Capstone Energy Plus, Inc. 10-Q

Item 4. Controls and Procedures Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure the information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In connection with the preparation of this Form 10-Q for the three months ended June 30, 2026, an evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in and pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our CEO and CFO have concluded that, as of June 30, 2026, our disclosure controls and procedures were effective. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent limitations of Internal Control A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. 33 Table of Contents PART II — OTHER INFORMATIO N Item 1. Legal Proceeding s California Air Resources Board Notice of Violation On August 4, 2026, the California Air Resources Board (“CARB”) issued a Notice of Violation (the “NOV”) alleging violations of California’s Distributed Generation Certification Regulation (Cal. Code Regs., tit. 17, §§ 94200–94214) involving 27 distributed generation units sold or leased for use in California. The NOV states that violations may result in civil penalties of up to $12,940 per day per violation but does not specify an aggregate penalty amount. The Company intends to meet with CARB to discuss the allegations and seek resolution. The matter is at a preliminary stage, and the Company cannot predict its outcome or reasonably estimate any resulting loss or range of loss. Refer to Note 12 – Commitments and Contingencies – Legal Proceedings, in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding legal proceedings in which we are involved. The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The outcome of litigation is inherently uncertain. If one or more legal matters were to be resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected. Item 1A. Risk Factor s In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” section contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026, together with the cautionary statement under the caption “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. The risks described are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There are uncertainties and risks related to the profitability, safety and regulatory environment of AI that could adversely affect our business and operations. In order to position ourselves to take advantage of growth opportunities, we have made, and may continue to make, investments, strategic acquisitions, mergers, partnerships, joint ventures and alliances related to AI-infrastructure and data centers that involve significant risks and uncertainties. We only recently began to pursue initiatives in AI related technologies and have not made any sales to AI infrastructure clients. Some of our competitors, including competitors that have significantly greater resources, have already successfully generated revenues from AI business lines. AI technologies and their uses are currently evolving rapidly. If we fail to successfully integrate our products in AI infrastructure or develop new products in response to changes in technology or industry standards or fail to bring product enhancements or new product developments to market quickly enough, our products could rapidly become less competitive or obsolete for use in the development of AI infrastructure. Thus, the future profitability of any AI-related investments is highly uncertain and such investments may adversely affect our business and operations. Data centers are increasingly scrutinized by federal, state, and local authorities, and have been subject to environmental activists and negative public perception, due to concerns regarding energy consumption, land use, carbon emissions, water usage, environmental impacts, data-sovereignty considerations and national-security-related issues. Regulators may impose new permitting requirements, energy-efficiency standards, carbon-reduction mandates, sustainability reporting rules, or operational restrictions specific to data centers, AI infrastructure, or high-density compute environments. For example, on July 14, 2026, New York State Governor Kathy Hochul signed an executive order barring the construction of new hyperscale data centers using 50 megawatts or more of power for up to one year in the state of New York. On July 1, 2026, Texas Governor Greg Abbot called for blocking new data center development in rural parts of the state. ​ If we continue to invest in utilizing our products for the development of AI data centers and other AI infrastructure, then any such regulatory developments may significantly impact our business and operations in ways that are difficult to predict. New regulations targeting data centers, at the federal level or by state and local governments, could increase our capital expenditures, delay development and implementation timelines, limit expansion opportunities, or require costly modifications to existing technology. Any such restrictions or new policy initiatives could also limit our opportunities to utilize our systems in AI infrastructure and restrict our ability to expand into the AI market, which may adversely affect our business or limit the economic viability of our strategic diversification initiatives. Given the evolving 34 Table of Contents nature of digital asset and data-center regulation, and the difficulty of predicting the outcomes of ongoing or future governmental actions, we cannot assure you that future regulatory or legislative developments will not have a material adverse effect on our business, prospects, financial condition, or operations. Even in the absence of new regulations or legislation, increased public scrutiny or negative publicity regarding the development and environmental impact of data centers could harm our reputation, which may adversely affect our business, financial condition and results of operations.