CAPS 10-K & 10-Q changes, risk factors and insider trading
Capstone Holding Corp. · Nasdaq · Wholesale-Lumber & Other Construction Materials · CIK 887151 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Impairment of goodwill and intangible assets related to our 2025 acquisitions could materially adversely affect our results of operations and financial condition.”
New heading “Our recently acquired businesses depend on key personnel, and the loss of these individuals could adversely affect our operations and the success of the acquisitions.”
New heading “Our installation services business exposes us to additional liability risks that could result in claims, increased costs, or reputational harm.”
New heading “Our increased indebtedness may limit our operational flexibility and ability to pursue additional opportunities and may adversely affect our financial condition.”
New heading “The conversion of our outstanding convertible notes could result in significant dilution to existing shareholders”
New heading “Grants under our equity incentive plan will dilute existing stockholders”
New heading “Our earn-out and contingent consideration obligations related to recent acquisitions could require significant additional payments and impact our financial results.”
New heading “Our cross-border operations subject us to multiple regulatory regimes and trade policies that could increase costs and disrupt our business.”
New heading “Global tax developments, including the OECD Pillar Two global minimum tax, could affect our effective tax rate.”
New heading “Our international operations expose us to foreign currency and other risks that could adversely affect our financial results.”
New heading “We may not successfully integrate our recent acquisitions or realize their anticipated benefits”
New heading “Payments to Nectarine Management LLC could reduce cash available for operations.”
New heading “We have received a notification from Nasdaq regarding non-compliance with the minimum bid price requirement, and failure to regain compliance could result in delisting of our Common Stock.”
New heading “Our ability to raise capital through shelf registration statements may be limited.”
Largest changes
“Impairment of goodwill and intangible assets related to our 2025 acquisitions could materially adversely affect our results of operations and financial condition.”see in full comparison
“We have received a notification from Nasdaq regarding non-compliance with the minimum bid price requirement, and failure to regain compliance could result in delisting of our Common Stock.”see in full comparison
“In January 2026, the Company received a notification from the Nasdaq Stock Market indicating that the closing bid price of its Common Stock had been below $1.00 per share for 30 consecutive business days, and that the Company was therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The Company has until July 6, 2026, to regain compliance, which requires the closing bid price of its Common Stock to be at least $1.00 per share for a minimum of 10 consecutive business days. …”see in full comparison
“Our operations in both the United States and Canada subject us to the laws and regulations of multiple jurisdictions, including tax laws, employment laws, environmental regulations, and customs and trade regulations. Changes in tariff policies, trade agreements, or import/export regulations affecting stone and building products could increase our costs or disrupt our supply chain. The regulatory burden of operating across international borders may increase our compliance costs and expose us to enforcement risk.”see in full comparison
We fund our operations primarily through cash provided from operations of our building products distribution network and available capacity under oursee in full comparisonABLcreditFacilityfacilities.(“Revolver”).Our operating cash flows fluctuate based on seasonality with the first half of the year typically resulting in negative operating cash flows from the build in accounts receivable and inventories and the second half of the year generating positive operating cash flows as we bring accounts receivables and inventory levels down from seasonal high periods and pay down ourRevolver.credit facilities. The liquidity of the Company is largely dependent on our ability to borrow funds on ourRevolver.creditIffacilities. The Company's recurring net losses (including a net loss of $21.2 million for theCompanyyearfailsendedtoDecemberfulfill31,its2025),financialaccumulatedcovenantdeficitrequirements, itof $218.0 million as of December 31, 2025, and upcoming debt maturities of $5.976 million due in 2026 represent conditions that, in the aggregate, couldloseraiseaccesssubstantialtodoubtfunding underabout theRevolver, which would significantly impact our liquidity and put ourCompany's ability to continue as a goingconcernconcern. Management has evaluated these conditions together with its financial resources and operational plans, including (i) the $3.252 million in net proceeds received from the March 2025 public offering, (ii) the $20 million Equity Line of Credit with 3i, LP (of which approximately $19.5 million remained undrawn atrisk.December 31, 2025), (iii) available capacity under the Company's Revolving Credit Agreement, and (iv) management's projections of improved operating performance in 2026 driven by the full-year contribution from the Carolina Stone and Fraser Canyon acquisitions. Based on this evaluation, management has concluded that these plans alleviate the substantial doubt. Accordingly, the Company's cash and available liquidity are expected to be sufficient to fund operations and meet obligations for at least one year from the issuance date of these consolidated financial statements.
“With the acquisition of CSI, we now conduct a portion of our business in Canada. Our Canadian operations expose us to risks associated with international business, including fluctuations in foreign currency exchange rates (primarily the Canadian dollar relative to the U.S. dollar), differences in regulatory environments, potential trade restrictions or tariffs, and geopolitical and economic uncertainty. A weaker Canadian dollar relative to the U.S. dollar would compress the reported U.S. dollar margins of our Canadian operations. …”see in full comparison
Full comparison: every changed paragraph (43)
The market for residential building products has experienced a sustained period of project deferrals, driven by higher interest rates and a structural lengthening of remodel cycles. According to Zonda Home (“Zonda”), the anticipated market recovery will be more muted than historical precedents due to ongoing mortgage rate uncertainty. For 2026, Zonda forecasts total residential building products spending will grow just 1.0%, with repair and remodel spending projected to grow 3.6%. While cash-out mortgage originations are expected to increase by over 50% in 2026, Zonda projects that remodeling growth will achieve only roughly half of the 20%+ growth rates seen in previous post-deferral cycles. If these structural deferrals persist, or if the expected stabilization in remodel volumes fails to materialize by mid-2026, our future revenue, operating results, and overall growth prospects could be materially adversely affected In addition to commercial and residential market indicators, we also depend to a significant extent upon the levels of home repair and remodeling and new construction spending, affected by such factors as interest rates, inflation, consumer confidence, unemployment and the availability of consumer credit.
The market story for 2024 was one of “deferral”,
with home improvement projects and new constructions being delayed due to higher interest rates. This pent-up demand is likely to
lead to a more volatile upswing when growth resumes in 2025 and beyond. According to Zonda Home (“Zonda”), building products
spending overall will grow +2.6% in 2025, with repair/remodel spend set to grow +7% in 2025. Cash-out home equity lines of credit
(HELOCs) are expected to increase ~25% and remodel growth is expected to increase 20%+ in 2025, based on historical precedents in the
year following rate-hike driven deferrals.
In addition to commercial and residential market
indicators, we also depend to a significant extent upon the levels of home repair and remodeling and new construction spending, affected
by such factors as interest rates, inflation, consumer confidence, unemployment and the availability of consumer credit.
Impairment of goodwill and intangible assets related to our 2025 acquisitions could materially adversely affect our results of operations and financial condition.
The Company has recorded goodwill and intangible assets in connection with its 2025 acquisitions. These assets are subject to periodic impairment testing. If the acquired businesses do not perform in accordance with expectations, or if market conditions deteriorate, we may be required to record impairment charges that could materially affect our reported results of operations and financial condition.
Our recently acquired businesses depend on key personnel, and the loss of these individuals could adversely affect our operations and the success of the acquisitions.
The success of our recently acquired businesses depends in part on the continued service and performance of key personnel at those businesses who have deep customer relationships and market expertise. The loss of key employees at Carolina Stone or CSI, particularly during the integration period, could adversely affect our ability to maintain customer relationships, execute on our growth plans, and realize the anticipated benefits of the acquisitions.
Our installation services business exposes us to additional liability risks that could result in claims, increased costs, or reputational harm.
Through Carolina Stone, the Company now provides professional stone installation services, which expose us to risks different from and in addition to those associated with our distribution operations. Installation activities carry risks of property damage, personal injury, workmanship claims, and general contractor disputes. Although Carolina Stone maintains insurance and follows industry-standard safety practices, claims arising from installation projects could result in significant liability, reputational harm, and increased insurance costs.
Our increased indebtedness may limit our operational flexibility and ability to pursue additional opportunities and may adversely affect our financial condition.
As a result of the 2025 acquisitions and related financing activities, the Company has significantly increased its indebtedness. Outstanding obligations include the Convertible Note Financing, seller notes from the Carolina Stone and CSI acquisitions, the Stream Finance mezzanine credit facility, the Berkshire Bank revolving credit agreement, and the TD Bank credit facilities maintained by Canadian Stone Industries. The increased debt burden could limit our operational flexibility, increase our vulnerability to adverse economic conditions, limit our ability to pursue additional acquisitions or capital expenditures, and increase our interest expense. Our ability to service our debt obligations depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
The conversion of our outstanding convertible notes could result in significant dilution to existing shareholders
As of December 31, 2025, the Company had approximately $3.9 million in aggregate outstanding principal under its Convertible Note Financing, with conversion prices as low as $0.75 per share. The conversion of these notes into common stock would result in significant dilution to existing shareholders. The authorized aggregate facility amount of approximately $10.9 million could result in further issuances and additional dilution. Conversion price adjustments made during fiscal 2025 have increased the dilutive impact of the outstanding notes. Future adjustments or additional draws could further increase potential dilution.
Grants under our equity incentive plan will dilute existing stockholders
On March 30, 2026, the Board of Directors approved the 2025 Stock Incentive Plan (the “2025 Plan”), reserving shares of common stock representing approximately 21.5% of the number of Common Shares outstanding as of the first trading day of each quarter for issuance as equity awards. On the same date, the Company granted 1,995,000 restricted stock awards to management and non-employee directors at a per-share fair market value of $0.649, subject to vesting schedules of up to three years, with certain director grants vesting upon cessation of service on the Board. The 2025 Plan includes an evergreen provision that automatically increases the authorized number of shares available for issuance as the Company’s outstanding common stock increases. As a result, future issuances of equity awards under the 2025 Plan will dilute the ownership interests of existing stockholders and may adversely affect the market price of our common stock.
Our earn-out and contingent consideration obligations related to recent acquisitions could require significant additional payments and impact our financial results.
Both the Carolina Stone and CSI acquisitions include earn-out provisions that could result in additional consideration payable to the sellers. These contingent payment obligations are subject to the achievement of specified financial or operational targets by the acquired businesses. The earn-out obligations may result in significant additional cash payments that could impact our liquidity and cash flow. Additionally, changes in the estimated fair value of earn-out liabilities could result in non-cash charges or credits that affect our reported operating results.
Our cross-border operations subject us to multiple regulatory regimes and trade policies that could increase costs and disrupt our business.
Our operations in both the United States and Canada subject us to the laws and regulations of multiple jurisdictions, including tax laws, employment laws, environmental regulations, and customs and trade regulations. Changes in tariff policies, trade agreements, or import/export regulations affecting stone and building products could increase our costs or disrupt our supply chain. The regulatory burden of operating across international borders may increase our compliance costs and expose us to enforcement risk.
Global tax developments, including the OECD Pillar Two global minimum tax, could affect our effective tax rate.
The Organization for Economic Co-operation and Development (the “OECD”) has issued various proposals that would change long-standing global tax principles. These proposals include a two-pillar approach to global taxation (BEPS 2.0 / Pillar Two), focusing on global profit allocation and a global minimum tax rate. On December 12, 2022, the European Union member states agreed to implement the OECD’s global corporate minimum tax rate of 15%, effective as of January 2024. Other countries are also actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. The enactment of Pillar Two legislation is not anticipated to have a material adverse effect on the Company’s effective tax rate, financial position, results of operations, or cash flows. The Company will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate.
Our international operations expose us to foreign currency and other risks that could adversely affect our financial results.
With the acquisition of CSI, we now conduct a portion of our business in Canada. Our Canadian operations expose us to risks associated with international business, including fluctuations in foreign currency exchange rates (primarily the Canadian dollar relative to the U.S. dollar), differences in regulatory environments, potential trade restrictions or tariffs, and geopolitical and economic uncertainty. A weaker Canadian dollar relative to the U.S. dollar would compress the reported U.S. dollar margins of our Canadian operations. Currency fluctuations could adversely affect our reported financial results, as revenue and expenses of our Canadian operations are translated into U.S. dollars for financial reporting purposes. As a Smaller Reporting Company, the Company is exempt from the quantitative market risk disclosures required by Item 305 of Regulation S-K; however, the Company’s exposure to foreign currency translation risk is qualitatively described here and in Note 3 to the consolidated financial statements. We may seek to mitigate currency risk through hedging, but there can be no assurance such measures will be effective.
We may not successfully integrate our recent acquisitions or realize their anticipated benefits
We completed two material acquisitions during fiscal year 2025 and may pursue additional acquisitions in the future. The integration of acquired businesses involves significant risks, including difficulties in integrating operations, technologies, and personnel; potential disruption to our ongoing business; diversion of management attention; and the risk that we may not realize the anticipated benefits or synergies. The Carolina Stone and CSI acquisitions added new operational complexity, including installation services and international operations, which are areas in which the Company has limited prior experience at the parent level. There can be no assurance that these acquisitions will perform in accordance with our expectations or that the benefits of these acquisitions will be realized. Integration difficulties could have a material adverse effect on our business, financial condition, and results of operations.
Our business has generated net loses,losses, and
we intend to continue to invest substantially in our business. Thus, we may not be able to achieve or maintain profitability. We may not
be able to secure financing on favorable terms, or at all, to meet our future capital needs.
The Company has incurred net losses since inception and had an accumulated deficit as of December 31, 2025. For the fiscal year ended December 31, 2025, the Company reported a consolidated net loss of approximately $12.9 million, a substantial portion of which was attributable to corporate-level expenses including public company compliance costs, convertible note interest expense, and management compensation. Our operating subsidiaries generate revenue and are individually capitalized; however, the holding company does not generate revenue and relies on distributions from its subsidiaries, external financing, and capital markets activity to fund its obligations. There can be no assurance that the Company will achieve profitability at the consolidated level, or that profitability, if achieved, will be sustained.
To date, the Company has funded its corporate operations and acquisition activity primarily through its March 2025 initial public offering, convertible note financings, and an equity line of credit facility. We may need to raise additional capital in the future to fund corporate obligations, service or refinance our indebtedness, or pursue strategic opportunities. Additional financing may not be available on terms favorable to us, or at all. If we raise additional funds through the issuance of equity or convertible debt securities, the ownership interests of our existing stockholders will be diluted. If adequate funds are not available, we may need to delay or reduce corporate expenditures, which could adversely affect our ability to support and grow our operating subsidiaries.
The Company’s outstanding indebtedness includes convertible notes, a mezzanine term loan, revolving credit facilities, and seller notes from recent acquisitions. Several of these obligations mature or require refinancing within the next twelve to twenty-four months. While the Company has historically been able to extend, refinance, or restructure its debt obligations as they come due, there can be no assurance that it will continue to be able to do so on acceptable terms, or at all. An inability to service or refinance our obligations as they mature could have a material adverse effect on our financial condition.
Our success is substantially dependent on the
continued service of our Chief Executive Officer (“CEO”), Matthew Lipman, our Chief Financial Officer (“CFO”),
Edward Schultz, and Kevin Grotke, President and Chief Executive Officer of our subsidiary,subsidiaries, including TotalStone, LLC. We do not carry key person
life insurance on any of itsour management, which would leave us uncompensated for the loss of any of itsour management. The loss of the services
of any of our senior management could make it more difficult to successfully operate our business and achieve our business goals. In addition,
our failure to retain qualified personnel in the diverse areas required for continuing itsour operations could harm our product development
capabilities and customer and employee relationships, delay the growth of sales of our products and could result in the loss of key information,
expertise or know-how.
Payments to Nectarine Management LLC could reduce cash available for operations.
Pursuant to an arrangement approved by our stockholders on November 18, 2025, we may pay Nectarine Management LLC — an entity controlled by Mr. Toporek and Mr. Lipman — a fee equal to 0.25% to 2% of transaction value on certain mergers, acquisitions, asset sales, equity issuances outside of incentive plans, joint ventures, and debt incurrences, plus reimbursement of up to $50,000 of legal fees per transaction. During 2025, we incurred approximately $88,700 of consent fees and agreed to up to $50,000 of legal fee reimbursement in connection with the Fraser Canyon acquisition, and an additional approximately $52,650 of contingent payments is owed upon repayment of the CAD 3.6 million Fraser Canyon seller note. Future transactions could trigger additional material payments to Nectarine and reduce cash otherwise available to fund operations and growth.
We have material weaknesses in our internal
control over financingfinancial reporting. If we fail to establish and maintain proper and effective internal control over financial reporting,
our operating results and our ability to operate our business could be harmed.
Ensuring that we have adequate internal financial
and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and
time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance
with generally accepted accounting principles. Due to accounting resource constraints, we have had limited review controls. These constraints
have resulted in (1) a lack of segregation of duties, since we have a limited administrative staff, and (2) lack of internal controls
structure review. As a result of these constraints, we have a material weakness in our internal control over financingfinancial reporting.
The liquidity of the Company is largely
dependent on our ability to borrow funds on our ABLcredit Facility.facilities.
We fund our operations primarily through cash
provided from operations of our building products distribution network and available capacity under our ABLcredit Facilityfacilities. (“Revolver”).
Our operating cash flows fluctuate based on seasonality with the first half of the year typically resulting in negative operating cash
flows from the build in accounts receivable and inventories and the second half of the year generating positive operating cash flows as
we bring accounts receivables and inventory levels down from seasonal high periods and pay down our Revolver.credit facilities. The liquidity of the Company
is largely dependent on our ability to borrow funds on our Revolver.credit Iffacilities. The Company's recurring net losses (including a net loss of $21.2 million for the Companyyear failsended toDecember fulfill31, its2025), financialaccumulated covenantdeficit requirements,
itof $218.0 million as of December 31, 2025, and upcoming debt maturities of $5.976 million due in 2026 represent conditions that, in the aggregate, could loseraise accesssubstantial todoubt funding underabout the Revolver, which would significantly impact our liquidity and put ourCompany's ability to continue as
a going concernconcern. Management has evaluated these conditions together with its financial resources and operational plans, including (i) the $3.252 million in net proceeds received from the March 2025 public offering, (ii) the $20 million Equity Line of Credit with 3i, LP (of which approximately $19.5 million remained undrawn at risk.December 31, 2025), (iii) available capacity under the Company's Revolving Credit Agreement, and (iv) management's projections of improved operating performance in 2026 driven by the full-year contribution from the Carolina Stone and Fraser Canyon acquisitions. Based on this evaluation, management has concluded that these plans alleviate the substantial doubt. Accordingly, the Company's cash and available liquidity are expected to be sufficient to fund operations and meet obligations for at least one year from the issuance date of these consolidated financial statements.
The proceeds from our Public OfferingOffering, which closed on
March 7, 20252025, are expected to improveimproved our liquidity position and reducereduced our reliance on the Revolver,Revolving Credit Agreement, enhancing our ability to meet financial
covenant requirements and fund our operations.operations, including the Carolina Stone and Fraser Canyon acquisitions completed during 2025. However, while we believe we will be able to continue to borrow funds on our RevolverRevolving Credit Agreement when
and as required, there can be no assurance that financing sufficient to enable us to continue our operations will be available to us in
the future. If additional financing is not available when required or is not available on acceptable terms, we may be unable to operate
our business as planned or at all, fund our expansion, successfully promote our business, develop or enhance our products and services,
take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our
business, financial condition and results of operations.
Capstone Holding Corp. is a holding company
with no operations of its own, and it depends on its operating subsidiarysubsidiaries for cash to fund all of its operations and expenses, including
to make future dividend payments, if any.
Our operations are conducted entirely through
our operating subsidiary,subsidiaries, and our ability to generate cash to fund operations and expenses, to pay dividends or to meet debt service obligations
is highly dependent on the earnings and the receipt of funds from our subsidiaries through dividends or intercompany loans. Deterioration
in the financial condition, earnings or cash flow of Capstone Holding Corp. (“Holdings”) and its subsidiaries for any reason
could limit or impair their ability to pay such distributions.
We have received a notification from Nasdaq regarding non-compliance with the minimum bid price requirement, and failure to regain compliance could result in delisting of our Common Stock.
In January 2026, the Company received a notification from the Nasdaq Stock Market indicating that the closing bid price of its Common Stock had been below $1.00 per share for 30 consecutive business days, and that the Company was therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The Company has until July 6, 2026, to regain compliance, which requires the closing bid price of its Common Stock to be at least $1.00 per share for a minimum of 10 consecutive business days. If the Company does not regain compliance within the initial compliance period, it may be eligible for an additional 180-day compliance period, subject to meeting certain requirements. There can be no assurance that the Company will be able to regain compliance. If the Company fails to regain compliance, its Common Stock may be subject to delisting from Nasdaq, which could materially adversely affect the liquidity and trading price of its Common Stock and its ability to raise capital. In January 2025, the SEC approved amendments to Nasdaq Listing Rule 5810(c)(3)(A) that restrict the ability of listed companies to use reverse stock splits as a compliance tool. Under the amended rules, if a company effects a reverse stock split and subsequently fails to maintain the minimum bid price requirement within one year, the company will not be eligible for any compliance period and Nasdaq will issue a delisting determination. In addition, companies that effect reverse stock splits with a cumulative ratio of 250-to-1 or greater over any two-year period are subject to immediate delisting without a compliance period. The Company’s Board of Directors is seeking shareholder authorization at the 2026 Annual Meeting to effect a reverse stock split as a potential backstop measure to regain compliance if necessary. However, even if authorized and effected, a reverse stock split may not result in sustained compliance with the minimum bid price requirement, and the amended Nasdaq rules would preclude the Company from relying on an additional compliance period if the stock price subsequently falls below $1.00 within one year of such reverse split.
Our ability to raise capital through shelf registration statements may be limited.
The Company is not currently eligible to register securities for resale on a shelf registration statement on Form S-3 under the Securities Act because the Company did not timely file a Form 8-K in connection with the closing of its August 2025 acquisition of Carolina Stone Holdings, LLC. Under SEC rules, the Company will not regain Form S-3 eligibility until approximately twelve months following the date the required filing is made. This limitation restricts the Company’s ability to efficiently access the capital markets through an at-the-market (ATM) offering program or other shelf takedowns, which could limit the Company’s financial flexibility and its ability to fund operations, acquisitions, or debt repayments on favorable terms.
Management's Discussion & Analysis (MD&A)
New heading “Impairment, Interest, and Other Items”
Removed heading “Other Income and Expenses”
Removed heading “Cost of goods sold”
Removed heading “Other Income and expenses”
Largest changes
“The results of our 2025 quantitative goodwill impairment testing indicated that the estimated fair value of the Instone reporting unit was below its carrying value by approximately $6,200 thousand, or 31.4%. Accordingly, the Company recorded a goodwill impairment charge of $6,200 thousand during the year ended December 31, 2025. The fair value was estimated using a blend of the income approach (discounted cash flow, weighted 50%), the guideline public company method (weighted 25%), and the guideline merged and acquired company method (weighted 25%). …”see in full comparison
“The Company recorded income tax expense of $7.2 million for 2025 compared to $0.4 million for 2024. The 2025 provision primarily reflects the establishment of a full valuation allowance against the Company's net deferred tax assets, following the Company's conclusion that it is not more likely than not that the deferred tax assets will be realized. The Company maintains a full valuation allowance against its federal and state deferred tax assets as of December 31, 2025. …”see in full comparison
“At December 31, 2025, goodwill totaled $18.5 million compared to $23.3 million at December 31, 2024. During 2025, the Company recorded a $6.2 million impairment charge related to the Instone reporting unit as part of its annual goodwill impairment test. The impairment resulted from a decline in the estimated fair value of the Instone reporting unit, primarily driven by revised near-term revenue and earnings projections reflecting softer demand conditions and the impact of higher operating costs. …”see in full comparison
“The Company recorded a goodwill impairment charge of $6.2 million related to the Instone reporting unit during 2025 (see Note 7). Interest expense increased $2.4 million to $3.9 million, driven by the issuance of $6.3 million in Senior Secured Convertible Notes in July and October 2025, including non-cash amortization of original issue discounts, debt issuance costs, and derivative-related discounts. The Company recognized an unrealized gain of $0.8 million on derivative instruments from the change in fair value of embedded conversion features in the convertible notes.”see in full comparison
Net cash provided by operating activities wassee in full comparison$3.7$4.6 million for the year ended December 31,2024,2025, primarilyresulting fromreflecting our net loss of$2.6$21.2millionmillion, partially offset by$5.4non-cash charges totaling approximately $16.6 millionprovidedin— including the $6.2 million goodwill impairment, $7.2 million deferred tax valuation allowance establishment, $2.2 million of amortization of debt discounts and derivative-related expenses, and $0.4 million of depreciation and amortization — and favorable changes inour non-cashworkingandcapitalnon-cash expenses.accounts.
Full comparison: every changed paragraph (72)
The following discussion and analysis should
be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2023,2025, and the related notes
thereto, which have been prepared in accordance with U.S. GAAP, included elsewhere in the registration statement of which this prospectusAnnual forms
aReport part.on Form 10-K. Throughout this discussion, unless the context specifies or implies otherwiseotherwise, the terms the “Company”,"Company," “we”,
“us”"we," "us," and “"our”" refer to the business and operations of Capstone Holding CorpCorp. and its operatingconsolidated subsidiary,subsidiaries, including TotalStone,
LLC (dba Instone), Carolina Stone Holdings, LLC, and Fraser Canyon Holdings Inc. (and its subsidiary, Canadian Stone Industries Inc.).
Capstone Holding Corp.Corp., formerly known as Capstone
Therapeutics Corp. and OrthoLogic Corp., incorporated in Delaware in 1987 as a domestic corporation, is the parent entity of TotalStone Holdings, LLC, which in turn owns TotalStone,
LLC (dba Instone). Instoneand hasInStone Canada Corp. Capstone also owns Carolina Stone Holdings, LLC. Together, our three operating subsidiaries maintain a building products distribution and installation network that services 31 US states (with such states having over
60% of American households). Our over 400 activeserving customers areacross primarilythe masonry,United building materialsStates and landscape dealers.Canada.
Historically, the product mix for Instone was
heavily concentrated on Cultured Stone®, which in 2018 Cultured Stone® comprised almost 80% of our total revenue. Through acquisition
andorganic product expansions,expansion and the acquisitions of Carolina Stone in August 2025 and Canadian Stone Industries in December 2025, we have increasedsignificantly broadened our product offeringoffering, togeographic our customers. This expansion has made Instone a more attractive supplier
to newreach, and existingcustomer dealers.base.
We provide value to our dealerscustomers — including masonry dealers, contractors, builders, and developers of residential, commercial, and multi-family projects — by making the
procurement and logistics process easy for product lines that are otherwise challenging for dealers to managesource if they were to purchase
directly withfrom a manufacturer or quarry. OurThrough websiteCarolina provides efficiency, andStone, we believealso ourdeliver turnkey installation services, combining product offeringsupply provideswith optionsprofessional andmasonry ability
installation for vendorconstruction consolidation and our logistical capabilities provide cost effective and efficient delivery, typically within a week or less.projects.
A key differentiating factor for our platform is the breadth of our product portfolio, which spans natural and manufactured stone veneer, thin brick veneer, stone siding, landscape stone, hardscape products, and modular masonry fireplaces. Across our three subsidiaries, we distribute a broad range of industry-leading brands including Cultured Stone®, Pangaea® Natural Stone, TerraCraft®, Dutch Quality®, Versetta Stone®, BrikClad, Isokern®, and Colonial Brick & Stone, among others, as well as our proprietary brands Toro Stone™, Beon Stone®, Aura™, and Interloc™. This breadth allows our customers to consolidate purchasing across multiple product lines through a single supplier relationship.
We operate across two complementary channels in the North American building products market. In distribution, we serve approximately 7,000 U.S. building products dealers plus a fragmented base of Canadian distributors and stone retailers. Most are privately held and cannot efficiently purchase or store a diverse product range, which constrains their ability to meet end-customer demand. Our website and logistics platform solve this by enabling customers to buy in the quantities they need across multiple product lines from a single supplier — improving their inventory turns, cash management, and ability to serve their own customers. In installation, Carolina Stone delivers turnkey masonry installation directly to contractors, builders, and developers for residential, commercial, and multi-family projects. Operating across both channels lets us serve customers at multiple points in the construction supply chain rather than a single one.
A key differentiating factor for our strategy
is that we own or control five of the eight brands we sell. Our products include stone veneer, landscape stone, and modular masonry fireplaces.
The brands we distribute which we do not control are Cultured Stone®, Dutch Quality®, and Isokern®. The brands we distribute
which we own or control include Aura™, Pangea Stone®, Toro Stone™, Beon Stone®, and Interloc™.
We operate in a market environment where there
are about 7,000 building products dealers, most of which are privately held. Many of these dealers are not able to efficiently purchase
or optimize storage space, which constrains their ability to sell the diverse range of products we offer. Our website enables dealers
to buy in the quantities they require thus driving a more optimal level of inventory while also significantly reducing logistical challenges.
We believe the ability for customers to buy in the quantities they need across many product lines instead of buying single product lines
form different manufacturers helps them manage cash and, in turn, allows them to offer a higher level of service to their own customers.
According to a December 2023 study jointly released by the management consulting firm, Roland Berger, and the financial advisory firm,
Lazard, “Trends in the Building Envelope Industry,” the sector has recently grown by 5 – 7%. Given the recent
peak of the interest rate cycle constraining the revenue of building products companies (due to fewer housing starts and less commercial
construction) we believe current conditions are the ideal backdrop for us to execute value-creating, accretive acquisitions.
During fiscal year 2025, the Company executed on its acquisition strategy with two transactions that significantly expanded its scale and geographic reach. We intend to continue to grow our business organically and through successfully integrating well-timed acquisitions.
Key developments during fiscal year 2025 included:
Public Offering and Nasdaq Uplisting. On March 7, 2025, the Company completed its follow-on public offering of 1,250,000 shares at $4.00 per share for gross proceeds of $5,000,000, and its common stock began trading on the Nasdaq Capital Market under the symbol “CAPS” on March 6, 2025.
TotalStone Restructuring. On March 7, 2025, TotalStone’s Class B and Class C preferred interests were exchanged for 3,782,641 shares of Common Stock, and the Company now owns 100% of TotalStone’s equity interests.
Convertible Note Financing. The Company issued two senior secured convertible notes totaling approximately $6.8 million in original principal ($6.25 million in gross proceeds) under a $10.9 million authorized facility. During the fiscal year, the Buyer converted approximately $2.9 million of principal into 3,166,667 shares of common stock (2,900,000 shares from the July Note at $1.00 per share and 266,667 shares from the October Note at $0.75 per share), and the Company redeemed approximately $62,000 of principal in cash. The conversion price on the July Note was reduced from $1.72 to $1.00 and subsequently to $0.75 per share through three amendments. On the October Note, at December 31, 2025, $1,585,940 of principal is convertible at $0.75 per share and $1,772,856 of principal continues at $1.10 per share. As of December 31, 2025, the aggregate net carrying value of the convertible notes was approximately $1.57 million, reflecting unamortized discounts of approximately $2.29 million (comprising original issue discounts, debt issuance costs, and derivative-related discounts). The amortization of these discounts to interest expense using the effective interest method will represent a material non-cash charge to earnings over the remaining term of the notes.
Carolina Stone Acquisition. Closed August 22, 2025. Aggregate purchase consideration of approximately $4.2 million (cash, seller note, and earn-out). See Note 4 for additional information. Carolina Stone contributed revenue and earnings to the Company's results beginning in the third quarter of 2025.
Fraser Canyon / CSI Acquisition. Closed December 1, 2025. Aggregate purchase consideration of approximately $6.8 million (cash, seller notes, and earn-out). See Note 4 for additional information. CSI contributed approximately one month of revenue and earnings to the Company's fourth quarter 2025 results.
On November 9, 2023, related party entities of
the Company’s majority shareholder entered into a transaction that resulted in unwinding the Company’s 2021 investment in
Diamond Products Holdings, LLC (“DPH”) valued at $8 million that was obtained in exchange for a $8 million note payable to
Brookstone Acquisition Partners XXI, LLC (“Brookstone XXI”).
Sales
Our sales primarily consist of distributing and installing manufactured
and natural stone cladding products, natural stone landscape products, and related masonry and hardscape goods for residential and commercial constructionconstruction. We sell across 38 U.S. states and two Canadian provinces through
a dealerour networkthree inoperating 31subsidiaries: statesInstone (U.S. distribution), Canadian Stone Industries (Canadian distribution), and Carolina Stone (distribution and installation in the Midwestern and NortheasternSoutheastern United States.States). The Company recognizes revenue when control over
the products has been transferred to the customer,customer or as installation services are performed, and the Company has a present right to payment.
Cost of goods sold includes the purchase price
of material,materials, inbound freight, miscellaneous import feesfees, (if applicable),and warranty and related expenses that are directly attributable to our fabricated
products.distributed Theproducts, Companyalong alsowith includesdirect amountslabor, subcontractor costs, and jobsite materials for our installation services. Amounts billed to customers for shipping and handling, along with the related to shipping and handling andexpenses, shippingare andalso handling expensesincluded in
cost of goods sold. Gross profit is equal to revenue less cost of goods sold. Gross profit margin is equal to gross profit divided by revenue.
Gross profit is equal to revenue less cost of
goods sold. Gross profit margin is equal to gross profit divided by revenue.
Other Income and Expenses
Other income and expenses consist primarily of
interest expenses on our line of credit and debt and, the write-off of our related party investment in DPH and related gain on extinguishment
of a note payable to Brookstone XXI.
Net sales increased $2.0 million, or 4.5%, to $46.9 million for the year ended December 31, 2025 from $44.9 million for the year ended December 31, 2024. The increase was primarily driven by the acquisitions of Carolina Stone Holdings in August 2025 and Fraser Canyon Holdings in December 2025, which contributed incremental revenue during their respective post-acquisition periods. Organic revenue from the TotalStone segment declined modestly, reflecting softer demand conditions in certain regional markets partially offset by expanded product distribution, including the addition of new dealer accounts.
Cost of goods sold increased $0.8 million, or 2.2%, to $36.1 million for the year ended December 31, 2025 from $35.3 million for the year ended December 31, 2024. The increase reflects the addition of Carolina Stone and Fraser Canyon cost of goods sold during their post-acquisition periods. As a percentage of net sales, cost of goods sold improved to 77.0% from 78.7%, reflecting a favorable product mix shift.
Gross profit increased $1.2 million, or 12.8%, to $10.8 million for the year ended December 31, 2025 from $9.6 million for the year ended December 31, 2024. Gross margin improved to 23.0% from 21.3%, reflecting a favorable product mix shift toward higher-margin stone veneer products and the contribution of the acquired businesses, which carry gross margins above the consolidated average.
Sales
Sales were $44.9 million in 2024 compared
to $48.4 million in 2023. Revenue decreased between 2024 and 2023 by $3.5 million.
For our owned and controlled brands, revenue was
down $2.6 million primarily driven by a decrease in market volume of $1.6 million relating to approximately 150,000 square feet of
non-fabricated items and price reductions of $990.0 thousand. For brands we do not control, revenue was down $790.0 thousand primarily
attributed to lower volume of $840.0 thousand or 105,000 square feet driven by lower market demand; offset by an increase in prices of
$50.0 thousand.
Cost of goods sold
Cost of goods sold decreased by $3.4 million,
or 9%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
During the pandemic, the industry experienced
significant supply chain disruptions on both domestic and imported products. The impact on imported products was more significant and
volatile in both costs and operations when compared to domestic products. Supply constraints, container availability, container costs,
port congestion among other factors drove an increase in cost of goods sold throughout periods during the pandemic. By the end of 2023,
these issues and related costs began to normalize.
Gross profit margin increased from 19.9% for the
year ended December 31, 2023 to 21.3% for the year ended December 31, 2024. The increase in gross profit margin was attributable to the
Company turning inventory through cost of goods sold in 2023 that had higher freight costs during the supply chain disruptions noted above.
Selling, general and administrative expenses increased $4.2 million, or 40.8%, to $14.4 million for the year ended December 31, 2025 from $10.2 million for the year ended December 31, 2024. The increase was primarily attributable to $1.6 million of operating costs from the Carolina Stone and Fraser Canyon acquisitions and $1.6 million of higher public company costs — including investor relations, audit, legal, and Nasdaq-related fees — incurred for the first full year following the March 2025 public offering. The remainder reflects increased executive compensation, board fees, and insurance premiums in connection with operating as a public company.
Impairment, Interest, and Other Items
The Company recorded a goodwill impairment charge of $6.2 million related to the Instone reporting unit during 2025 (see Note 7). Interest expense increased $2.4 million to $3.9 million, driven by the issuance of $6.3 million in Senior Secured Convertible Notes in July and October 2025, including non-cash amortization of original issue discounts, debt issuance costs, and derivative-related discounts. The Company recognized an unrealized gain of $0.8 million on derivative instruments from the change in fair value of embedded conversion features in the convertible notes.
Selling general and administrative expenses decreased
by $659.0 thousand, or 6.0%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease
results primarily from a reduction in force of $364.0 thousand, lower travel expenses of $109.0 thousand and considerable efforts to reduce
overall spending of $180.0 thousand to adjust for lower revenues.
Other Income and expenses
Other expenses, net, decreased by $846.0 thousand,
or 36%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease consists of lower interest expense
of $189.0 thousand, largely attributed to our revolving line of credit, a $8 million loss in 2023 on the write-off of our related party
investment in DPH and a related $7.2 million gain on extinguishment (forgiveness) of debt by Brookstone XXI associated with the DPH investment;
offset by lower other income of $143.0 thousand.
The Company recorded income tax expense of $7.2 million for 2025 compared to $0.4 million for 2024. The 2025 provision primarily reflects the establishment of a full valuation allowance against the Company's net deferred tax assets, following the Company's conclusion that it is not more likely than not that the deferred tax assets will be realized. The Company maintains a full valuation allowance against its federal and state deferred tax assets as of December 31, 2025. Net loss increased $18.7 million to $21.2 million for 2025 from $2.6 million for 2024, driven by the goodwill impairment charge, the establishment of the valuation allowance, higher interest expense, increased SG&A costs, and transaction expenses, partially offset by higher gross profit and the change in fair value of derivative liabilities.
Income tax expense increased by $208.0 thousand
or 89% for the year ended December 31, 2024, compared to the year ended December 31, 2023. The negative effective tax rate in 2024 is
primarily attributable to an increase in the valuation allowance for deferred income tax assets.
The Company has one operating andtwo reportable segment
segments: (i) the TotalStone segment, which consists ofincludes the operations of TotalStone.TotalStone, LLC and Canadian Stone Industries, and (ii) the Carolina Stone segment, which includes the operations of Carolina Stone Distributors. Both segments are engaged in the distribution and fabrication of natural and manufactured stone and related building products. The Company also has corporate-level SG&A expenses which are included in Capstone
Holding Corp. (“"Capstone”" or “"the Parent”") and consist primarily of board fees and,fees, investor relations, filing,
legal, insurance, accounting and consulting expenses not identifiable and allocated to TotalStone.the operating segments.
The following table is a summary of TotalStone’s
each segment's operating results through operating income (loss) reconciled to the Company’sCompany's consolidated totals with the inclusion of Parent and
eliminating amounts:
The above discussion of consolidated operating
results through operating income (loss) is in substancereflects the combined operating results of TotalStonethe Instone and Carolina Stone segments for the comparable periods presented. The
elimination of selling, general and administrative expenses reflect the elimination of management fees incurred by TotalStonethe operating segments and earned
by Parent. The Parent classifies the management fee income earned as a component of net non-operating income (expense) and the corresponding
income is also eliminated in the Company’sCompany's consolidated results.
The Company has historically funded its operations through a combination of cash flows from operations, borrowings under its revolving credit facility, and proceeds from debt and equity financings. As of December 31, 2025, the Company had cash of $0.7 million and $10.3 million outstanding under its revolving line of credit. Working capital (current assets less current liabilities) was a deficit of $0.2 million at December 31, 2025 compared to a surplus of $0.3 million at December 31, 2024. The $0.5 million decrease was primarily driven by increases in the revolving line of credit, current maturities of long-term debt (including the senior secured convertible notes), management fee accruals, and current lease liabilities assumed in the Carolina Stone and Fraser Canyon acquisitions, partially offset by higher inventory and accounts receivable balances acquired through those transactions and by the $3.3 million of net proceeds from the March 2025 public offering.
In March 2025, the Company completed its initial public offering of 1,250,000 shares of common stock at $4.00 per share, generating net proceeds of approximately $3.3 million after deducting underwriting discounts and offering costs. The Company used a portion of the net proceeds to repay the Berkshire Bank term loan and fund general corporate purposes. The balance was subsequently deployed to fund a portion of the Carolina Stone and Fraser Canyon acquisitions.
Working capital was $250.0 thousand as of December 31,
2024, a decrease of $850.0 thousand as compared to $1.1 million as of December 31, 2023. The decrease in working capital is
primarily attributable to a decrease in inventory and our revolving line of credit; offset by an increase in accounts payable.
The Company primarily funds ourits operations through
cash provided from operations of our building products distribution networkand installation businesses and available capacity under our ABLcredit Facilityfacilities (“Revolver”"Credit Facilities").
Our.Our operating cash flows fluctuate based on seasonality with the first half of the year typically resulting in negative operating cash
flows from the build in accounts receivable and inventories and the second half of the year generating positive operating cash flows as
we bring accounts receivables and inventory levels down from seasonal high periods and pay down our Revolver.Credit Facilities. The liquidity of the Company
is largely dependent on our ability to borrow funds on our Revolver.Credit Facilities. If the Company fails to fulfill its financial covenant requirements,
our ability to continue as a going concern could be at risk. We believe ongoing availability of our RevolverCredit Facilities plus cash provided from operations
combined with our considerable efforts to reduce overall spending will be sufficient to satisfy our cash requirements for at least one
year after the date the consolidated financials are issued. The Company believes we will be able to continue to borrow funds on our Revolver
Credit Facilities when and as required. Future acquisitions may be financed through other forms of financing that will depend on then-existing conditions.
In July and October 2025, the Company issued two Senior Secured Convertible Notes with aggregate gross proceeds of $6.3 million. These notes bear interest at 7.0% per annum and mature in July and October 2026, respectively. At December 31, 2025, the aggregate net carrying value of the notes was $1.6 million after deducting unamortized original issue discounts, debt issuance costs, and derivative-related discounts of $2.3 million in aggregate. See Note 11 — Debt for additional information regarding conversion activity, the embedded derivative, and subsequent events.
The Company's ability to continue as a going concern depends on its ability to generate sufficient cash flows from operations, access additional capital, and manage its debt maturities. The Senior Secured Convertible Notes mature in July and October 2026. The Company's U.S. revolving credit facility with Beacon Bank & Trust (successor by merger to Berkshire Bank) matures in June 2026, and Canadian Stone Industries' operating loan with TD Bank is subject to annual renewal. The mezzanine term loan with Stream Finance, LLC matures in September 2027. Management is evaluating alternatives to refinance or extend these obligations and believes that the Company's existing cash, availability under its revolving credit facilities, and expected operating cash flows will be sufficient to fund operations for at least the next twelve months from the date of this filing.
The Company historically experiences higher sales
during ourits second and third quarters due to the favorable weather in the MidwesternMidwestern, Northeastern, and NortheasternSoutheastern United States and in Canada for new construction
and remodeling.
Net cash provided by operating activities was
$3.7 $4.6 million for the year ended December 31, 2024,2025, primarily resulting fromreflecting our net loss of $2.6$21.2 millionmillion, partially offset by $5.4non-cash charges totaling approximately $16.6 million
provided in— including the $6.2 million goodwill impairment, $7.2 million deferred tax valuation allowance establishment, $2.2 million of amortization of debt discounts and derivative-related expenses, and $0.4 million of depreciation and amortization — and favorable changes in our non-cash working andcapital non-cash expenses.accounts.
Net cash provided by operating activities was
$1.7 $3.8 million for the year ended December 31, 2023,2024, primarily resulting from our net loss of $3.8$2.6 million offset by $4.2$6.4 million
provided in changes in ourof non-cash workingexpenses and non-cashworking expenses.capital changes.
Net cash used in investing activities was $6.9 million for the year ended December 31, 2025, primarily reflecting the acquisitions of Carolina Stone ($2.7 million, net of cash acquired), Fraser Canyon ($3.6 million, net of cash acquired), and CSIA ($0.5 million), along with $0.2 million of property, equipment, and intangible asset purchases.
Net cash used in investing activities was $120.0
thousand$0.1 and $208.0 thousandmillion for the yearsyear ended December 31, 20242024, andconsisting 2023, respectively. These cash outflows were related to purchases
of property and equipment.equipment purchases.
Net cash usedprovided inby financing activities was $3.3 million
for the year ended December 31, 2024. The cash outflow was a result of a $2.3 million net decrease in our line of credit and
the repayment of debt of $1.0 million. Net cash used in financing activities was $1.4$12.3 million for the year ended December 31,
2023. The2025. cashCash outflowinflows wasincluded $6.25 million in gross proceeds from the Senior Secured Convertible Notes, $5.0 million in gross proceeds from our March 2025 public offering, a result of a $1.3$4.0 million net increase in our revolving line of credit, offsetand primarily$0.3 bymillion thefrom repaymentour equity line of term
credit. Cash outflows included $2.3 million in financing fees and $1.0 million in debt of $2.1 million.repayments.
Net cash used in financing activities was $3.7 million for the year ended December 31, 2024, primarily reflecting a $2.3 million net decrease in our line of credit, $1.0 million in debt repayments, and $0.2 million in deferred IPO costs.
The Company used the net proceeds of its March 2025 Public Offering to fund a portion of the cash consideration for the Carolina Stone acquisition (closed August 22, 2025) and the Fraser Canyon / CSI acquisition (closed December 1, 2025), and for general corporate and working capital purposes.
We currently expect to use the net proceeds of
our March 2025 Public Offering primarily for organic growth, by expanding the breadth of our distribution network by both geography and
new products, and inorganic growth via rapid acquisition program of building products distributors and manufacturers whose distribution
core can be fortified to expand their footprint.
The Company recognizes revenue when control of promised goods or services transfers to the customer, which for product sales through our distribution businesses generally occurs at a point in time upon shipment, and for installation services provided through Carolina Stone occurs over time as the work is performed. Revenue is presented net of sales tax. For 2025 and 2024, there are no material estimates of variable consideration included in revenue.
Sales are recognized when revenue is realized
or becomes realizable and has been earned, net of sales tax. In general, revenue is recognized at a point in time, which is usually upon
shipment of the product. Our revenue is recognized at a point in time when ownership, risks and rewards transfer. For 2024 and 2023, there
are no estimates of variable consideration represented in revenue.
What changed in the latest 10-Q
Risk Factors
New heading “Nasdaq has adopted a new minimum market value requirement for continued listing that could apply to us.”
Largest changes
“In July 2026, the SEC approved new Nasdaq continued listing standards that require automatic delisting if the market value of a company's listed securities remains below $5 million for 30 consecutive business days (the “MVLS Rule”). The new MVLS Rule eliminates any cure period, precludes any automatic stay of suspension pending an appeal, and results in an immediate trading suspension upon Nasdaq's determination of non-compliance. …”see in full comparison
see in full comparisonWeThehavecompany has receivedaannotificationadditionalfrom180-dayNasdaqcomplianceregardingperiod,non-compliancethrough January 4, 2027, to regain compliance with the $1.00 minimum bid pricerequirement,requirementandforfailurecontinuedtolistingregainoncompliancethecouldNasdaqresultCapitalinMarket.delistingTheofminimumourbidCommonpriceStock.is the Company’s only remaining listing deficiency.
see in full comparisonWeThewereCompanynotwas in compliance withtheitsminimumfinancialCash Flow Coverage Ratiocovenants under our Revolving Credit Agreement as ofMarchJune31,30, 2026, and although wehavereceived a written waiver from ourlender,lender for the prior quarter, there can be no assurance that we will maintain compliance in future periods or that our lender will grant additional waivers, which could result in acceleration of our outstanding indebtedness and materially impair our liquidity.
“Nasdaq has adopted a new minimum market value requirement for continued listing that could apply to us.”see in full comparison
As ofsee in full comparisonMarchJune31,30, 2026,wethewereCompanynotwas in compliance with both the minimum Cash Flow Coverage Ratiocovenantand the minimum Tangible Net Worth covenants under our Revolving Credit Agreement with Beacon Bank & Trust. We were not in compliance with that covenant as of March 31, 2026. On May 18, 2026, we received a written waiver limited tothisthat specific violation; the waiverdoesdid not extend to any future defaults or events of default. On June 17, 2026, we entered into the Sixteenth Amendment to the Revolving Credit Agreement, which extended the maturity date by six months from June 19, 2026 to December 31, 2026. There can be no assurance that we will maintain compliance with the financial covenants of the amended Revolving Credit Agreement in future periods or that our lender will grant additional waivers if we do not.
In January 2026, the Company received a notification from the Nasdaq Stock Market indicating that the closing bid price of its Common Stock had been below $1.00 per share for 30 consecutive business days, and that the Company was therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The Companysee in full comparisonhashad until July 6, 2026, to regain compliance, whichrequiresrequired the closing bid price of its Common Stock to be at least $1.00 per share for a minimum of 10 consecutive business days.If theThe Companydoesdid not regain compliance withinthe initial compliancethat period,itandmayNasdaqbegrantedeligibletheforCompany an additional 180-day complianceperiod,periodsubjectthroughtoJanuarymeeting4,certain requirements.2027. There can be no assurance that the Company will be able to regaincompliance.compliance within that period. If the Company fails to regain compliance, its Common Stock may be subject to delisting from Nasdaq, which could materially adversely affect the liquidity and trading price of its Common Stock and its ability to raise capital. In January 2025, the SEC approved amendments to Nasdaq Listing Rule 5810(c)(3)(A) that restrict the ability of listed companies to use reverse stock splits as a compliance tool. Under the amended rules, if a company effects a reverse stock split and subsequently fails to maintain the minimum bid price requirement within one year, the company will not be eligible for any compliance period and Nasdaq will issue a delisting determination. In addition, companies that effect reverse stock splits with a cumulative ratio of 250-to-1 or greater over any two-year period are subject to immediate delisting without a compliance period.The Company’s Board of Directors is seeking shareholder authorization atAt the 2026 Annual Meeting held on June 18, 2026, the Company’s stockholders authorized the Board of Directors to effect a reverse stock split as a potentialbackstopmeasure to regaincompliance if necessary.compliance. However, even if authorized and effected, a reverse stock split may not result in sustained compliance with the minimum bid price requirement, and the amended Nasdaq rules would preclude the Company from relying on an additional compliance period if the stock price subsequently falls below $1.00 within one year of such reverse split.
Full comparison: every changed paragraph (7)
WeThe wereCompany notwas in compliance with theits minimumfinancial Cash Flow Coverage Ratiocovenants under our Revolving Credit Agreement as of MarchJune 31,30, 2026, and although we have received a written waiver from our lender,lender for the prior quarter, there can be no assurance that we will maintain compliance in future periods or that our lender will grant additional waivers, which could result in acceleration of our outstanding indebtedness and materially impair our liquidity.
As of MarchJune 31,30, 2026, wethe wereCompany notwas in compliance with both the minimum Cash Flow Coverage Ratio covenantand the minimum Tangible Net Worth covenants under our Revolving Credit Agreement with Beacon Bank & Trust. We were not in compliance with that covenant as of March 31, 2026. On May 18, 2026, we received a written waiver limited to thisthat specific violation; the waiver doesdid not extend to any future defaults or events of default. On June 17, 2026, we entered into the Sixteenth Amendment to the Revolving Credit Agreement, which extended the maturity date by six months from June 19, 2026 to December 31, 2026. There can be no assurance that we will maintain compliance with the financial covenants of the amended Revolving Credit Agreement in future periods or that our lender will grant additional waivers if we do not.
On April 16, 2026, we reduced the conversion price applicable to $500,000 of the principal amount outstanding under the October Note to $0.57 per share. On the same date, the buyer converted an aggregate of $1,725,136 of principal and $120,762 of accrued interest into 2,557,198 shares of common stock, increasing our outstanding share count by approximately 22% in a single day. On August 10, 2026, we further reduced the conversion price of both Notes to $0.2949 per share with respect to all $1,900,759.78 of principal then outstanding. At that price the outstanding principal is convertible into approximately 6,445,438 shares of Common Stock, compared with approximately 2,115,154 shares at the conversion prices in effect at June 30, 2026.
WeThe havecompany has received aan notificationadditional from180-day Nasdaqcompliance regardingperiod, non-compliancethrough January 4, 2027, to regain compliance with the $1.00 minimum bid price requirement,requirement andfor failurecontinued tolisting regainon compliancethe couldNasdaq resultCapital inMarket. delistingThe ofminimum ourbid Commonprice Stock.is the Company’s only remaining listing deficiency.
In January 2026, the Company received a notification from the Nasdaq Stock Market indicating that the closing bid price of its Common Stock had been below $1.00 per share for 30 consecutive business days, and that the Company was therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The Company hashad until July 6, 2026, to regain compliance, which requiresrequired the closing bid price of its Common Stock to be at least $1.00 per share for a minimum of 10 consecutive business days. If theThe Company doesdid not regain compliance within the initial compliancethat period, itand mayNasdaq begranted eligiblethe forCompany an additional 180-day compliance period,period subjectthrough toJanuary meeting4, certain requirements.2027. There can be no assurance that the Company will be able to regain compliance.compliance within that period. If the Company fails to regain compliance, its Common Stock may be subject to delisting from Nasdaq, which could materially adversely affect the liquidity and trading price of its Common Stock and its ability to raise capital. In January 2025, the SEC approved amendments to Nasdaq Listing Rule 5810(c)(3)(A) that restrict the ability of listed companies to use reverse stock splits as a compliance tool. Under the amended rules, if a company effects a reverse stock split and subsequently fails to maintain the minimum bid price requirement within one year, the company will not be eligible for any compliance period and Nasdaq will issue a delisting determination. In addition, companies that effect reverse stock splits with a cumulative ratio of 250-to-1 or greater over any two-year period are subject to immediate delisting without a compliance period. The Company’s Board of Directors is seeking shareholder authorization atAt the 2026 Annual Meeting held on June 18, 2026, the Company’s stockholders authorized the Board of Directors to effect a reverse stock split as a potential backstop measure to regain compliance if necessary.compliance. However, even if authorized and effected, a reverse stock split may not result in sustained compliance with the minimum bid price requirement, and the amended Nasdaq rules would preclude the Company from relying on an additional compliance period if the stock price subsequently falls below $1.00 within one year of such reverse split.
Nasdaq has adopted a new minimum market value requirement for continued listing that could apply to us.
In July 2026, the SEC approved new Nasdaq continued listing standards that require automatic delisting if the market value of a company's listed securities remains below $5 million for 30 consecutive business days (the “MVLS Rule”). The new MVLS Rule eliminates any cure period, precludes any automatic stay of suspension pending an appeal, and results in an immediate trading suspension upon Nasdaq's determination of non-compliance. On July 29, 2026, the SEC stayed the effectiveness of that approval order pending its consideration of notices of intent to petition for review, and the amendments are not currently operative. Accordingly, it is currently uncertain when the stay will be lifted, or the MVLS Rule delayed, modified, or set aside. If the amended standards become effective and the market value of our listed securities is below the required minimum, we could receive an additional deficiency notice from Nasdaq. A reverse stock split would not, by itself, increase the market value of our listed securities, and any actions we take to address the requirement, including issuances of additional securities, could dilute existing stockholders. If we do not satisfy the requirement within any applicable compliance period, our Common Stock could be delisted, which would materially impair the liquidity of our Common Stock and our ability to raise capital, including under the ELOC.
Management's Discussion & Analysis (MD&A)
New heading “Provision for income taxes”
New heading “Results of Operations Comparing Six Months Ended June 30, 2026 to 2025.”
New heading “Selling general and administrative expenses”
New heading “Provision for income taxes”
Removed heading “Transaction expenses”
Removed heading “Income Tax Expense”
Largest changes
“Results of Operations Comparing Six Months Ended June 30, 2026 to 2025.”see in full comparison
“Gross profit margin was 26.3% for the six months ended June 30, 2026 compared to 21.5% for the six months ended June 30, 2025. Gross margin for the six months ended June 30, 2026 benefited from the $438.0 thousand tariff refund recorded as a reduction of cost of goods sold (see Note 3), which contributed approximately 1.3 percentage points of the improvement. …”see in full comparison
Full comparison: every changed paragraph (61)
The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included in this Quarterly Report and our audited consolidated financial statements and related notes thereto for the year ended December 31, 2025, included in our 2025 Form 10-K. Throughout this discussion, unless the context specifies or implies otherwise the terms the “Company”, “we”, “us” and “our” refer to the business and operations of Capstone Holding Corp and its operating subsidiary, TotalStone, LLC (dba Instone), Carolina Stone Holdings, LLC, and Canadian Stone Industries (Fraser Canyon Holdings Inc. and its subsidiaries).
In addition to events previously disclosed, the following significant developments occurred during the financial period covered by this Quarterly Report:
• Convertible Note, Price Adjustment (April 16, 2026). The Company and the holder of the Senior Secured Convertible Notes entered into a letter agreement to adjust the conversion price on $500,000 of principal outstanding under the October 2025 Convertible Note from $1.10 to $0.57 per share. The adjustment is accounted for as a modification of the embedded conversion feature, with the change in fair value of the bifurcated derivative liability reflected in earnings for the period (see Note 11).
• Convertible Note, Price Adjustment (August 10, 2026). The Company and the holder of the Senior Secured Convertible Notes entered into a Conversion Price Voluntary Adjustment Notice reducing the conversion price of both Notes to $0.2949 per share with respect to all $1,900,759.78 of principal then outstanding. At that price the outstanding principal is convertible into approximately 6,445,438 shares of Common Stock. The adjustment is accounted for as a modification of the embedded conversion features, with the change in fair value of the bifurcated derivative liabilities reflected in earnings in the third quarter of 2026 (see Note 19).
• Convertible Note Conversions. During the six months ended June 30, 2026, aggregate of $1,958,781 of principal and $137,115 of accrued interest was converted into 2,890,533 shares of Common Stock under the Senior Secured Convertible Notes (See Note 11).
• Revolving Credit Facility Waiver and Sixteenth Amendment. On May 18, 2026, the Company received a written waiver from Beacon Bank & Trust of the Company’s noncompliance with the minimum Cash Flow Coverage Ratio under the Revolving Credit Agreement as of March 31, 2026. On June 17, 2026, the Company entered into the Sixteenth Amendment to the Revolving Credit Agreement, extending the maturity date by six months from June 19, 2026 to December 31, 2026 (see Note 11).
• Stream Finance Mezzanine Loan Extension. On June 17, 2026, the Company entered into the Fourth Amendment to the Stream Finance Credit Agreement, extending the maturity date by one year from September 30, 2027 to September 30, 2028 (see Note 11).
• 2026 Annual Meeting of Stockholders. On June 18, 2026, the Company held its 2026 Annual Meeting of Stockholders. The stockholders approved each proposal set forth in the proxy statement, including the election of Class I and Class II directors, authorization to effect a reverse stock split, approval of an amendment to the 2025 Stock Incentive Plan and ratification of the Company’s independent registered public accounting firm (see Note 15).
• Equity Line of Credit Draws. Between April 5, 2026 and June 18, 2026, the Company submitted ten VWAP Purchase Notices under the May 2025 Equity Line of Credit agreement with Tumim Stone Capital, LLC, resulting in the issuance of an aggregate of 1,222,268 shares of Common Stock for aggregate gross proceeds of approximately $425,277.
• 2025 Stock Incentive Plan; Restricted Stock Awards. The 1,995,000 restricted stock awards granted on March 30, 2026 began amortizing stock-based compensation expense over their respective requisite service periods during the three and six months ended June 30, 2026 (see Note 15). Stock-based compensation expense recognized was approximately $398.8 thousand for the six months ended June 30, 2026 The March 30, 2026 grant date resulted in de minimis expense in the first quarter.
A number of Brookstone entities controlled by Messrs. Lipman and Toporek control over 50% of the Company’s voting stock. The notes held by BP Peptides, LLC (“BP Peptides”) and Brookstone Partners Acquisition XXI Corporation (“Brookstone Acquisition”) were exchanged for shares of Series Z 8% Non-Convertible Preferred Stock on September 30, 2025, as described below, and accordingly had no outstanding balance as notes payable as of MarchJune 31,30, 2026 and December 31, 2025. As of MarchJune 31,30, 2026, Stream Finance, LLC was the sole remaining related party note payable.
On September 30, 2025, following approval by the Audit Committee of the Board, the Company and each of BP Peptides and Brookstone Acquisition (collectively, the “Brookstone Lenders”), entered into an Exchange Agreement (the “Exchange Agreement”) whereby the Brookstone Lenders agreed to exchange their notes for shares of the Company’s newly created Series Z 8% Non-Convertible Preferred Stock (the “Series Z Preferred”). Based on the Nasdaq Official Closing Price of the Company’s common stock, $0.0005 par value per share (the “Common Stock”), of $1.32 on the day prior to the parties entering into the Exchange Agreement, BP Peptides received 642,364 Series Z Preferred shares and Brookstone Acquisition received 825,168 Series Z Preferred shares. The unaudited interim consolidated financial statements included in this Form 10-Q reflect the issuance of the Series Z shares as of MarchJune 31,30, 2026.
Pursuant to the Certificate of Designation, the Series Z Preferred shares are not convertible into shares of Common Stock, have voting rights of one vote per share and will vote together as a single class with the Common Stock shareholders. Each share of Series Z Preferred will accrue cumulative dividends at a rate of eight percent (8%) per annum based on the $1.32 stated value per share of the Series Z Preferred, accruing daily and payable, at the sole option of the Board, either in cash or payment-in-kind via the issuance of further shares of Series Z Preferred. The Series Z Preferred shares are redeemable upon the earlier of the seven year anniversary of the issuance of the shares or the occurrence of a fundamental transaction (as defined in the Certificate of Designation) On January 21, 2026, the Company entered into a fee waiver agreement with Brookstone Partners IAC under which Brookstone agreed to waive its $400.0 thousand annual management fee for fiscal year 2026, and the Company's Chief Executive Officer agreed to reduce his annual base cash salary to $1.00,$1.00 inwith eachthe casefee waiver effective January 1, 2026 and the salary reduction effective February 1, 2026.
During the threesix months ended MarchJune 31,30, 2026, the Company completed fivetwelve conversions of principal under the October Note; eleven conversions totaling $233,645$1,495,325 of principal and $16,356$104,673 of accrued interest, which were converted into 333,3352,133,335 shares of common stock at a conversion price of $0.75 per share.share Theand Companyone alsoconversion completedtotaling ten draws under its Equity Line$213,084 of Creditprincipal duringand the quarter, generating aggregate net proceeds$14,916 of approximatelyaccrued $194,571.interest, which were converted into 400,000 shares of common stock at a conversion price of $0.57 per share.
During the six months ended June 30, 2026, the Company completed one conversion of principal under the July Note totaling $250,371 of principal and $17,526 of accrued interest, which were converted into 357,198 shares of common stock at a conversion price of $0.75 per share.
The Company completed twenty draws under its Equity Line of Credit during the six months ended June 30, 2026, generating gross proceeds of approximately $619,848 for 1,544,768 shares of common stock.
On March 30, 2026, the Compensation Committee of the Board of Directors granted 1,995,000 restricted stock awards to executive officers and non-employee directors under the Company's 2025 Plan, with a grant-date fair value of $1,294,755. The awards generally vest at the third anniversary of the grant date for management recipients (with continued service required) and upon separation from the Board for non-employee director recipients.recipients, only upon the qualifying terminations of Board service described in Note 15; other terminations, including voluntary resignation, result in forfeiture.
On April 16, 2026, the Company entered into a Letter Agreement with 3i, LP reducing the conversion price on a $500,000 portion of the principal amount outstanding under the October Note to $0.57 per share.
The following is management’s discussion of the Company’s consolidated financial statements and results of operations for the three months ended MarchJune 31,30, 2026 and 2025 in thousands:
Results of Operations Comparing Three Months Ended MarchJune 31,30, 2026 to 2025.
Sales were $12.6$21.5 million for the three months ended MarchJune 31,30, 2026 compared to $7.9$12.9 million for the three months ended MarchJune 31,30, 2025. The period-over-period change in revenue was $4.7$8.6 million, primarily driven by the full-period contributions from the Carolina Stone (August 2025) and Fraser Canyon (December 2025) acquisitions. Revenue from the Company's legacy Instone operations wasincreased approximately flat$0.9 million period-over-period; the increase reflects approximately $2.4$3.2 million contributed by Carolina Stone and approximately $2.5$4.5 million contributed by Fraser Canyon.
Cost of goods sold changedincreased by $3.1$5.8 million or 47.0%,59.2%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.
The change in cost of goods sold was driven primarily by the changeincrease in sales attributable to the Carolina Stone and Fraser Canyon acquisitions.
Gross profit margin was 23.5%27.9% for the three months ended MarchJune 31,30, 2026 compared to 16.8%24.4% for the three months ended MarchJune 31,30, 2025. Gross margin for the three months ended June 30, 2026 benefited from the $438.0 thousand tariff refund recorded as a reduction of cost of goods sold (see Note 3), which contributed approximately 2.0 percentage points of the improvement. The remaining improvement reflects gross margin gains within the Company's TotalStone segment, together with the addition of Carolina Stone, whose stone distribution and installation mix carries a higher gross margin of approximately 37.8%.34.7%.
Selling, general and administrative expenses changedincreased by $1.7$2.1 million or 62.3%,62.5%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, primarily driven by the full-period effect of the Carolina Stone ($877.0 thousand) and Fraser Canyon acquisitions and transaction-related professional fees of $99($897.0 thousand) recognized during the period, partly offset by the January 2026 cost rationalization program initiated by the Company.acquisitions.
Transaction expenses
Acquisition-related transaction expenses changed by $99 thousand for the three months ended March 31, 2026, primarily related to professional fees associated with subsequent-event activities and the integration of recently acquired businesses.
Interest expense changed by $0.6 million or 197.0%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by the amortization of debt discount and issuance costs on the Company’s Senior Secured Convertible Notes.
Income Tax Expense
IncomeChange taxin expensefair changedvalue of contingent consideration increased by $2$58.0 thousand for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.2025, related to the remeasurement of the Carolina Stone earn-out payable.
Unrealized gain on derivative instruments increased by $166.0 thousand for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, related to the Company's Senior Secured Convertible Notes.
Realized foreign currency loss, net, increased by $14.0 thousand for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, related to the Fraser Canyon acquisition.
Interest expense increased by $1.5 million or 346%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily driven by the amortization of debt discount and issuance costs on the Company’s Senior Secured Convertible Notes.
Provision for income taxes
The Company recorded a provision for income taxes of $3.0 thousand for the three months ended June 30, 2026, compared to no provision for the three months ended June 30, 2025. The provision consists of Canadian income taxes on the operations of Canadian Stone Industries Inc., which the Company did not own during the 2025 period. No U.S. tax benefit was recognized on the pretax loss in either period because of the full valuation allowance against U.S. net deferred tax assets.
The following is management’s discussion of the Company’s consolidated financial statements and results of operations for the six months ended June 30, 2026 and 2025 in thousands:
Results of Operations Comparing Six Months Ended June 30, 2026 to 2025.
Sales were $34.1 million for the six months ended June 30, 2026 compared to $20.8 million for the six months ended June 30, 2025. The period-over-period change in revenue was $13.4 million, primarily driven by the full-period contributions from the Carolina Stone (August 2025) and Fraser Canyon (December 2025) acquisitions. Revenue from the Company's legacy Instone operations increased approximately $857.0 thousand period-over-period; the increase reflects approximately $5.5 million contributed by Carolina Stone and approximately $7.0 million contributed by Fraser Canyon.
Cost of goods sold increased by $8.9 million or 54.3%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
The change in cost of goods sold was driven primarily by the increase in sales attributable to the Carolina Stone and Fraser Canyon acquisitions.
Gross profit margin was 26.3% for the six months ended June 30, 2026 compared to 21.5% for the six months ended June 30, 2025. Gross margin for the six months ended June 30, 2026 benefited from the $438.0 thousand tariff refund recorded as a reduction of cost of goods sold (see Note 3), which contributed approximately 1.3 percentage points of the improvement. The remaining improvement reflects gross margin gains within the Company's TotalStone segment, together with the addition of Carolina Stone, whose stone distribution and installation mix carries a higher gross margin of approximately 36.0%.
Selling general and administrative expenses
Selling, general and administrative expenses increased by $3.8 million or 62.4%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily driven by the full-period effect of the Carolina Stone ($1.7 million) and Fraser Canyon ($1.8 million) acquisitions.
Change in fair value of contingent consideration increased by $58.0 thousand for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, related to the remeasurement of the Carolina Stone earn-out payable.
Unrealized gain on derivative instruments increased by $642.0 thousand for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, related to the Company's Senior Secured Convertible Notes.
Realized foreign currency loss, net. increased by $14.0 thousand for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, related to the Fraser Canyon acquisition.
Interest expense increased by $2.1 million or 286%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily driven by the amortization of debt discount and issuance costs on the Company’s Senior Secured Convertible Notes.
Provision for income taxes
The Company recorded a provision for income taxes of $5.0 thousand for the six months ended June 30, 2026, compared to no provision for the six months ended June 30, 2025, for the same reasons.
The above discussion of consolidated operating results through operating income (loss) is in substance the operating results of TotalStone for the comparable periods presented. The elimination of selling, general and administrative expenses reflect the elimination of management fees incurred by TotalStone and earned by the Company. The Company classifies the management fee income earned as a component of net non-operating income (expense) and the corresponding income is also eliminated in the Company’s consolidated results.
Working capital excludingwas negative $244.0 thousand as of June 30, 2026 compared to positive $78.0 thousand as of December 31, 2025. Excluding the current portion of long-term debtdebt, working capital was $2.9$4.0 million and $3.8 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. The $0.9$200.0 millionthousand decreaseincrease was primarily driven by a $2.4$4.5 million increase in accounts receivable, offset by a $1.9 million increase in accounts payable and a $2.3 million increase in borrowings under our revolving line of credit and a $2.0 million increase in accounts payable, partially offset by a $2.0 million increase in accounts receivable and a $1.0 million increase in inventory.credit.
As of MarchJune 31,30, 2026, the Company had $12.7a combined balance of $12.6 million outstanding under its Revolver,revolving whichcredit facilities. Our Revolving Credit Agreement with Beacon Bank matures on JuneDecember 19,31, 2026, as extended by the FifteenthSixteenth Amendment to the Credit Agreement dated DecemberJune 19,17, 2025.2026. As of MarchJune 31,30, 2026, the Company was not in compliance with both the minimum Cash Flow Coverage Ratio and the minimum Tangible Net Worth covenants under the Revolving Credit Agreement. The Company received a written waiver of the covenant noncompliance from Beacon Bank & Trust dated May 18, 2026. See Note 10.11. Management is in discussions with Beacon Bank & Trust regarding a longer-term extension of the Revolver with financial covenants aligned to the Company's anticipated future results.
The liquidity of the Company is largely dependent on our ability to borrow funds on our Revolver. The longer-term extension of the Revolver and future compliance with financial covenants are subject to risks and uncertainties which could have a material adverse effect on our business, financial condition and results of operations. The Company currently believes that it will have sufficient working capital to operate for a period of at least one year from the issuance date of the MarchJune 31,30, 2026 interim consolidated financial statements based on future expected results. Future acquisitions may be financed through other forms of financing that will depend on existing conditions.
The Company’s ability to continue as a going concern depends on its ability to generate sufficient cash flows from operations, access additional capital, and manage its debt maturities. The July 2025 Senior Secured Convertible NotesNote maturematured inon July 29, 2026 and has since been extended to August 29, 2026, and the October 2025 Note matures on October 22, 2026. The Company’s U.S. revolving credit facility with Beacon Bank & Trust (successor by merger to Berkshire Bank) matures in JuneDecember 2026, as extended by the Sixteenth Amendment, and Canadian Stone Industries’ operating loan with TD Bank is subject to annual renewal. The mezzanine term loan with Stream Finance, LLC matures in September 2027.2028, as extended by the Fourth Amendment dated June 17, 2026. Management is evaluating alternatives to refinance or extend these obligations and believes that the Company’s existing cash, availability under its revolving credit facilities, and expected operating cash flows will be sufficient to fund operations for at least the next twelve months from the date of this filing.
Net cash used in operating activities was $2.8$3.2 million for the threesix months ended MarchJune 31,30, 2026, primarily resulting from the Company’s net loss of $1.9$3.3 million and a $1.1$2.2 million build in working capital, partially offset by $0.5$2.2 million of non-cash items including depreciation, amortization, and accrued interest.
Net cash used in operating activities was $2.3$4.0 million for the threesix months ended MarchJune 31,30, 2025, primarily resulting from our net loss of $1.7$2.4 million and a $0.7$1.8 million build in working capital, partially offset by $0.1 million of depreciation and amortization.capital.
Net cash used in investing activities was $29.0$131.0 thousand for the threesix months ended MarchJune 31,30, 2026, relatedconsisting toof purchases$93.0 thousand of property and equipment.equipment purchases and $38.0 thousand paid to settle the working capital adjustment under the Fraser Canyon purchase agreement (see Note 4).
Net cash used in investing activities was $17.0$2.0 thousand for the threesix months ended MarchJune 31,30, 2025, related to purchases of property and equipment.
Net cash provided by financing activities was $2.5$2.8 million for the threesix months ended MarchJune 31,30, 2026, primarily consisting of net borrowings under our revolving line of credit of $2.4 million and net proceeds from our equity line of credit of $0.2$620.0 million.thousand.
Net cash provided by financing activities was $4.0$4.8 million for the threesix months ended MarchJune 31,30, 2025, primarily consisting of net proceeds from our March 2025 public offering of $3.3 million and net borrowings under our revolving line of credit of $1.5$2.5 million, partially offset by debt repayments of $0.9$910.0 million.thousand.
CAPS insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 3 Form 4 filings (3 insiders, 1 trade date, 125,000 shares, about $500.0K) and open-market sales in 0 filings. Net open-market shares: 125,000 (purchases minus sales); net value about $500.0K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-07 | Feldman Fredric J |
Grant/award | 105,124 | — | — |
| 2026-08-07 | Grotke Kevin Allan |
Grant/award | 515,495 | — | — |
| 2026-08-07 | Holliman John M Iii |
Grant/award | 305,248 | — | — |
| 2026-08-07 | Howse Elwood D |
Grant/award | 105,124 | — | — |
| 2026-08-07 | Lipman Matthew E. |
Grant/award | 1,094,648 | — | — |
| 2026-08-07 | Schultz Edward Christopher |
Grant/award | 310,310 | — | — |
| 2026-08-07 | Strout Gordon Lewis Jr |
Grant/award | 357,810 | — | — |
| 2026-08-07 | Toporek Michael |
Grant/award | 1,094,647 | — | — |
| 2026-03-30 | Feldman Fredric J |
Grant/award | 95,000 | — | — |
| 2026-03-30 | Holliman John M Iii |
Grant/award | 95,000 | — | — |
| 2026-03-30 | Howse Elwood D |
Grant/award | 95,000 | — | — |
| 2026-03-30 | Strout Gordon Lewis Jr |
Grant/award | 142,500 | — | — |
| 2026-03-30 | Toporek Michael |
Grant/award | 356,250 | — | — |
| 2026-03-30 | Lipman Matthew E. |
Grant/award | 356,250 | — | — |
| 2026-03-30 | Schultz Edward Christopher |
Grant/award | 190,000 | — | — |
| 2025-03-07 | Strout Gordon Lewis Jr |
Other | 822,128 | — | — |
| 2025-03-07 | Strout Gordon Lewis Jr |
Open-market purchase | 41,500 | $4.00 | $166.0K |
| 2025-03-07 | Toporek Michael |
Open-market purchase | 41,750 | $4.00 | $167.0K |
| 2025-03-07 | Lipman Matthew E. |
Open-market purchase | 41,750 | $4.00 | $167.0K |
Well-known investors holding CAPS (13F)
None of the 59 investors we track reported a position in their latest 13F.