000

)

 0.435

 0.150

 —

 —

 Outstanding,
 December 31, 2022

 608,288

 0.449

 0.18

 1.60

 —

 Granted

 —

 —

 —

 —

 —

 Exercised

 —

 —

 —

 —

 —

 Forfeited/expired

 ( 200,000

)

 0.435

 0.21

 —

 —

 Outstanding,
 December 31, 2023

 0.456

 0.15

 1.13

 —

 Vested/exercisable
 at December 31, 2023

 0.456

 0.15

 1.13

 —

 The following table
summarizes the information with respect to options granted, outstanding and exercisable under the 2005 Plan:

of Options Granted, Outstanding and Exercisable Under the 2005 Plan

 Exercise
 Price

 Options
 Outstanding

 Remaining
 Contractual Life in Years

 Number
 of Options Currently Exercisable

 $

.435

 0.60

 $

.435

 1.60

 $

 1.448

 8,288

 2.60

 8,288

 $

.456

 1.13

 Adoption of Stock Repurchase
Plan

 On August 23,
2016, the Company's Board of Directors authorized the Company to implement a stock repurchase plan for up outstanding common stock.
The repurchase plan may be discontinued at any time at the Company's discretion.

 On December
19, 2018, Company entered a Purchase Plan pursuant to Rule 10b5-1 under the Exchange Act, with Wilson Davis & Co., Inc., a registered
broker-dealer. Under the Purchase Plan, Wilson Davis & Co., Inc will make periodic purchases of shares at prevailing market prices,
subject to the terms of the Purchase Plan.

 On May 31,
2019, the Company's Board of Directors the maximum amount of aggregate funding available for possible stock repurchases under the
stock repurchase program remained at $1,000,000 during the renewal period.

 F- 25

 NOTES

 NOTE
5 - STOCK TRANSACTIONS (continued)

 During May
and June 2022, the Company repurchased 66,167 shares of the Company's outstanding common stock in the open market. The total purchase
cost was $11,662.

 On July 7,
2022, the Board of Directors resolved to discontinue the stock purchase agreement.

31, 2023, a total of 816,167 of the Company's common stock was repurchased since the plan was incepted at a total cost of $119,402.
The cost of the repurchased shares were recorded as a reduction of additional paid-in capital.

 NOTE
6 - INCOME TAXES

31, 2023, the Company had federal and state net operating loss carry forwards of approximately $6,540,448. The federal net operating
loss is available to the Company indefinitely and available to offset up to 80% of future taxable income each year.

 On March 27,
2020, the CARES Act was enacted into law. The CARES Act is a tax and spending package intended to provide economic relief to address
the impact of the COVID-19 pandemic. The CARES Act included several significant income and other business tax provisions that, among
other things, would eliminate the taxable income limit for certain net operating losses ("NOLs") and allow businesses to
carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years. The Company was able to carryback the 2018 and the 2019
NOLs to 2017 tax year and generate an estimated refund of previously paid income taxes at an approximate 34% federal tax rate. This resulted
in a net benefit of approximately $862,000 which was recorded in the first quarter 2020 of which a total of $806,800 was subsequently
received. During the year ended December 31, 2022, the difference of $55,265 was reflected in income tax expense on the consolidated
statement of operations.

 Tax benefit for income
taxes differs from the amount computed using the federal US statutory income tax rate as follows:

of income tax reconciliation

 Years Ended

 2023

 2022

 Tax
 benefit at U.S. statutory rate

 $

 ( 348,908

)

 $

 ( 545,212

)

 State
 income taxes, net of federal benefit

 ( 46,892

)

 ( 153,085

)

 Tax
 effect of foreign operations

 —

 2,285

 Non-deductible
 items

 27,278

 ( 31,914)

 Valuation
 allowance

 248,057

 740,508

 Adjustment
 to net operating loss

 155,415

 Other

 —

 55,265

 Tax Expense (Benefit)

 $

 $

 67,847

 The effective
tax rate for the years ended December 31, 2023 and 2022, respectively, was (2.10%) and (2.61%) and the statutory tax rate was
23.829% in 2023 and 25.39% in 2022.

 F- 26

 NOTES

 NOTE
6 - INCOME TAXES (continued)

 The income tax benefit
for the years ended December 31, 2023 and 2022 consists of:

of income tax benefit

 2023

 2022

 Current:

 Federal

 $

 —

 $

 55,278

 State

 —

 Deferred:

 Federal

 29,834

 ( 2,835

)

 State

 5,116

 16,604

 Tax Expense (Benefit)

 $

 $

 67,847

 The tax effects
of temporary differences and carry forwards that give rise to significant portions of deferred tax assets and liabilities consist of
the following:

of deferred tax assets and liabilities

 Years Ended December 31,

 Deferred tax assets:

 2023

 2022

 Accruals and allowances

 $
 179,474

 $
 187,320

 Capitalized research and development

 22,702

 Stock based compensation

 15,485

 70,559

 Net operating
 allowances

 1,635,069

 1,338,208

 1,852,730

 1,596,087

 Deferred tax liabilities:

 Intangible assets

 ( 328,916
)

 ( 285,379
)

 Valuation
 allowance

 ( 1,844,143
)

 ( 1,596,087
)

 Net deferred
 tax assets and liabilities

 $
 ( 320,329
)

 $
 ( 285,379
)

 Deferred tax assets
are to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred assets will not be
realized. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management
has considered the Company's history of cumulative net losses incurred and has concluded that it is more likely than not that the
Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against
the deferred tax assets as of December 31, 2023 and 2022. Since indefinite-lived assets cannot be used as a source of taxable income
to support the realization of deferred tax asset, a valuation allowance was recorded against the deferred tax assets, and a net deferred
tax liability or naked credit of approximately $320,000 and $285,000 is presented on the company's balance sheet, respectively.
The Company's valuation allowance increased by $248,056 in 2023.

 The Company recognizes
liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest
amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for
the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining
the adequacy of its provision for income taxes.

 F- 27

 NOTES

 NOTE
7 - SUBSEQUENT EVENTS

 Related Party
Notes Payable

 Subsequent to December
31, 2023, and through the date of this filing, the Company has received $50,000 in working capital note payable proceeds from Director,
Jeffery Postal. Principal accrues simple interest at a rate of 5 percent per annum, maturing September 13, 2024 with the ability
for the Company to request a 90-day extension. The loan may be prepaid in full or partially without any penalty.

 Subsequent to December
31, 2023, and through the date of this filing, the Company has received $40,000 in working capital note payable proceeds from Chief Executive
Officer, Stewart Wallach. Principal accrues simple interest at a rate of 5 percent per annum, maturing June 15, 2024 with the ability
for the Company to request a 90-day extension. The loan may be prepaid in full or partially without any penalty.

 Extension of Purchase
Order Funding Agreement

 On March 13, 2024,
the $1,020,000 Purchase Order Funding Agreement note payable was amended, extending the maturity date from April 13, 2024 to September
13, 2024. All other terms remain unchanged (see Note 3).

 Renewal of CFO
Agreement

 On March 25, 2024,
the Company renewed Ms. Perez's contracting agreement for Chief Financial Officer services, commencing January 1, 2024 and ending
March 31, 2025.

 F- 28