Capstone Holding Corp.
For the period ended Sep 30, 2025. Filed Nov 18, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 18, 2025
CAPS$1.90+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-15.
0001213900-25-077016
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-18.
0001213900-25-111773
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 86 previous paragraphs and 102 current paragraphs.
52 unchanged; 21 reworded; 28 added; 13 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
Through TotalStone, the Company also operates Carolina Stone Products, a distributor and installer of stone and masonry products serving the Southeastern United States. From two strategic locations in Raleigh and Charlotte, North Carolina, Carolina Stone Products provides showroom, warehouse, and staging-yard capabilities that support both direct-to-builder installations and distribution to regional dealers. The addition of Carolina Stone Products enhances Instone’s service capacity, extends our geographic coverage, and strengthens relationships with builders and distributors in a growing regional market.
Current report
On August 22, 2025, the Company completed its membership interest purchase agreement of the Carolina Stone Holdings. The aggregate purchase price of the Holdings Membership Interest is (i) $2,625,000 in cash, subject to adjustment set forth in Section 2.6 of the Membership Purchase Agreement, plus (ii) a seller note in the original principal amount of $1,250,000, plus (iii) the amount payable pursuant to the terms of the earn-out agreement. The Company transferred $2,501,500 in cash to the Seller, representing the aggregate purchase price of $2,625,000 less $123,000 for the preliminary working capital adjustment as set forth in Section 2.6 of the Purchase Agreement.
Current report
On August 14, 2025, pursuant to Section 7(h) of the Conversion Note, the Company and the Buyer agreed, pursuant to a Conversion Price Voluntary Adjustment Notice executed by both parties, to reduce the Conversion Price of the Convertible Note with regard to $1,363,836 of principal of the Convertible Note to $1.00 per share starting on October 6, 2025 through the maturity date of the Convertible Note.
Current report
On October 5, 2025, pursuant to Section 7(h) of the Conversion Note, the Company and the Buyer agreed, pursuant to a Conversion Price Voluntary Adjustment Notice executed by both parties, to reduce the Conversion Price of the Convertible Note with regard to the entire principal of the Convertible Note to $1.00 per share starting on October 6, 2025 through the maturity date of the Convertible Note. The Company recognized an additional $845.0 thousand loss on debt extinguishment in October 2025 for the effect of this change in the conversion price.
Current report
Exchange Agreement and Series Z Preferred Stock Certificate of Designation
Current report
The Chief Executive Officer of the Company, Matthew Lipman and the Chairman of the Board of Directors of the Company (the “Board”), Michael Toporek, control Brookstone Partners (“Brookstone”), a private equity group with 25 years of deep expertise in building products investments.
Current report
A number of Brookstone entities controlled by Messrs. Lipman and Toporek control over 50% of the Company’s voting stock. In addition, as of September 30, 2025, one Brookstone entity, BP Peptides, LLC (“BP Peptides”), held a note from the Company in the combined principal and interest amount of $847,920. As of September 30, 2025, another Brookstone entity, Brookstone Partners Acquisition XXI Corporation (“Brookstone Acquisition”), held a note from the Company in the combined principal and interest amount of $1,089,222. Both notes had a maturity date of June 30, 2026.
Current report
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 will receive 642,364 Series Z Preferred shares and Brookstone Acquisition will receive 825,168 Series Z Preferred shares. Although the unaudited interim consolidated financial statements included in this Form 10-Q reflect the issuance of the Series Z shares, the formal share issuance process was not completed as of September 30, 2025.
Current report
On September 30, 2025, following Board approval, the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series Z 8% Non-Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware with up to three million five hundred thousand (3,500,000) Series Z Preferred shares being authorized for issuance.
Current report
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)
Current report
Sales were $13.7 million for the three months ended September 30, 2025 compared to $12.3 million for the three months ended September 30, 2024. Revenue increased between the three months ended September 30, 2025 and 2024 by $1.3 million. The $1.3 million increase was primarily attributable to the acquisition of Carolina Stone Holdings, which contributed approximately $957.0 thousand of incremental revenue during the period.
Current report
Cost of goods sold increased by $1.1 million, or 12%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
Current report
The increase in cost of goods sold was driven primarily by an increase in sales of $1.3 million primarily attributable to the acquisition of Carolina Stone Holdings.
Current report
Gross profit margin decreased from 24.3% for the three months ended June 30, 2024 to 23.8% for the three months ended September 30, 2025.
Current report
Transaction expenses
Current report
Transaction expenses increased by $652.0 thousand for the three months ended September 30, 2025. The increase is related to transaction expenses for the Company’s acquisition expenses.
Current report
Loss on extinguishment of debt
Current report
Loss on extinguishment of debt increased by $652.0 thousand for the three months ended September 30, 2025. The increase relates to a substantial change to the conversion feature of the Company’s Convertible Notes in accordance with ASC 470-50 (see Note 10).
Current report
Interest expense
Current report
Results of Operations Comparing Nine Months Ended September 30, 2025 to 2024.
Current report
Transaction expenses
Current report
Transaction expenses increased by $652.0 thousand or 100% for the nine months ended September 30, 2025. The increase is related to transaction expenses for the Company’s acquisition expenses.
Current report
Loss on extinguishment of debt
Current report
Loss on extinguishment of debt increased by $652.0 thousand for the nine months ended September 30, 2025. The increase relates to a substantial change to the conversion feature of the Company’s Convertible Notes in accordance with ASC 470-50 (see Note 10).
Current report
Interest expense
Current report
Interest expense increased by $186.0 thousand, or 16%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase is largely attributed to the amortization of debt costs related to our Senior Convertible Note.
Current report
Net cash used in investing activities was $2.4 million for nine months ended September 30, 2025, primarily attributable to the Company’s acquisition of Carolina Stone Holdings.
Current report
Net cash used in by financing activities was $1.0 million for the nine months ended September 30, 2024. The cash out was primarily related to the repayment of term debt of $750.0 thousand.
Removed paragraphs (13)
Previous report
The decrease in cost of goods sold was driven primarily by product mix, lower outbound freight, and lower landed cost goods.
Previous report
Gross profit margin increased from 21.4% for the three months ended June 30, 2024 to 24.4% for the three months ended June 30, 2025. The increase in gross profit margin was primarily driven by product mix, lower outbound freight, and lower landed cost goods.
Previous report
Interest and other expense
Previous report
Results of Operations Comparing Six Months Ended June 30, 2025 to 2024.
Previous report
Sales were $20.7 million for the six months ended June 30, 2025 compared to $22.2 million for the six months ended June 30, 2024. Revenue decreased between the six months ended June 30, 2025 and 2024 by $1.5 million.
Previous report
Sales decreased in 2025 due to colder winter temperatures experienced when compared to prior year, along with challenging economic conditions attributable to trade policies, interest rates, and concerns about inflation.
Previous report
The majority of the decline was driven by lower volumes in our veneer products resulting in $2.4 million in lower revenues; offset by an increase in our landscaping products of $760.0 thousand.
Previous report
We continue to evaluate the potential impact of tariffs and have successfully transitioned the sourcing of higher volume products from China to other parts of the world. We believe the actions taken will minimize the impact of tariffs on our customers and end users.
Previous report
Cost of goods sold decreased by $1.4 million, or 8%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.
Previous report
The decrease in cost of goods sold was driven primarily by product mix, lower outbound freight, and lower landed cost goods.
Previous report
Gross profit margin increased from 20.3% for the six months ended June 30, 2024 to 21.5% for the six months ended June 30, 2025. The increase in gross profit margin was primarily driven by product mix, lower outbound freight, and lower landed cost goods.
Previous report
Interest and other expense
Previous report
Other expenses, net, decreased by $34.0 thousand, or 4%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The decrease is primarily attributed to our revolving line of credit.
Reworded paragraphs (21)
Previous wording
On July 29, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Buyer”), pursuant to which the Company authorized the issuance of senior secured convertible notes to the Buyer, in the aggregate original principal amount of up to $10,909,885, which are being issued with a 8.34% original issue discount (each, a “Convertible Note”). The first Convertible Note was issued in the original principal amount of approximately $3,272,966 (the “Convertible Note Financing”). The Convertible Notes are convertible into shares of common stock, $0.0005 par value per share (the “Common Stock”), in certain circumstances in accordance with the terms of the Convertible Notes at an initial conversion price per share of $1.72. The Company received gross proceeds of $3,000,000, prior to the deduction of transaction related expenses, from the initial closing of the Convertible Note Financing. Concurrently with the Convertible Note Financing and the Purchase Agreement, the Company entered into a registration rights agreement and a security agreement with the Buyer.
Current wording
On July 29, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Buyer”), pursuant to which the Company authorized the issuance of senior secured convertible notes to the Buyer, in the aggregate original principal amount of up to $10,909,885, which are being issued with a 8.34% original issue discount (each, a “Convertible Note”). The first Convertible Note was issued in the original principal amount of approximately $3,272,966 (the “Convertible Note Financing”). The Convertible Notes are convertible into shares of our common stock, in certain circumstances in accordance with the terms of the Convertible Notes at an initial conversion price per share of $1.72. The Company received gross proceeds of $3,000,000, prior to the deduction of transaction related expenses, from the initial closing of the Convertible Note Financing. Concurrently with the Convertible Note Financing and the Purchase Agreement, the Company entered into a registration rights agreement and a security agreement with the Buyer.
Previous wording
Our sales primarily consist of distributing manufactured and natural stone cladding products, natural stone landscape products, and related goods for residential and commercial construction through a dealer network in 31 states in the Midwestern and Northeastern United States. The Company recognizes revenue when control over the products has been transferred to the customer, and the Company has a present right to payment.
Current wording
Our sales primarily consist of distributing manufactured and natural stone cladding products, natural stone landscape products, and related goods for residential and commercial construction through a dealer network in 32 states in the Midwestern, Northeastern and Southeastern United States. For distribution sales the Company recognizes revenue when control over the products has been transferred to the customer, and the Company has a present right to payment. For installation and project-based work, the Company recognizes revenue over time as performance obligations are satisfied. For production and custom residential jobs, revenue is generally recognized upon completion, as substantially all projects are short-term in nature. A small portion of commercial projects are recognized based on progress toward completion, typically through monthly billings.
Previous wording
Cost of goods sold includes the purchase price of material, freight, miscellaneous import fees (if applicable), warranty and related expenses that are directly attributable to our fabricated products. The Company also includes amounts billed to customers related to shipping and handling and shipping and handling expenses in cost of goods sold.
Current wording
Cost of goods sold includes the purchase price of material, freight, miscellaneous import fees (if applicable), warranty and other expenses that are directly attributable to our distributed, fabricated and installed products. The Company also includes amounts billed to customers related to shipping and handling and shipping and handling expenses in cost of goods sold.
Previous wording
Other income and expenses consist primarily of interest expenses on our line of credit and debt.
Current wording
Other income and expenses consist primarily of management fees and interest expenses on our line of credit and debt.
Previous wording
The following is management’s discussion of the Company’s consolidated financial statements and results of operations for the three and six months ended June 30, 2025 and 2024 in thousands:
Current wording
The following is management’s discussion of the Company’s consolidated financial statements and results of operations for the three and nine months ended September 30, 2025 and 2024 in thousands:
Previous wording
Selling general and administrative expenses increased by $640.0 thousand, or 23.0%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase results primarily from an increase in investor relations of $510.0 thousand.
Current wording
Selling general and administrative expenses increased by $790.0 thousand, or 31.0%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase results primarily from an increase in investor relations of $510.0 thousand and the acquisition of Carolina Stone Holdings.
Previous wording
Other expenses, net, increased by $46.0 thousand, or 12%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase is largely attributed the amortization of debt costs related to our Mezzanine Term Loan.
Current wording
Interest expense increased by $220.0 thousand, or 59%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase is largely attributed to the amortization of debt costs related to our Convertible Note issued on July 29, 2025.
Previous wording
Income tax expense decreased by $1.0 thousand or 100% for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.
Current wording
Income tax expense decreased by $5.0 thousand or 100% for the three months ended September 30, 2025, compared to the three months ended September 30, 2024.
Previous wording
Sales were $12.9 million for the three months ended June 30, 2025 compared to $12.9 million for the three months ended June 30, 2024. Revenue slightly decreased between the three months ended June 30, 2025 and 2024 by $34.0 thousand.
Current wording
Sales were $34.4 million for the nine months ended September 30, 2025 compared to $34.6 million for the nine months ended September 30, 2024. Revenue decreased between the nine months ended September 30, 2025 and 2024 by $158.0 thousand.
Previous wording
Cost of goods sold decreased by $400.0 thousand, or 4%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.
Current wording
Cost of goods sold decreased by $366.0 thousand, or 1%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
Previous wording
Selling general and administrative expenses increased by $932.0 thousand, or 18.0%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase results primarily from an increase in investor relations of $681.0 thousand.
Current wording
Selling general and administrative expenses increased by $1.7 million, or 22.0%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase results primarily from an increase in investor relations of $1.0 million and the acquisition of Carolina Stone Holdings.
Previous wording
Income tax expense decreased by $17.0 thousand or 100% for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.
Current wording
Income tax expense decreased by $22.0 thousand or 100% for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
Previous wording
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 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’s consolidated results.
Current wording
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.
Previous wording
Working capital excluding the current portion of long-term debt was $2.5 million and $2.1 million as of June 30, 2025 and December 31, 2024, respectively. The $400.0 thousand increase in working capital is primarily attributable to an increase in accounts receivable and cash; offset by an increase in our revolving line of credit.
Current wording
Working capital excluding the current portion of long-term debt was $2.8 million and $2.1 million as of September 30, 2025 and December 31, 2024, respectively. The $700.0 thousand increase in working capital is primarily attributable to an increase in accounts receivable, inventory and cash; offset by accounts payable and an increase in our revolving line of credit.
Previous wording
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 June 30,2025 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.
Current wording
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 September 30, 2025 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.
Previous wording
Net cash used in operating activities was $1.1 million for the six months ended June 30, 2024, primarily resulting from our net loss of $1.5 million; offset by $117.0 thousand provided by changes in our non-cash working and non-cash expenses.
Current wording
Net cash used in operating activities was $4.0 million for the nine months ended September 30, 2025, primarily resulting from our net loss of $4.9 million, offset by $956.0 thousand provided by changes in our working capital and non-cash expenses.
Previous wording
Net cash used in operating activities was $4.0 million for the six months ended June 30, 2025, primarily resulting from our net loss of $2.4 million and $1.8 million used in changes in our non-cash working capital and non-cash expenses.
Current wording
Net cash provided by operating activities was $1.1 million for the nine months ended September 30, 2024, primarily resulting from our net loss of $1.5 million; offset by $2.6 million provided by changes in our working capital and non-cash expenses.
Previous wording
Net cash used in investing activities was $2.0 thousand for six months ended June 30, 2025 compared to $121.0 thousand for the six months ended June 30, 2024. These cash outflows were related to purchases of property and equipment.
Current wording
Net cash used in investing activities was $101.0 thousand for the nine months ended September 30, 2024. These cash outflows were related to purchases of property and equipment.
Previous wording
Net cash provided by financing activities was $4.8 million for the six months ended June 30, 2025. The cash inflow was a result of funds received from our public offering of $3.3 million and a net increase in our line of credit of $2.5 million, offset by the repayment of term debt of $910.0 thousand. Net cash provided by financing activities was $1.3 million for the six months ended June 30, 2024. The cash inflow was a result of a $1.8 million net increase in our line of credit, offset primarily by the repayment of term debt of $500.0 thousand.
Current wording
Net cash provided by financing activities was $7.2 million for the nine months ended September 30, 2025. The cash inflow was a result of funds received from our public offering of $3.3 million, proceeds from debt issuance $3.0 million and a net increase in our line of credit of $2.0 million, offset by the repayment of term debt of $975.0 thousand.
Previous wording
The Company, as described in Note 9 to the consolidated financials statements included in this Quarterly Report and in the Recent Developments section of this Management’s Discussion and Analysis, received $3 million in gross proceeds pursuant to the Convertible Note Financing. In addition, as described in Note 4, the Company may receive up to $20.0 million from the sale of the Equity Line Securities to the Equity Line Investor. The Company plans to raise additional funds to finance the growth of our operations through equity financing or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted.
Current wording
The Company, as described in Note 10 to the consolidated financials statements included in this Quarterly Report and in the Recent Developments section of this Management’s Discussion and Analysis, received $6,250,000 in gross proceeds pursuant to the Convertible Note Financing. In addition, as described in Note 5, the Company may receive up to $20.0 million from the sale of the Equity Line Securities to the Equity Line Investor. The Company plans to raise additional funds to finance the growth of our operations through equity financing or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted.
Previous wording
The Critical Accounting Policies and Significant Judgments and Estimates included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025, have not materially changed.
Current wording
The Critical Accounting Policies and Significant Judgments and Estimates included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025, have not materially changed. For the quarter ended September 30, 2025, we added the following two critical accounting policies and Significant Judgments and Estimates to Note 3 in the footnotes to the consolidated financial statements: Business Combinations and Convertible Notes.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
On October 22, 2025, the Company issued to the Buyer a second Convertible Note in the original principal amount of $3,545,712.42 (the “Second Note”). The Second Note is convertible into shares of Common Stock, $0.0005 par value per share (the “Common Stock”), in certain circumstances in accordance with the terms of the Convertible Notes at an initial conversion price per share of $1.10. The Company received gross proceeds of $3,250,000, prior to the deduction of transaction-related expenses, from the closing of the Second Note.