Capstone Holding Corp.
For the period ended Mar 31, 2026. Filed May 20, 2026.
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.
Mar 31, 2026 · Filed May 20, 2026
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 2025-09-30; filed 2025-11-18.
0001213900-25-111773
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-20.
0001437749-26-017870
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 102 previous paragraphs and 103 current paragraphs.
53 unchanged; 18 reworded; 31 added; 31 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 3 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 (31)
Current report
ITEM 2. MANAGEMENT**’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report
This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements within the meaning of the federal securities laws. All statements contained in this Quarterly Report, other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, potential growth or growth prospects, future research and development, sales and marketing and general and administrative expenses, and our objectives for future operations, are forward-looking statements. Words such as "believes," "may," "will," "estimates," "potential," "continues," "anticipates," "intends," "expects," "could," "would," "projects," "plans," "targets," and variations of such words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors" in our 2025 Form 10-K and in Part II, Item 1A of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report and in other documents we file from time to time with the Securities and Exchange Commission (the "SEC") that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Current report
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. In addition, the forward-looking statements in this Quarterly Report are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update such statements for any reason after the date of this Quarterly Report or to conform statements to actual results or revised expectations, except as required by law.
Current report
You should read this Quarterly Report and the documents that we reference herein and have filed with the SEC as exhibits to this Quarterly Report with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
Current report
This Quarterly Report also contains or may contain estimates, projections and other information concerning our industry, our business and the markets for our products, including data regarding the estimated size of those markets and their projected growth rates. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.
Current report
Capstone Holding Corp., incorporated in Delaware in 1987 as a domestic corporation, is a national, technology-enabled building products distribution and installation platform. Through our three operating subsidiaries — Instone (TotalStone, LLC), Canadian Stone Industries (Fraser Canyon Holdings Inc. and its subsidiaries, “CSI”), and Carolina Stone (Carolina Stone Distributors, LLC) — we distribute and install thin veneer stone, natural stone, manufactured stone, and related masonry and hardscape products for residential and commercial construction markets across 38 U.S. states and two Canadian provinces.
Current report
Instone, founded over 30 years ago, is the largest wholesale distributor of thin veneer masonry products in the United States, operating from five distribution centers in the Northeast, Midwest, Mid-Atlantic, and West Coast. CSI is a leading wholesale distributor of natural and manufactured stone products in Canada, operating from two locations in British Columbia and Ontario. Carolina Stone distributes and installs thin veneer stone and related masonry products for residential, commercial, and multi-family projects in the Southeast United States from two locations in North Carolina. Together, our platform offers over 3,000 SKUs across nine warehouse and distribution center locations, serving a diverse base of masonry dealers, contractors, builders, and homeowners.
Current report
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 March 31, 2026 and December 31, 2025. As of March 31, 2026, Stream Finance, LLC was the sole remaining related party note payable.
Current report
Carolina Stone Acquisition
Current report
On August 22, 2025, the Company, through its subsidiary CS Purchase Holdings LLC, acquired all of the issued and outstanding membership interests of Carolina Stone Holdings, LLC (“Carolina Stone”), which owns Carolina Stone Distributors, LLC.
Current report
The aggregate purchase consideration was approximately $4.2 million, consisting of cash, a subordinated seller note, working-capital adjustments and contingent earn-out consideration. The seller note matures on February 22, 2028, and the sellers may receive earn-out consideration of up to $825,000 based on Carolina Stone’s EBITDA performance during fiscal years 2025, 2026 and 2027. Carolina Stone contributed revenue of $3.3 million and a net loss of $169,000 to the Company’s consolidated results for the period from August 22, 2025 through December 31, 2025.
Current report
Fraser Canyon / CSI Acquisition
Current report
On December 1, 2025, the Company completed the acquisition of the Fraser Canyon / Canadian Stone Industries (“CSI”) business through two transactions: TotalStone, LLC acquired substantially all of the assets and assumed certain liabilities of Continental Stone Industries, Inc., and a subsidiary of TotalStone acquired all of the outstanding shares of Fraser Canyon Holdings Inc.
Current report
The aggregate consideration was approximately US$6.8 million, consisting of cash, two subordinated seller notes and contingent earn-out consideration of up to CAD $3.0 million based on Average EBITDA during the 2026–2027 and 2027–2028 measurement periods. In connection with the acquisition, Canadian Stone Industries and Klad Envelope Solutions Inc. entered into a TD Bank revolving operating loan with a CAD $5.0 million credit limit for working-capital purposes. CSI contributed revenue of $592,000 and a net loss of $92,000 to the Company’s consolidated results for the period from December 1, 2025 through December 31, 2025.
Current report
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, in each case effective January 1, 2026.
Current report
On February 12, 2026, the Company entered into a Letter Agreement with 3i, LP (“3i”) modifying the Senior Secured Convertible Note dated July 29, 2025. The Letter Agreement deferred the $606,054 installment payment originally due January 22, 2026 to the maturity date. As consideration for the deferral, the Company issued to 3i a warrant to purchase 405,000 shares of common stock at an exercise price of $0.01 per share, exercisable for five years.
Current report
During the three months ended March 31, 2026, the Company completed five conversions of principal under the October Note totaling $233,645 of principal and $16,356 of accrued interest, which were converted into 333,335 shares of common stock at a conversion price of $0.75 per share. The Company also completed ten draws under its Equity Line of Credit during the quarter, generating aggregate net proceeds of approximately $194,571.
Current report
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.
Current report
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.
Current report
Sales were $12.6 million for the three months ended March 31, 2026 compared to $7.9 million for the three months ended March 31, 2025. The period-over-period change in revenue was $4.7 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 was approximately flat period-over-period; the increase reflects approximately $2.4 million contributed by Carolina Stone and approximately $2.5 million contributed by Fraser Canyon.
Current report
Cost of goods sold changed by $3.1 million or 47.0%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Current report
Gross profit margin was 23.5% for the three months ended March 31, 2026 compared to 16.8% for the three months ended March 31, 2025. The 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%.
Current report
Selling, general and administrative expenses changed by $1.7 million or 62.3%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by the full-period effect of the Carolina Stone and Fraser Canyon acquisitions and transaction-related professional fees of $99 thousand recognized during the period, partly offset by the January 2026 cost rationalization program initiated by the Company.
Current report
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.
Current report
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.
Current report
Income tax expense changed by $2 thousand for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Current report
As of March 31, 2026, the Company had $12.7 million outstanding under its Revolver, which matures on June 19, 2026, as extended by the Fifteenth Amendment to the Credit Agreement dated December 19, 2025. As of March 31, 2026, the Company was not in compliance with the minimum Cash Flow Coverage Ratio 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. 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.
Current report
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.
Current report
Net cash used in operating activities was $2.8 million for the three months ended March 31, 2026, primarily resulting from the Company’s net loss of $1.9 million and a $1.1 million build in working capital, partially offset by $0.5 million of non-cash items including depreciation, amortization, and accrued interest.
Current report
Net cash provided by financing activities was $2.5 million for the three months ended March 31, 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 million.
Current report
The Company used the net proceeds of its March 2025 Public Offering and its Senior Secured Convertible Notes to fund a portion of the cash consideration for the Carolina Stone Holdings acquisition (closed August 22, 2025) and the Fraser Canyon Holdings acquisition (closed December 1, 2025), and for general corporate and working capital purposes.
Removed paragraphs (31)
Previous report
Capstone Holding 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, LLC (dba Instone). Instone has a building products distribution network that services 31 US states (with such states having over 60% of American households). Our over 400 active customers are primarily masonry, building materials and landscape dealers.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
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 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.
Previous report
Loss on extinguishment of debt
Previous 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).
Previous report
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 report
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 report
Results of Operations Comparing Nine Months Ended September 30, 2025 to 2024.
Previous report
Sales
Previous report
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 report
Cost of goods sold
Previous report
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 report
Selling general and administrative expenses
Previous report
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 report
Transaction expenses
Previous 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.
Previous report
Loss on extinguishment of debt
Previous 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).
Previous report
Interest expense
Previous 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.
Previous report
Income Tax Expense
Previous report
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 report
In 2024, the Company was not in compliance with certain of the Revolver’s financial covenants which have been waived by our lender. As of September 30, 2025, the Company was in compliance with the Revolver’s financial covenant as of the issuance date of these interim consolidated financial statements. In June 2025, the Company executed an amendment to the Revolver that extended the maturity date from April 2025 to December 2025. The Company believes the Revolver will continue to be available and the longer-term extension will be executed with financial covenants aligned to the Company’s anticipated future results.
Previous report
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 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.
Previous report
We currently expect to use some of 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.
Reworded paragraphs (18)
Previous wording
On March 7, 2025, the Company closed its public offering (the “March 2025 Public Offering”) of 1,250,000 shares of common stock (the “Public Offering Shares”), which were registered under the Rule 424(b) of the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form S-1 (File No. 333-284105) which was declared effective by the SEC on February 14, 2025. The Public Offering Shares were sold at a public offering price of $4.00 per share, which generated net proceeds of approximately $3,250,000 after deducting underwriting discounts and commissions and other offering expenses.
Current wording
On March 7, 2025, the Company closed its public offering (the “March 2025 Public Offering”) of 1,250,000 shares of common stock (the “Public Offering Shares”), which were registered under the Rule 424(b) of the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form S-1 (File No. 333-284105) which was declared effective by the SEC on February 14, 2025. The Public Offering Shares were sold at a public offering price of $4.00 per share, which generated net proceeds of approximately $3,252,000 after deducting underwriting discounts and commissions and other offering expenses.
Previous wording
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 wording
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 $124,000 for the preliminary working capital adjustment as set forth in Section 2.6 of the Purchase Agreement.
Previous wording
On May 14, 2025, we entered into a purchase agreement with the Equity Line Investor (as defined in Note 9 to the consolidated financials statements included in this Quarterly Report), pursuant to which the Equity Line Investor committed to purchase up to $20.0 million in shares of our Common Stock, subject to certain limitations and conditions as described in Note 4.
Current wording
On May 14, 2025, we entered into a purchase agreement with the Equity Line Investor (as defined in Note 11 to the consolidated financial statements included in this Quarterly Report), pursuant to which the Equity Line Investor committed to purchase up to $20.0 million in shares of our Common Stock, subject to certain limitations and conditions as described in Note 11.
Previous wording
On June 26, 2025, the Company and the Equity Line Investor entered into a first amendment to the Purchase Agreement as described in Note 10 to the consolidated financials statements included in this Quarterly Report.
Current wording
On June 26, 2025, the Company and the Equity Line Investor entered into a first amendment to the Purchase Agreement as described in Note 11 to the consolidated financial statements included in this Quarterly Report.
Previous wording
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 wording
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 $1,363,736 of principal of the Convertible Note to $1.00 per share starting on October 6, 2025 through the maturity date of the Convertible Note.
Previous wording
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.
Current wording
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 “October Note”). The October 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 October Note.
Previous wording
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 wording
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 March 31, 2026.
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 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.
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 38 U.S. states and two Canadian provinces. 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
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:
Current wording
The following is management’s discussion of the Company’s consolidated financial statements and results of operations for the three months ended March 31, 2026 and 2025 in thousands:
Previous wording
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 wording
The change in cost of goods sold was driven primarily by the change in sales attributable to the Carolina Stone and Fraser Canyon acquisitions.
Previous wording
The Company has one operating and reportable segment which consists of the operations of TotalStone. 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, investor relations, filing, legal, insurance, accounting and consulting expenses not identifiable and allocated to TotalStone.
Current wording
The Company has two reportable segments — TotalStone (which includes the legacy Instone distribution business together with Fraser Canyon, acquired December 1, 2025) and Carolina Stone (acquired August 22, 2025). The Company also has corporate-level SG&A expenses, included in Capstone Holding Corp. (“Capstone” or the “Parent”), consisting primarily of board fees, investor relations, filing, legal, insurance, accounting and consulting expenses not identifiable to either reportable segment.
Previous 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.
Current wording
Working capital excluding the current portion of long-term debt was $2.9 million and $3.8 million as of March 31, 2026 and December 31, 2025, respectively. The $0.9 million decrease was primarily driven by a $2.4 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.
Previous 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.
Current wording
Net cash used in operating activities was $2.3 million for the three months ended March 31, 2025, primarily resulting from our net loss of $1.7 million and a $0.7 million build in working capital, partially offset by $0.1 million of depreciation and amortization.
Previous 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.
Current wording
Net cash used in investing activities was $29.0 thousand for the three months ended March 31, 2026, related to purchases of property and equipment.
Previous wording
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 wording
Net cash used in investing activities was $17.0 thousand for the three months ended March 31, 2025, related to purchases of property and equipment.
Previous 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.
Current wording
Net cash provided by financing activities was $4.0 million for the three months ended March 31, 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 million, partially offset by debt repayments of $0.9 million.
Previous 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.
Current wording
Through October 22, 2025, the Company received an aggregate of $6,250,000 in gross proceeds pursuant to its Senior Secured Convertible Notes financings (the July 29, 2025 issuance and the October 22, 2025 issuance), as described in Note 11 to the consolidated financial statements included in this Quarterly Report and in the Recent Developments section of this Management's Discussion and Analysis. In addition, as described in Note 11 and Note 15, 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 through the issuance of equity, equity-related or debt securities, those securities may have rights, preferences or privileges senior to the rights of our existing Common Stock, and our existing stockholders may experience dilution.
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. 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.
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, 2025, filed with the SEC on April 16, 2026, as amended on April 17, 2026, have not materially changed. For the quarter ended March 31, 2026, 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
Cautionary Note Regarding Forward-Looking Statements