Capstone Holding Corp.

Note 1 Nature of Operations

Capstone Holding Corp. (the "Company") is a holding company that operates through its consolidated subsidiaries: TotalStone, LLC ("TotalStone"), Carolina Stone Holdings, LLC ("Carolina Stone"), and Fraser Canyon Holdings Inc. ("FCHI" and together with its subsidiaries, the "CSI business"). Through these subsidiaries, the Company distributes and installs masonry and stone veneer products for residential and commercial construction across North America.

On* April 1, 2020,*the Company obtained a controlling interest in TotalStone, a materials distribution company that distributes masonry and stone veneer products for residential and commercial construction across the United States. TotalStone operates under the trade names Instone and Northeast Masonry Distributors ("NMD").

On* August 22, 2025,*the Company, through its subsidiary CS Purchase Holdings LLC, acquired all the issued and outstanding membership interests (the "Holdings Membership Interests") in Carolina Stone Holdings, which owns all the issued and outstanding membership interests of Carolina Stone Distributors, LLC. Carolina Stone is a stone supplier and installer specializing in both manufactured and natural stone veneer and offering end-to-end services, including material supply, installation, and project management for residential, commercial, and multi-family projects in the Raleigh-Durham and Charlotte, North Carolina markets.

On* December 1, 2025,through its indirect subsidiary Instone Canada Corp., the Company acquired 100% of the outstanding equity interests of Fraser Canyon Holdings Inc. ("FCHI") and substantially all assets of Continental Stone Industries, Inc. ("CSIA"), collectively the "CSI business." FCHI is the parent company of Canadian Stone Industries Partnership, Canadian Stone Industries Inc., and CSIA, which together distribute natural and manufactured stone products wholesale from locations in Langley, British Columbia; North York, Ontario; and San Leandro, California. Effective at the closing of the CSI acquisition, the San Leandro, California operations were integrated into Instone's U.S. distribution network to consolidate West Coast operations; the CSI business today operates fromtwo* locations in British Columbia and Ontario.

Note2 IPO and Restructuring

On* March 7, 2025 (the “Restructuring Date”), Capstone closed its Public Offering of 1,250,000 shares of common stock (the “Public Offering Shares”), which were registered under the Rule424*(b) of the Securities Act of1933, as amended, pursuant to the Registration Statement on Form S-1 (FileNo. 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.

On* March 7, 2025,TotalStone entered into afifth* amended and restated limited liability company agreement to govern its operations and affairs and its relationship with its members, which post restructuring is solely Capstone.

On* March 10, 2025,TotalStone paid Brookstone Partners IAC, Inc. $200,000 for financial advisory and related services with respect to Capstone’s capital raising transaction as agreed upon in the Restated Management Fee Agreement and Transaction Fee Agreement executed in March 2025.*

Outstanding warrants to purchase 1,125 Class A Common Interests in TotalStone were cancelled on the Restructuring Date.

On the Restructuring Date, pursuant to a master exchange agreement (the “Master Exchange Agreement”) entered into by Capstone, TotalStone and TotalStone’s Class B and Class C Members, all of TotalStone’s Class B and Class C Preferred Interests were exchanged for 3,782,641 shares of Common Stock that constitute approximately 96% of the shares of Common Stock outstanding on the Restructuring Date, which were allocated to the Class B and Class C Members as set forth in the Master Exchange Agreement. As consideration for the issuance of 3,782,641 shares of Common Stock, the Class B and Class C Members surrendered their existing TotalStone’s membership interests and withdrew from the membership of TotalStone. Following the restructuring, BP Peptides, LLC, the owner of approximately 77.3% of Capstone’s shares prior to the restructuring, owns approximately 3% of Capstone’s shares on a post restructuring basis. Following the restructuring, the largest holder of Capstone’s shares (approximately 64%) will be BPA XIV, LLC. BP Peptides, LLC is jointly controlled by Matthew Lipman, our chief executive officer and a member of our board of directors, and Michael Toporek, the chairman of our board of directors, and BPA XIV, LLC is controlled by Mr. Lipman. On the Restructuring Date, the Class C Member cancelled his Class A TS Warrants, and his right to receive incentive compensation from TotalStone. TotalStone’s Class C Preferred Interests were historically included in TotalStone’s Class B Preferred Interests on the Company’s consolidated balance sheet.

TotalStone’s Special Preferred Membership Interests were exchanged on the Restructuring Date for loans in an aggregate principal amount of $1,143,646 (representing $1,006,377 of original principal plus $137,269 of accrued interest).

In connection with the Restructuring, Capstone also increased its authorized shares of Common Stock to 50,000,000 shares and increased the authorized shares of preferred stock to 25,000,000 shares.

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Note 3 Summary of Significant Accounting Policies

Basis of Presentation and Preparation

The consolidated financial statements include the accounts of Capstone and its consolidated subsidiaries (collectively, the “Company”). Intercompany accounts and transactions have been eliminated. The preparation of these financial statements and accompanying notes is in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, the financial statements include all adjustments necessary for the fair presentation of our financial position, results of operations, and cash flows, and all adjustments were of a normal recurring nature.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the rules and regulations for reporting the Quarterly Report on Form10-Q (“Form10-Q”). Accordingly, they donot include all the information and notes required by GAAP for annual consolidated financial statements.

The consolidated balance sheet on* December 31, 2025* has been derived from the audited consolidated financial statements at that date but doesnot include all the information and notes required by GAAP for complete financial statements. These financial statements have been prepared on a basis that is consistent with the accounting principles applied in our Annual Report on Form10-K for the fiscal year ended on* December 31, 2025* (“2025 Form10-K”). This report should be read in conjunction with our2025 Form10-K filed with the SEC on* April 16, 2026,as amended on April 17, 2026.*

In our opinion, the accompanying unaudited interim consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates, and assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of* March 31, 2026* and its results of operations, cash flows, and changes in stockholders’ Equity (deficit) for thethree months ended* March 31, 2026and2025*. The results for thethree months ended* March 31, 2026*, arenot necessarily indicative of the results expected for any future period or the full year.

Use of Estimates

The preparation of financial statements in accordance with US GAAP requires management to make some assumptions and estimates that affect the reported amounts of assets, liabilities, and expenses in our financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s assumptions regarding current events and actions that* mayimpact on the Company in the future, actual results may*differ from these estimates and assumptions.

Business Combinations

The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with which assets acquired, and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed at acquisition date.

The Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed, as well as intangibles and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows and appropriate discount rates used in computing present values. These judgments* maymaterially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results mayvary from these estimates which may*result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to the fair value of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.

Fair Value Measurements

The Company measures certain assets and liabilities at fair value in accordance with ASC820, Fair Value Measurement. ASC820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC820 establishes athree-level hierarchy that prioritizes the inputs used in measuring fair value at the date of acquisition:

Level1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level2 — Inputs other than quoted prices included within Level1 that are observable for the asset or liability, either directly or indirectly. Level2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that arenot active, and inputs that are derived principally from or corroborated by observable market data.

Level3 — Unobservable inputs for the asset or liability that are supported by little orno market activity and that are significant to the fair value measurement. Level3 inputs reflect the Company's own assumptions about the assumptions market participants would use in pricing an asset or liability, developed based on the best information available in the circumstances.

The categorization of an asset or liability within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Transfers between levels are recognized at the end of the reporting period in which the transfer occurs.

The Company's recurring fair value measurements as of* March 31, 2026* consist of (i) the embedded conversion features bifurcated from the Senior Secured Convertible Notes, classified as derivative liabilities and measured at fair value using significant unobservable inputs (Level3); and (ii) the contingent earn-out consideration related to the Carolina Stone and Fraser Canyon acquisitions, measured at fair value using a probability-weighted discounted cash flow model with significant unobservable inputs (Level3). The Company also performs nonrecurring fair value measurements in connection with business combinations (Note4) and goodwill impairment testing (Note7), which involve Level3 inputs including projected cash flows, discount rates, and market multiples. The Company hasno recurring Level1 or Level2 fair value measurements as of* March 31, 2026* or* December 31, 2025*.

Cash

Cash consists of balances held in a commercial bank account.

Accounts Receivable

Accounts receivables are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company estimates expected credit losses for the allowance for expected credit losses based upon its assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that* mayaffect the Company’s ability to collect from customers. As of March 31, 2026* and* December 31, 2025*, the allowance for doubtful accounts totaled approximately $135.0 and $127.0 thousand, respectively.

Certain of the Company’s contracts with customers include retainage provisions. Retainage represents amounts withheld from billings by customers until installation work has been inspected to ensure that obligations have been satisfied under the contract. Company invoices are retained and included in contract receivables when obligations have been satisfied and the right to receipt is subject only to the passage of time. As of* March 31, 2026* and* December 31, 2025*, retainage receivables were $15.0 thousand.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and trade accounts receivable. The Company places cash with high credit quality institutions. During the normal course of business, balances in these accounts* mayexceed the maximum amount insured by the Federal Deposit Insurance Corporation (“FDIC”). Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company’s diverse customer base and generally short payment terms. Management believes there isno* business vulnerability regarding concentrations of accounts receivable and sales due to the strong relationships and financial strength of our customers.

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Note 3 Summary of Significant Accounting Policies(cont.)

Inventories

Inventories consisting of finished goods are stated at the lower cost, determined by the average cost method, or net realizable value. Inventories also include deposits placed on inventory purchases for shipmentsnot yet received. Significant prepaid inventory* maybe located overseas. At March 31, 2026*, the Company didnot have a prepaid inventory balance. At* December 31, 2025*, the total prepaid inventory balance was $61.0 thousand. The reserve for obsolete inventory at* March 31, 2026* and* December 31, 2025*, totaled $840.0 and $793.0 thousand, respectively.

Property and Equipment

Property and equipment are stated at cost and is depreciated over the estimated useful lives ranging from three toforty years. Depreciation is computed by using the straight-line method for financial reporting purposes and straight-line and accelerated methods for income tax purposes. Property and equipment is comprised of building, machinery & equipment, computer equipment, leasehold improvements, software, office equipment, vehicles, and furniture & fixtures. Minor maintenance and repairs are charged to expense as incurred.

Goodwill and Other Intangible Assets

Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill and indefinite lived intangible assets arenot amortized but rather are tested for impairment annually as of the1st day of thefourth quarter of each year or more frequently if indications of potential impairment exist. The Company’s goodwill is allocated to the Company’s reporting units for impairment assessment purposes. As of* March 31, 2026*, the Company hasthree reporting units: TotalStone (TotalStone, LLC), Canadian Stone Industries (Fraser Canyon Holdings Inc.), and Carolina Stone (Carolina Stone Distributors, LLC). The Company aggregates TotalStone and Canadian Stone Industries into a single reportable segment for ASC280 segment-reporting purposes (see Note18).

In evaluating potential goodwill impairment, the Companyfirst assesses qualitative factors to determine whether it is more likely thannot that the fair value of a reporting unit is less than its carrying value. If, based on a review of qualitative factors, it is more likely thannot that the fair value of a reporting unit is less than its carrying value, the Company performs a quantitative analysis. If the quantitative analysis indicates the carrying value of a reporting unit exceeds its fair value, the Company measures any goodwill impairment loss as the amount by which the carrying amount of a reporting unit exceeds its fair value,not to exceed the total amount of goodwill allocated to that reporting unit.

During the year ended* December 31, 2025,the Company performed a quantitative goodwill impairment test for the Instone reporting unit as of October 1, 2025,and recorded a goodwill impairment charge of $6.2 million. See Note7* for additional information regarding the Company's goodwill impairment testing. As of* March 31, 2026,the Company concludedno* goodwill impairment was required.

Intangible assets with finite lives, consist of a distribution agreement, customer relationships and non-compete agreements that are amortized over the terms of the agreements or expected useful lives.

Long-lived Asset Impairments

Long-lived assets and finite lived identifiable intangibles are reviewed for impairment whenever events of changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. Recoverability of the assets is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount of which the carrying amount of the assets exceeds the fair value of the assets. The Company determined thatno impairment was required for the period presented.

Convertible Debt

The Company accounts for convertible debt in accordance with ASC470-20, Debt with Conversion and Other Options, and ASC815, Derivatives and Hedging. At issuance, the Company evaluates whether embedded conversion features require bifurcation as derivative liabilities under ASC815-15. If bifurcation is required, the embedded feature is recorded at fair value as of the issuance date, with the initial fair value recognized as a derivative liability and a corresponding debt discount on the host instrument. The derivative liability is remeasured at fair value as of each subsequent balance sheet date, with changes in fair value recognized in earnings as other income or expense. The Company reassesses the classification of its derivative instruments at each balance sheet date. Upon modification of convertible debt, the Company evaluates the transaction under ASC470-50, Debt Modifications and Extinguishments, and remeasures the bifurcated derivative immediately before and after the modification, with the change in fair value recognized in earnings. Upon conversion, the Company derecognizes the pro-rata carrying amount of the host debt (including unamortized OID, debt issuance costs, and derivative discount) and the corresponding portion of the derivative liability at its then-current fair value.

Revenue Recognition

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 states andtwo Canadian provinces. For distribution sales, the Company recognizes revenue when control over the products has been transferred to the customer, typically upon shipment, 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 percentage of completion, typically through monthly billings. For thethree months ended* March 31, 2026and2025*, there areno estimates of variable consideration represented in revenue. Net revenue recognized at a point in time totaled approximately $10.2 million and $7.9 million for thethree months ended* March 31, 2026and2025*, respectively. Net revenue recognized over time totaled approximately $2.4 Million for thethree months ended* March 31, 2026* and primarily relates to Carolina Stone.

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****Note 3 Summary of Significant Accounting Policies(cont.)

Shipping and Handling

The Company includes amounts billed to customers related to shipping and handling expenses in cost of goods sold.

Advertising Costs

Advertising and promotional expenses are expensed in the period incurred unless there are material costs that benefit future periods. The consolidated financial statements currently donot reflect any prepaid advertising expenses. For thethree months ended* March 31, 2026and2025*, advertising expenses were $28.0 thousand and $15.0 thousand, respectively.

Research and Development

Research and development costs are expensed as incurred and werenot significant in the periods presented.

Mandatorily Redeemable Preferred Stock

The Company classifies preferred stock that embodies an unconditional obligation to redeem the instrument by transferring assets at a specified or determinable date as a liability in accordance with ASC480, Distinguishing Liabilities from Equity. Such instruments are initially measured at fair value and subsequently measured at the present value of the amount to be paid at settlement, with interest expense accrued using the rate implicit at inception. Periodic dividend obligations on mandatorily redeemable preferred stock classified as a liability are presented as interest expense in the consolidated statements of operations. The Company's Series Z8% Non-Convertible Preferred Stock, issued* September 30, 2025,has been assessed as mandatorily redeemable and is presented as a liability in the accompanying consolidated balance sheets. See Note15* for additional information.

Earnings Per Share

Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to the common stockholders of Capstone Holding Corp. by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method and the if-converted method for convertible notes. Potential common shares are excluded from computation when their effect is antidilutive. Warrants issued with a nominal exercise price of*$0.01* per share are considered common stock equivalents and are included in the weighted-average number of common shares outstanding used to compute basic earnings (loss) per share.

For thethree months ended* March 31, 2026and2025*, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. For thethree months ended* March 31, 2026and2025*, the number of incremental common shares from potentially dilutive securities consisted of the following:

Reclassifications

Certain reclassifications to prior period information have been made to conform with current period presentation.

Recent Accounting Pronouncements

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures, including jurisdictional information, by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. ASU2023-09 is effective for annual periods beginning after* December 15, 2024*and early adoption is permitted. The Company adopted the disclosure requirements of this standard on its consolidated financial statements on a prospective basis.

The Company adopted the disclosure requirements of this standard on a prospective basis effective* January 1, 2025.Adoption didnot* have a material effect on the Company’s consolidated financial statements but resulted in expanded income tax disclosures in the Company’s2025 Form10-K and in this Quarterly Report.

In* November 2024,the FASB issued ASU2024*-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic220-40), which requires public business entities to disclose disaggregated information about specified categories of expenses. The standard is effective for annual periods beginning after* December 15, 2026and interim periods within annual periods beginning after December 15, 2027,*with early adoption permitted. The Company is evaluating the impact of the standard on its consolidated financial statement disclosures.

In* December 2024,the FASB issued ASU2024*-04, Debt — Debt with Conversion and Other Options (Subtopic470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the assessment of whether modifications of convertible debt instruments should be accounted for as induced conversions. The Company adopted this guidance effective* January 1, 2026on a prospective basis. Adoption didnot* have a material effect on the Company’s consolidated financial statements.

In* May 2025,the FASB issued ASU2025*-05, Financial Instruments — Credit Losses (Topic326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient permitting entities to assume current conditions as of the balance sheet date persist over the contractual life of accounts receivable and contract assets. The standard is effective for annual periods beginning after* December 15, 2025,with early adoption permitted. Adoption didnot* have a material effect on the Company’s consolidated financial statements.

Note4 Business Combination

During the fiscal year ended* December 31, 2025,the Company completedtwo* acquisitions, each accounted for as a business combination under ASC Topic805, Business Combinations. The Company engaged Loop Capital Financial Consulting Services, LLC (“Loop Capital”) as an independentthird-party valuation firm to assist with the purchase price allocations.

Carolina Stone Distributors, LLC

On* August 22, 2025,*the Company, through its subsidiary CS Purchase Holdings LLC, completed its acquisition of all the issued and outstanding membership interests in Carolina Stone Holdings, LLC (“Carolina Stone Holdings”), which owns all of the issued and outstanding membership interests of Carolina Stone Distributors, LLC (“Carolina Stone”). Carolina Stone is a Morrisville, North Carolina-based distributor and installer of stone veneer and masonry products serving the Raleigh-Durham and Charlotte metropolitan areas.

Purchase Consideration. The aggregate purchase consideration for the Carolina Stone Companies was approximately $4,202.0 thousand, consisting of the following: cash at closing of $2,625.0 thousand (less preliminary working capital adjustment of $124.0 thousand for net cash transferred of $2,501.0 thousand), a subordinated promissory note of $1,250.0 thousand, final working capital adjustment of $77.0 thousand, and contingent consideration (earn-out) at fair value of $250.0 thousand.

The subordinated promissory note was issued toD22L, Inc. in the original principal amount of $1,250 thousand, maturing* February 22, 2028.The note bears interest at SOFR plus 1.25%, payable quarterly commencing December 31, 2025,with quarterly principal payments of $100.0 thousand beginning December 31, 2026.*After application of the working capital true-up of approximately $56.0 thousand, the outstanding principal balance at closing was approximately $1,306.0 thousand.

Contingent consideration of up to $825.0 thousand is payable as a singular payment based on Carolina Stone’s EBITDA performance duringthree annual measurement periods (fiscal years2025, 2026, and2027). Onlyone payment can be earned across allthree periods. If Carolina Stone achieves EBITDA of at least $1,000 thousand in either thefirst orsecond measurement period, the seller receives the full $825 thousand, payable in equal quarterly installments through* June 30, 2028.If the EBITDA threshold isnot* met in thefirst two periods, the seller* mayreceive up to $825.0 thousand in thethird* measurement period if the full amount if EBITDA exceeds $1,000 thousand, or a pro-rata amount determined by linear interpolation if EBITDA falls between $800.0 thousand and $1,000.0 thousand (as the value that EBITDA represents between $775.0 thousand and $1,000.0 thousand). If EBITDA doesnot reach $800.0 thousand in any measurement period, no earn-out is payable. Based on Carolina Stone's audited financial results for the year ended* December 31, 2025,the EBITDA threshold of$1,000* thousand wasnot achieved for the First Earn-out Period, and accordinglyno Earn-Out Payment is payable in respect of the First Earn-out Period.

The fair value of contingent consideration at acquisition date of $250.0 thousand was estimated using a Monte Carlo simulation model with key assumptions including asset volatility of 35.0%, risk-free rate of 3.69%, and EBITDA projections based on management forecasts. Based on management’s assessment as of* March 31, 2026and December 31, 2025,no significant remeasurement of the contingent consideration fair value was required for thethree months ended March 31, 2026.*

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**Note4 Business Combination(cont.)

The following table presents the purchase price allocation for the Carolina Stone Holdings acquisition as finalized at* December 31, 2025,measured in accordance with ASC805* (in thousands):

Goodwill of $758.0 thousand is attributable to the assembled workforce (valued at approximately $170.0 thousand) and expected synergies from integrating Carolina Stone’s distribution and installation capabilities with the Company’s existing platform. All goodwill is allocated to the Carolina Stone reporting unit and is deductible for income tax purposes.

Post-Acquisition Results. Carolina Stone contributed revenue of $3.3 million and net income (loss) of ($169.0) thousand to the Company’s consolidated results for the period from* August 22, 2025through December 31, 2025.For thethree* months ended* March 31, 2026,Carolina Stone contributed revenue of $2.4 million and net income of $62.0 thousand to the Company's consolidated results. Acquisition-related costs of $131.0 thousand were expensed as incurred and were included in selling, general and administrative expenses during thethree* months ended* September 30, 2025.*

Fraser Canyon Holdings Inc. / Canadian Stone Industries

On* December 1, 2025,the Company completed the acquisition of Fraser Canyon Holdings Inc. (“FCHI”) and its subsidiaries, including Canadian Stone Industries Inc. (“CSI”), throughtwo* simultaneous transactions: (i) TotalStone, LLC acquired substantially all of the assets and assumed certain liabilities of Continental Stone Industries, Inc. (the “Asset Purchase”), and (ii) a subsidiary of TotalStone acquired all of the outstanding shares of FCHI (the “Share Purchase”). CSI is a Langley, British Columbia-based distributor of manufactured and natural stone products serving Western and Eastern Canada.

Purchase Consideration. The Fraser Canyon Acquisition comprisestwo simultaneous transactions: (i) the CSIA Asset Purchase, in which TotalStone, LLC acquired substantially all of the assets and assumed certain liabilities of Continental Stone Industries, Inc. for cash consideration of approximately US$459.0 thousand (CAD $647.0 thousand); and (ii) the FCHI Share Purchase, in which Instone Canada Corp., a wholly-owned subsidiary of TotalStone, acquired all of the outstanding shares of Fraser Canyon Holdings Inc. for consideration of approximately US$6,267 thousand (representing the FCHI Share Purchase portion of the combined transaction). Under ASC805, both transactions have been accounted for as a single combined business combination because they were entered into in contemplation ofone another and effected concurrently. The purchase consideration for the combined Fraser Canyon Acquisition consisted of: (i)C$6,200,000 in cash (approximately US$4,447 thousand at the closing-day exchange rate ofUS$1.00 =C$1.3943), of which US$459.0 thousand (C$647 thousand) represented the Continental Cash Purchase Price paid by TotalStone, LLC for the CSIA Asset Purchase, reduced by a working capital adjustment of C$473,189 (approximately US$339.0 thousand) that lowered the Cash Purchase Price payable to the FCHI sellers; (ii) Seller Note I in the principal amount of C$1,600,000 (approximately US$1,148.0 thousand), maturing* March 31, 2027; (iii) Seller Note II in the principal amount of C$2,000,000 (approximately US$1,434.0 thousand), maturing December 1, 2028;and (iv) contingent earn-out consideration of up to C$3,000,000 (approximately US$2,152.0 thousand) based on Average EBITDA during the2026–2027* and2027–2028 measurement periods, with an acquisition-date fair value of US$100 thousand (US$80.0 thousand for Earn-Out Provision I and US$20.0 thousand for Earn-Out Provision II) as measured with the assistance of Loop Capital and reflected in the purchase price allocation set forth below. The seller notes, working capital adjustment, and earn-out provisions relate solely to the FCHI Share Purchase. U.S. dollar amounts have been translated from Canadian dollars at the closing-day exchange rate ofUS$1.00 =C$1.3943. The purchase price is subject to finalization during the measurement period.

The Company engaged Loop Capital to assist with the valuation of identifiable intangible assets and contingent consideration; the purchase price allocation presented below is based on valuations performed with the assistance of Loop Capital. The Company will finalize the purchase price allocation within the measurement period. The purchase price allocation is based on management’s best estimates and is subject to adjustment during the measurement period (up toone year from the acquisition date) as additional information is obtained about facts and circumstances that existed at the acquisition date. The aggregate purchase consideration of approximately US$6,262.0 thousand reflected in the purchase price allocation below represents the FCHI Share Purchase only, stated net of the Continental Cash Purchase Price paid separately for the CSIA Asset Purchase and net of the working capital reduction described above, with U.S. dollar amounts translated at the exchange rates used for purchase accounting purposes.

Goodwill totaled approximately US$617 thousand and US$616 thousand at* March 31, 2026and December 31, 2025 (compared to US$601.0 thousand at the acquisition date), including approximately $16.0 thousand and $15.0 thousand of foreign currency translation impact, respectively. Of the goodwill recognized at the acquisition date, $601.0 thousand was recognized in connection with the FCHI Share Purchase, attributable to the assembled workforce (valued at approximately US$230.0 thousand) and expected synergies from integrating Canadian Stone Industries’ western Canadian distribution operations with the Company’s existing platform. Goodwill from the FCHI Share Purchase isnot* deductible for Canadian income tax purposes. The CSIA Asset Purchase didnot result in goodwill, as the cash purchase consideration approximated the fair value of the net assets acquired; any tax basis in goodwill from the CSIA Asset Purchase is amortizable for U.S. income tax purposes pursuant to Section197 of the Internal Revenue Code. Goodwill recognized in connection with the Fraser Canyon acquisition is allocated to the TotalStone reporting unit.

CSI contributed revenue of$592.0 thousand and net loss of $92.0 thousand for the period from* December 1, 2025through December 31, 2025.For thethree* months ended* March 31, 2026,*CSI contributed revenue of $2.5 million and a net loss of $292.0 thousand to the Company's consolidated results. Acquisition-related costs, including the Nectarine consent fee of $89.0 thousand and legal and advisory fees, were expensed as incurred.

Pro Forma Financial Information

The following unaudited pro forma information presents the Company’s consolidated results of operations for thethree months ended* March 31, 2026and2025* as though both acquisitions had been completed as of* January 1, 2025:*

The Company prepared this unaudited pro forma information under ASC805-10-50-2(h), presenting consolidated results as if the Carolina Stone Holdings acquisition and the Fraser Canyon acquisition had closed on* January 1, 2025.Pro forma earnings per share uses the Company's actual weighted-average common shares outstanding —9,329,828 for thethree* months ended* March 31, 2026and 5,190,251 for thethree* months ended* March 31, 2025 —*because neither acquisition involved share consideration.

The pro forma results include the following adjustments directly attributable to the acquisitions, consistent with the Company's prior pro forma disclosures in Forms8-K/A filed with the SEC:

(a) Acquisition-related transaction expenses — Under the assumed acquisition date of* January 1, 2025,$99 thousand of acquisition-related transaction expenses recorded in thethree* months ended* March 31, 2026is excluded from pro forma2026* results because all transaction-related costs would have been incurred prior to the comparative period.

(b) Incremental amortization expense—$32 thousand for thethree months ended* March 31, 2025,on the identifiable intangible assets recognized in the finalized purchase price allocations for the Carolina Stone acquisition (trade names of $670 thousand amortized over 20 years; customer relationships of $740 thousand amortized over 12 years; and non-compete agreements of $60 thousand amortized over 5 years) and the Fraser Canyon acquisition (trade names of $190 thousand amortized over 20 years and customer relationships of $170 thousand amortized over 17 years). For thethree* months ended* March 31, 2026,*the related amortization expense is already reflected in reported results.

(c) Income taxes —No incremental tax effect has been recognized on Carolina Stone or other U.S.-jurisdiction pro forma adjustments because the Company maintains a full valuation allowance against its U.S. net deferred tax assets. Canadian income tax effects on the Fraser Canyon-related pro forma adjustments arenot material to the pro forma presentation and havenot been separately reflected.

The pro forma results donot represent what the Company would have reported had the acquisitions closed on the assumed date, nor do they predict future performance.

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Note5 Related Party Transactions

TotalStone is party to a management agreement with Brookstone Partners IAC ("Brookstone"), an entity controlled by the Company's Chief Executive Officer and Chairman of the Board. Pursuant to this agreement, Brookstone provides annual consulting services totaling $400.0 thousand billed quarterly. The agreement also provides for an additional management fee equal to 5% of earnings before interest, taxes, depreciation, and amortization (EBITDA) in excess of $4.0 million, plus a special services fee in cash equal totwo percent (2%) of total consideration of any acquisition of a majority of the equity interests of any entity. There wereno management fees expensed for thethree months ended* March 31, 2026* and $100.0 thousand for thethree months ended* March 31, 2025,and are included in selling, general and administrative expenses. In connection with the Carolina Stone acquisition, Brookstone earned a 2% special services fee of approximately $94.0 thousand, which is included in accrued related party management fees. In connection with the Continental Stone Industries asset purchase completed December 1, 2025,Brookstone earned a 2% special services fee of approximately $9.2 thousand, which is included in accrued related party management fees. Amounts accrued for consulting and advisory services totaled $954.0 and $954.0 thousand as of March 31, 2026and December 31, 2025,*respectively.

On* January 21, 2026,Brookstone entered into a conditional fee waiver and deferral agreement with TotalStone, pursuant to which Brookstone agreed to waive the$400.0 thousand in management and consulting fees that would otherwise accrue during calendar year2026.* The obligation to pay such waived fees will be extinguished unless TotalStone achieves certain performance targets specified in the agreement.

Effective* February 1, 2026,in connection with the cost rationalization program implemented by the Board, the Company’s Chief Executive Officer reduced his annual base cash salary to $1.00. Mr. Lipman continues to serve as Chief Executive Officer without other cash compensation arrangements; he separately participates in the Company’s2025* Plan as described in Note15.

Separately, Gordon Strout, a director of the Company and Board Chairman of TotalStone, is party to an executive agreement with TotalStone pursuant to which he receives deferred compensation. As of* March 31, 2026* and* December 31, 2025*, approximately $145.0 and $145.0 thousand of deferred compensation was accrued, respectively, and payable to Mr. Strout under this agreement, which is included in accrued management fees on the consolidated balance sheet.

Stream Finance, LLC, which serves as a creditor on TotalStone’s mezzanine term loan, is managed by Brookstone. As of* March 31, 2026* and* December 31, 2025*, the Company’s outstanding principal was $2,581,088 and $2,493,664, respectively. As of* March 31, 2026* and* December 31, 2025*, accrued and deferred interest was $524,431. The Company has also accrued an amendment fee of $695,000 payable to Stream Finance on the Deferral Date (as defined in the Stream Finance Credit Agreement).

On* March 10, 2025,*TotalStone paid Brookstone $200,000 for financial advisory and related services with respect to Capstone’s capital raising transaction (the “Capstone Capital Raising Transaction”).

In connection with the Fraser Canyon acquisition, Nectarine Management LLC, an entity whose voting of Company securities is solely controlled by Mr. Toporek, earned a consent fee of $88,700 (CAD $124,000), representing 2.0% of the gross cash consideration of CAD $6,200,000. The fee was invoiced on* December 10, 2025pursuant to a letter agreement dated September 15, 2025.*Additional deferred fees of up to CAD $132,000 are payable as, if and when seller note principal repayments and earn-out payments are made.

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Note 6 Property and Equipment, Net.

A summary of the Company’s property and equipment is as follows in (“000’s”):

Depreciation and amortization expense on property and equipment for thethree months ended* March 31, 2026and2025* was $126.0 and $65.0 thousand, respectively.

Note 7 Goodwill and Other Intangible Assets

The following tables summarize the Company’s other intangible assets in (“000’s”):

Intangible assets are amortized over the estimated useful lives of the respective assets on a straight-line basis. Total amortization expense for thethree months ended* March 31, 2026and2025* was $33.0 and $2.0 thousand, respectively.

Total future amortization expense for finite-lived intangible assets was estimated as follows in (“000’s):

The future amortization schedule above excludes $64 thousand of indefinite-lived trademarks, which arenot subject to amortization and are tested for impairment at least annually.

The changes in the carrying amount of goodwill for thethree months ended* March 31, 2026are as follows in (“000’s”*):

During the year ended* December 31, 2025,the Company engaged Loop Capital and performed a quantitative goodwill impairment test for the Instone reporting unit as of October 1, 2025.The estimated fair value of the reporting unit was determined using a weighted blend of the income approach (discounted cash flow method,50% weight), the guideline public company method (25% weight), and the guideline merged and acquired company method (25% weight). The blended enterprise value of approximately $28,148.0 thousand, after adjustment for net debt of approximately $14,632.0 thousand, resulted in an estimated fair value of equity of $13,516.0 thousand, which was $6.2 million (31.4%) below the carrying value of $19.7 million. Accordingly, the Company recorded a goodwill impairment charge of $6.2 million during thefourth* quarter of2025. Following the impairment charge, goodwill allocated to the Instone reporting unit was $17.1 million as of* December 31, 2025.*

Note 8 Fair Value Measurements

The Company’s fair value hierarchy policy is described in Note3. There wereno material changes in the carrying amount of goodwill between* December 31, 2025and March 31,*2026.The following table presents assets and liabilities measured at fair value by level:

At* March 31, 2026,the Company’s Level3* recurring fair value measurements consisted of derivative liabilities of $197 thousand (down from $702.0 thousand at* December 31, 2025,principally due to derecognition upon convertible note conversions during the period) and earn-out payable of $352.0 thousand (unchanged from December 31, 2025).The non-recurring Level3* measurement of goodwill — Instone reporting unit was $17,086.0 thousand at both* March 31, 2026and December 31, 2025;no triggering events for interim impairment testing were identified during thethree months ended March 31, 2026.The goodwill of each of the Company'sthree* reporting units - TotalStone (Instone), Canadian Stone Industries, and Carolina Stone - is evaluated for impairment at least annually, or more frequently if impairment indicators arise. Goodwill of the Canadian Stone Industries reporting unit ($617.0 thousand at* March 31, 2026and $616.0 thousand at December 31, 2025)and Carolina Stone reporting unit ($758.0 thousand at both dates) was recognized at acquisition-date fair value in the respective2025* business combinations (see Note4);no impairment indicators were identified for these reporting units, andno remeasurement was required, through* March 31, 2026.Total goodwill of $18,461.0 thousand at March 31, 2026and $18,460.0 thousand at December 31, 2025agrees to the consolidated balance sheets and to the goodwill roll-forward in Note7.* The* February 2026warrants issued to3i,* LP — a non-recurring Level3 fair value measurement during the period — are described in Note14.

Significant unobservable inputs used in the Level3 measurement of the derivative liabilities (Black-Scholes option-pricing model) are summarized below:

In addition to the embedded derivative liabilities described above, the Company's Level3 recurring fair value measurements include contingent earn-out consideration of $352 at both* March 31, 2026and December 31, 2025,comprising $250 from the Carolina Stone acquisition and $102 from the Fraser Canyon acquisition at each date. The fair value of each earn-out was determined at the respective acquisition date using an option pricing model implemented through a Monte Carlo simulation of the underlying EBITDA of each acquired business. As there wereno* material changes in management's underlying EBITDA forecasts or other significant unobservable inputs from the respective acquisition dates through* March 31, 2026,the contingent earn-out consideration continues to be carried at its acquisition-date fair value, andno remeasurement was required during thethree* months ended* March 31, 2026.*

The significant unobservable inputs used in the Carolina Stone earn-out valuation included EBITDA volatility of 35.0%, a risk-adjusted discount rate of 15.00% to 15.50%, and risk-free rates of 3.75% to 4.37% across thethree annual measurement periods through2027, with forecasted annual EBITDA ranging from $285 to $1,021. The Carolina Stone earn-out is capped at $825 per annual measurement period subject to EBITDA floors and targets of $800 to $1,000. For the Fraser Canyon earn-out, the significant unobservable inputs included EBITDA volatility of 40.0%, a risk-adjusted discount rate of 11.50%, and risk-free rates of 3.55% to 3.63% across thethree annual measurement periods through2028, with forecasted annual EBITDA ranging from CAD $776 to CAD $1,065.

The fair value of the contingent earn-out consideration is most sensitive to changes in projected EBITDA, EBITDA volatility, and the risk-adjusted discount rate. Significant increases (decreases) in expected EBITDA would result in a higher (lower) fair value measurement. Significant increases (decreases) in EBITDA volatility generally result in a higher (lower) fair value given the option-like payoff structure. Increases (decreases) in the risk-adjusted discount rate would result in a lower (higher) fair value. Changes in the fair value of the earn-out liabilities are recognized within operating expenses in the consolidated statements of operations.

The fair value of the embedded derivative liabilities is highly sensitive to changes in the expected volatility input. Significant increases (decreases) in the expected annualized volatility would result in a significantly higher (lower) fair value measurement of the derivative liabilities, which would be recognized as a non-operating loss (gain) in the consolidated statements of operations.

Note 9 Investment in Non-Marketable Securities

On* January 15, 2021,Capstone acquired a minority interest in a consumer products company, Diamond Products Holdings, LLC (“Diamond”), a sexual wellness holding company. The structure of the transaction was as follows: i) Brookstone Acquisition Partners XXI Corporation (“Brookstone XXI”) contributed its approximately 95% equity interest in Diamond, which represented approximately 62% equity ownership on a fully-diluted basis, to Diamond Products Holdings, LLC (“DPH”); ii) The Company formed Capstone Beta LLC (“Beta”) as a wholly-owned subsidiary, and Beta purchased a portion of Brookstone XXI’s interest in DPH; iii) Beta issued a promissory note to Brookstone XXI in the original principal amount of $8.0 million, bearing interest at 1% per annum over a 36 month term, and secured its obligations thereunder by pledging Beta’s interests in DPH; and iv) As additional credit support, Capstone issued a limited payment guaranty to Brookstone XXI in the amount of 10% of the principal amount of Beta’s promissory note. The terms of the promissory note issued by Beta to Brookstone XXI include provisions whereby in the event that the membership interests in Diamond are sold or otherwise disposed of, any proceeds received by Beta are to be utilized to prepay the promissory note to Brookstone XXI and Brookstone XXI’s remaining recourse for the remaining note balance, if any, is limited to the pledged collateral (Beta’s membership interest in DPH) and the $800.0 thousand limited payment guarantee provide by Capstone. DPH was structured to holdone* asset, the membership interest in Diamond, and accordingly upon the sale or other disposition of the membership interests in Diamond, the sole recourse of payment by Brookstone XXI is the $800.0 thousand limited payment guarantee. In summary, the intent of Brookstone XXI and the special committee of Capstone’s independent directors entering this arrangement was to limit Capstone’s downside risk to $800.0 thousand.

Diamond was previously sold to its lender in satisfaction of outstanding secured indebtedness, and the Company recognized an impairment charge equal to its full basis in the investment. As of* March 31, 2026*, and* December 31, 2025*, the carrying value of the Company's investment in DPH was $0, andno amount is presented in the accompanying consolidated balance sheets.

Note 10 Line of Credit

On* December 20, 2017,TotalStone executed a Revolving Credit, Term Loan and Security Agreement with Berkshire Bank (the “Revolving Credit Agreement”). The Revolving Credit Agreement has been amendedfifteen* times through the fiscal year ended* December 31, 2025.In connection with the Carolina Stone acquisition, CS Purchase Holdings LLC, Carolina Stone Holdings, LLC, and Carolina Stone Distributors, LLC were added as co-borrowers under the Fourteenth Amendment, dated August 22, 2025.Under the Fifteenth Amendment, executed December 19, 2025,the lender is now Beacon Bank & Trust (successor by merger to Berkshire Bank), and the maturity date was extended to June 19, 2026. TotalStone’s maximum revolving advance amount is $11,500,000 for working capital purposes. Advances under the credit agreement are limited to a formula-based amount of up toeighty-five* (85%) percent of the face amount of “Eligible Accounts Receivable” plus approximatelyfifty-four (54%) percent of the face amount of the TotalStone and Carolina Stone, “Finished Goods Inventory” up to a maximum inventory amount of $8.0 million. Interest charged on the unpaid principal amount bears a rate per annum of Term SOFR plus 3.00% (6.79% and 6.99% at* March 31, 2026and December 31, 2025,respectively). The Borrower is required to maintain minimum undrawn availability of $317,000 at all times. The balance outstanding on the line of credit was $9.6 and $7.9 million as of March 31, 2026and December 31, 2025respectively. Financial covenants include a minimum Cash Flow Coverage Ratio of 1.15x and a minimum Tangible Net Worth of $1,250,000. As of March 31, 2026*, the borrowers werenot 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.The lender hasnot* declared an Event of Default or accelerated the obligations under the Revolving Credit Agreement.

In connection with the Fraser Canyon acquisition, on* November 7, 2025,Canadian Stone Industries and Klad Envelope Solutions Inc. entered into a Letter of Agreement with The Toronto-Dominion Bank ("TD Bank") providing Canadian Stone Industries with a revolving operating loan with a credit limit of CAD $5,000,000 for working capital purposes. Advances are available as Prime Rate Based Loans at Prime Rate +0.50% per annum or United States Base Rate Loans at USBR +0.50% per annum. The facility is uncommitted and repayable on demand. Advances are limited to a formula-based amount equal to the lesser of (i) CAD $5,000,000 and (ii) the sum of 80% of eligible Canadian and U.S. accounts receivable plus 50% of inventory held in Canada net of30*-day accounts payable. The balance outstanding on the TD Bank operating loan was approximately $3.1 million and $2.4 million as of* March 31, 2026and December 31, 2025respectively. The TD Bank credit facility is secured byfirst*-priority General Security Agreements from Canadian Stone Industries, Fraser Canyon Holdings Inc., Canadian Stone Industries (2022) Inc., Klad Envelope Solutions Inc., and Instone Canada Corp., covering all present and after-acquired personal property. Instone Canada Corp. has provided an unlimited guarantee. Financial covenants include a minimum trailingtwelve-month Debt Service Coverage Ratio of 1.25x. As of* March 31, 2026,*the Borrowers were in compliance with the financial covenants under the TD Bank Letter of Agreement.

As of* March 31, 2026* the combined balance outstanding under the Company's revolving credit facilities was $12.7 million and $10.3 million as of* March 31, 2026* and* December 31, 2025*, respectively. The U.S. Revolver balance outstanding was $9.6 million and $7.9 million as of* March 31, 2026* and* December 31, 2025*, respectively. The TD Bank operating loan balance outstanding was $3.1 million and $2.4 million as of* March 31, 2026* and* December 31, 2025*, respectively.

Note 11 Debt

As of* March 31, 2026*, the Company had $8.8 million in long-term debt, with $4.4 million payable within12 months. A summary of the Company’s long-term debt is as follows in (“000’s”):

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Note 11 Debt(cont.)

Mezzanine Term Loan —Stream Finance, LLC.

TotalStone, LLC is party to the Second Amended and Restated Credit Agreement, dated* March 8, 2023,with Stream Finance, LLC, as agent (as amended, the "Stream Finance Credit Agreement"). The mezzanine term loan bears interest at an annual rate of 14% (12% per annum plus payment-in-kind interest of 2%, equivalent to 12% payable in cash and 2% paid-in-kind) pursuant to the terms of the Stream Finance Credit Agreement, as amended. As of January 1, 2025,the outstanding balance of the mezzanine term loan was $1,552,244, consisting of principal of $1,309,244 and accrued and deferred interest of $243,000. On March 7, 2025,in connection with the corporate restructuring described in Note2,* the Special Preferred Membership Interests previously held by Stream Finance were exchanged for additional term loans, adding $1,143,646 (representing $1,006,377 of original principal plus $137,269 of accrued interest) to the outstanding principal balance. PIK interest of $40,774 was capitalized to principal through* December 31, 2025.As of March 31, 2026* and* December 31, 2025,the outstanding principal balance of the mezzanine term loan was $2,581,088 and $2,493,664, respectively. As of March 31, 2026* and* December 31, 2025,including accrued and deferred interest of $524,431, and the total outstanding balance was $3,105,520 and $3,018,095, respectively. Including the $695,000 amendment fee payable on the Deferral Date, the Company's total obligation to Stream Finance was $3,713,095 as of December 31, 2025.The amendment fee is payable on the Deferral Date, defined as the earliest to occur of (i) the date of repayment or prepayment of the entire outstanding principal balance of the loan, (ii) the acceleration of the entire outstanding principal balance of the loan, and (iii) the Stream Finance Maturity Date. The Stream Finance Credit Agreement matures on September 30, 2027,as extended pursuant to the Third Amendment dated June 11, 2025.The loan is secured by asecond*-priority lien on substantially all assets of TotalStone, LLC.

The following table summarizes the activity in the Stream Finance mezzanine term loan for thethree months ended* March 31, 2026*:

(1) The table above presents principal activity only. As of* March 31, 2026* and* December 31, 2025,accrued and deferred interest totaled $524,431 and the amendment fee of $695,000 remained payable on the Deferral Date. The Company's total obligation to Stream Finance, including principal of $2,581,088, accrued and deferred interest of $524,431, and the amendment fee of $695,000, was $3,800,520 at March 31, 2026*.

Prior to the Fourteenth Amendment, the interest rate on the Credit Facility was determined on a performance-based sliding scale, with the applicable rate set each quarter by reference to trailing Adjusted EBITDA of TotalStone as measured under thetwo tables below (Table A excluding the Northeast operations and Table B including them):

Subordinated Promissory Note—*** Carolina Stone.*In connection with the acquisition of Carolina Stone Holdings, LLC on August 22, 2025,CS Purchase Holdings LLC issued a subordinated promissory note to the seller in the original principal amount of $1,250,000 (the “CS Seller Note”). Following the final working capital adjustment of $56,047 added to the principal balance, the CS Seller Note had a balance of approximately $1,306,000 at closing. The CS Seller Note bears interest at a rate of SOFR plus 1.25%, payable quarterly beginning December 31, 2025.Quarterly principal payments of $100,000 commence December 31, 2026,with the remaining balance due at maturity on February 22, 2028.The CS Seller Note is subordinated and unsecured and is pre-payable without penalty. The balance outstanding as of March 31, 2026 was approximately $1,306,000. .

Seller Notes—*** Fraser Canyon.In connection with the acquisition of Fraser Canyon Holdings Inc. and the assets of Continental Stone Industries, Inc. on December 1, 2025,Instone Canada Corp. issuedtwo subordinated promissory notes to the sellers: First Seller Note. Thefirst* note was issued in the original principal amount of CAD $1,600,000 and matures on* March 31, 2027.The note bears interest at TD Bank’s prime rate plus 1.00% through November 30, 2026,stepping up to prime rate plus 3.00% thereafter, payable quarterly. Principal payments of CAD $400,000 each are due on July 31, 2026and October 31, 2026,with the remaining balance due at maturity. The note is guaranteed by Capstone Holding Corp. and includes a mandatory prepayment provision requiring50%* of net cash proceeds from Capstone equity or debt raises in excess of US $1,100,000. As of* March 31, 2026,the outstanding principal balance was CAD $1,600,000 (approximately USD $1,170,000), excluding accrued interest. Second Seller Note. Thesecond* note was issued in the original principal amount of CAD $2,000,000 and matures on* December 1, 2028.The note bears interest at30*-day average SOFR plus an escalating margin:1.25% through* November 30, 2026;2.50% from December 1, 2026through November 30, 2027;and 3.75% thereafter, payable quarterly. Quarterly principal payments of CAD $50,000 commence March 31, 2027,with the remaining balance due at maturity. The note includes a mandatory prepayment provision requiring50%* of quarterly fixed charge excess cash flow to be applied to principal. As of* March 31, 2026*, the outstanding principal balance was CAD $2,000,000 (approximately USD $1,463,000), excluding accrued interest. Both notes are subordinated to the TD Bank credit facilities.

Liquidity and Nasdaq Listing Compliance

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 for30 consecutive business days and that the Company was thereforenot in compliance with Nasdaq Listing Rule5550(a)(2). The Company has until* July 6, 2026to regain compliance, and the Board of Directors intends to seek shareholder authorization at the2026* Annual Meeting to effect a reverse stock split, if needed, to satisfy the minimum bid price requirement. Continued listing on Nasdaq is an important component of the Company's access to capital markets, including its ability to issue shares under the ELOC and to raise additional equity capital on favorable terms. A delisting or prolonged non-compliance could adversely impact the Company's liquidity position. In addition, the Company has generated recurring net losses, including a net loss of $1,915 thousand for thethree months ended* March 31, 2026*, and has had negative cash flow from operations in each of the pasttwo fiscal years.

The Company’s recurring net losses, accumulated deficit, and upcoming debt maturities represent conditions that, in the aggregate, could raise substantial doubt about the Company’s ability to continue as a going concern withinone year after the date these consolidated financial statements are issued. Management has evaluated these conditions together with the Company's liquidity resources and operational plans. In* April 2025,the Company entered into a $20.0 million Equity Line of Credit agreement with the Equity Line Investor (the "ELOC"), under which the Company has the right, butnot* the obligation, to require the Equity Line Investor to purchase shares of Common Stock from time to time, subject to certain conditions, including a per-notice "VWAP Purchase Maximum Amount", under which the Company* maysell shares of its Common Stock from time to time to the Equity Line Investor at pricing determined under the ELOC agreement, subject to certain conditions, including the Company's continued Nasdaq listing. As of December 31, 2025,approximately $19.5 million remained undrawn under the ELOC, and as of May 19, 2026,approximately $19.2 million remained undrawn. The Company's ability to access the ELOC is subject to certain conditions, including the maintenance of the Company's Nasdaq listing (with respect to which the Company is currentlynot* in compliance with the*$1.00* per share minimum bid price requirement, as described above), the per-notice VWAP Purchase Maximum Amount, and other limitations under the ELOC. The Company intends to continue using the ELOC as a component of its liquidity strategy alongside its Revolving Credit Agreement. The Company is also actively integrating the businesses acquired in2025 and implementing plans to realize operating synergies and cost reductions across the combined platform. On the revenue side, management is expanding the Company's product offering — including new stone veneer lines, complementary hardscape and masonry categories, and broader distribution into the Carolinas and Canadian markets — to drive organic growth and improve operating leverage in2026. Based on this evaluation, management believes 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 leastone year from the issuance date of these consolidated financial statements.

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Senior Secured Convertible Notes.

The embedded conversion features are bifurcated as derivative liabilities and measured at fair value at each reporting date with changes in fair value recognized in earnings, in accordance with ASC815-15. In* July 2025,the Company issued a Senior Secured Convertible Note to3i,* LP (the* "JulyNote") in the original principal amount of $3,272,966 (net of an 8.34% original issue discount), maturing July 29, 2026.In October 2025,the Company issued asecond* Senior Secured Convertible Note to3i, LP (the* "OctoberNote") in the original principal amount of $3,545,712, maturing October 22, 2026.Both notes bear interest at 7.0% per annum, with quarterly cash amortization beginning after 90 days. The notes are secured by afirst*-priority lien on substantially all of the Company's assets. The embedded conversion features were bifurcated and accounted for as derivative liabilities at fair value in accordance with ASC815 (see the derivative instruments disclosure below). During the year ended* December 31, 2025,the Company entered intothree* amendments to the* JulyNote andone* amendment to the* OctoberNote that reduced the applicable conversion prices. The conversion price on the JulyNote was reduced from $1.72 to $1.00 per share and subsequently to $0.75 per share. On the OctoberNote, the conversion price on $1,772,856 of principal was reduced from $1.10 to $0.75 per share, while the remaining $1,772,856 of principal continued at $1.10 per share. During the year ended December 31, 2025,the Buyer converted $2,710,280 of JulyNote principal into 2,900,000 shares of common stock at $1.00 per share and $186,916 of OctoberNote principal and $13,084 of accrued interest into 266,667 shares at $0.75 per share. Separately, the Company redeemed $61,942 of JulyNote principal in cash on September 3, 2025.As of March 31, 2026* and* December 31, 2025,the outstanding principal balance was $500,744, on the JulyNote, and $3,125,152 and $3,358,797, respectively, on the October*Note, for aggregate balances of $3,625,896 and $3,859,541, respectively.

The following table summarizes the carrying value of the Company's senior secured convertible notes as of* March 31, 2026*:

At* December 31, 2025,the net carrying value of the Senior Secured Convertible Notes was $1,568,779, consisting of stated principal of $3,859,541 ($500,744 for SSN#1* and $3,358,797 for SSN*#2*), reduced by unamortized original issue discount of $327,052, unamortized debt issuance costs of $327,358, and unamortized derivative discount of $1,636,352.

The following table presents a roll forward of the derivative liabilities associated with the embedded conversion features for thethree month ended* March 31, 2026*:

As of* March 31, 2026*, the following shares of common stock were issuable upon conversion of the outstanding senior secured convertible notes:

Promissory Note — Brookstone XXI, LLC. The $800,000 unsecured promissory note payable to Brookstone Partners Acquisition XXI Corporation was included in the combined principal and interest balance of $1,089,222 exchanged for 825,168 shares of Series Z 8% Non-Convertible Preferred Stock on* September 30, 2025 (see above). Upon completion of the exchange, the note and all related obligations, including Capstone’s limited payment guaranty, were extinguished in full. As of March 31, 2026,*no amounts remain outstanding.

Scheduled maturities of long-term debt as of* March 31, 2026*, are as follows:

Note 12 Leases

As of* March 31, 2026*, the balance of our right-of-use (“ROU”) assets was $4.9 million, net, and total lease liabilities of $5.0 million (consisting of $1.5 million current and $3.5 million non-current), included in current portion, lease liability and lease liability, net of current portion.

In connection with the acquisitions of Carolina Stone (* August 22, 2025)and Fraser Canyon Holdings/CSI ( December 1, 2025),the Company assumed operating leases for distribution, showroom, and warehouse facilities. The Carolina Stone leases include: (i) approximately 13,500 square feet at10306* Globe Road, Morrisville, NC, extended through* May 31, 2027,at approximately $154,560 annually, and (ii) approximately 28,000 square feet at901* Tulip Drive, Gastonia, NC, through* June 30, 2029,at a starting annual base rent of $130,200 escalating at 3.5% annually. The CSI leases include: (i) approximately 31,418 square feet at27524–51A* Avenue, Langley, BC, through* July 31, 2030,at approximately CAD $627,024 annually, and (ii) approximately 30,000 square feet at45* Fenmar Drive, North York, ON, through* November 30, 2026,with afive*-year extension optionnot yet exercised. Operating lease ROU assets of $906.0 thousand and corresponding lease liabilities were recognized at fair value upon the Carolina Stone acquisition date (see Note4). Fraser Canyon/CSI ROU assets and lease liabilities are included in the purchase price allocation and totaled approximately $2.1 million.

The maturity of our lease liabilities as of* March 31, 2026* is as follows in (“000’s”):

Lease expense recognized on our leases for thethree months ended* March 31, 2026and2025* is as follows in (“000’s”):

The following summarizes additional information related to our leases forthree months ended* March 31, 2026* is as follows in (“000’s”):

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Note 13 TotalStone Preferred Units

The Company owns 100% of TotalStone’s outstanding common voting units and receives certain funding from TotalStone, in exchange for potential benefits to the combined organization from the use of the Company’s Federal Net Operating Loss and other tax benefit carryovers. The existing holders of TotalStone’s common stock received Class B Preferred Units valued at $20.5 million, with a quarterly dividend.

In addition, as part of the merger of the Company and TotalStone, the Mezzanine lender accepted $873.0 thousand as a Special Preferred Unit in lieu of debt. The Special Preferred Unit has a preferential distribution position but doesnot earn a preferred return.

On* March**8,* 2023, the Company entered into the Ninth Amendment to the Revolving Credit, term Loan and Security Agreement (the “Ninth Amendment”). The Ninth Amendment permitted a payment of $389.0 thousand to the Special Preferred Unit holders.

On the Restructuring Date (* March 7, 2025),all outstanding Class B and Class C Preferred Interests in TotalStone were exchanged for 3,782,641 shares of the Company’s Common Stock pursuant to the Master Exchange Agreement described in Note2.* The Special Preferred Membership Interests were also extinguished in connection with the restructuring. As of* March 31, 2026*, and* December 31, 2025*no TotalStone preferred units remained outstanding.

Note 14 TotalStone Warrants

TotalStone Class A Warrants. In* April 2020,1,175 warrants to purchase Class A common interests in TotalStone were granted to TotalStone management at an exercise price of $0.01 per unit, vesting over three years through March 31, 2023.Of the original grant,50 warrants were previously forfeited, and the remaining 1,125 outstanding warrants were cancelled on the Restructuring Date ( March 7, 2025)in connection with the corporate restructuring described in Note2.* As of* March 31, 2026and December 31, 2025,*no TotalStone warrants remained outstanding.

Representative's Warrant. In connection with the* March 7, 2025,Public Offering, the Company issued warrants to the underwriters to purchase 62,500 shares of Common Stock at an exercise price of $4.00 per share. The Representative's Warrant became exercisable on September 5, 2025,and expires on September 7, 2026.As of March 31, 2026*, no portion had been exercised.

• February 2026Warrant (3i, LP). On February 12, 2026,in connection with the Letter Agreement deferring the $606,054 installment payment originally due January 22, 2026under SSN#2* (see Note11), the Company issued to3i, LP afive-year warrant to purchase 405,000 shares of Common Stock at an exercise price of $0.01 per share, expiring* February 12, 2031.The Company evaluated the modification under ASC470*-50, concluded the10% test wasnot met, and accounted for it as a modification. The warrant was classified as equity under ASC815-40 and isnot subject to recurring remeasurement. The fair value of $203 thousands was estimated using the Black-Scholes option-pricing model with the following inputs: stock price $0.5077 (CAPS closing on2/12/2026), exercise price $0.01, expected term 5.0 years, risk-free rate 3.67%, dividend yield 0%, and annualized volatility 100.5%. The fair value was recorded as an increase to additional paid-in capital with a corresponding discount on SSN*#2,* which is being amortized to interest expense over the remaining term to maturity. As of* March 31, 2026,*no portion of the warrant had been exercised.

Note 15 Stockholders’** Equity**

As of* March 31, 2026*, the Company had 11,423,707 shares of Common Stock issued and 9,428,707 outstanding, the difference representing 1,995,000 unvested restricted stock awards granted on* March 30, 2026that have voting rights but are excluded from basic earnings per share until vesting and 25,000,000 shares of preferred stock authorized, of which 2,000,000 are designated as Series B Preferred Stock (985,063 shares issued and outstanding) and 3,500,000 are designated as Series Z 8% Non-Convertible Preferred Stock (1,467,532 shares issued and outstanding, classified as a liability pursuant to ASC480*).

In* June2015,* our stockholders approved the2015 Equity Incentive Plan (the*“2015* Plan”) and reserved 1,000,000 shares of our common stock for issuance. At* March 31, 2026* and* December31,* 2025, no shares remained available to grant under the Plan and all granted shares are fully vested.

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company generally estimates the fair value of each stock-based award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate and dividend yield. No options were granted in2026 or2025.

Stock Compensation

On* March 30, 2026,the Board of Directors approved the Capstone Holding Corp.2025 Stock Incentive Plan (the“2025* Plan”), reserving up to 5,000,000 shares of common stock for issuance in the form of stock options, restricted stock awards, and other equity-based awards. On the same date, the Board approved an initial grant of 1,995,000 restricted stock awards (“RSAs”) under the2025 Plan, at a grant-date fair value of $0.6490 per share (the closing price of the Common Stock on the Nasdaq Capital Market on* March 30, 2026),resulting in aggregate grant-date fair value of approximately $1,295,000. The grants are bifurcated intotwo* cohorts: (i)1,116,250 shares that vest in full on thethird anniversary of the grant date (* March 30, 2029)subject to continued service, recognized straight-line over the 36-month service period; and (ii)878,750 shares that vest in full upon the recipient’s separation from the Board of Directors, with the requisite service period inferred from the recipient’s remaining director term. Because the grants were made on the last day of the quarter, stock-based compensation expense recognized for thethree* months ended* March 31, 2026was de minimis. Total unrecognized compensation cost related to these grants was approximately $1,295,000 as of March 31, 2026*, expected to be recognized over a period of 36 months for cohort (i) and through the separation date from the Board of Directors, a weighted-average period of approximately 10 months, for cohort (ii).

As of* March 31, 2026* and* December 31, 2025,there were 0 and 50 stock options exercisable and vested at a weighted-average exercise price of $163.00, respectively. During2026* and2025, 50 and 450 options expired unexercised. No options were granted or exercised in2026 or2025.

The Brookstone Partners warrant expired unexercised on* April 1, 2024.*

Preferred Stock

On* February 20, 2025,following the Company’s controlling shareholder’s approval, the Company filed an amendment to its Restated Certificate of Incorporation to increase the authorized shares of preferred stock to 25,000,000 shares. As of March 31, 2026,the Company had 985,063 shares of Series B Preferred Stock outstanding. Additionally,1,467,532 shares of Series Z 8% Non-Convertible Preferred Stock were issued and outstanding; however, the Series Z Preferred Stock is classified as a liability on the consolidated balance sheet pursuant to ASC480,* Distinguishing Liabilities from Equity (see Series Z disclosure below).

The Tax Benefit Preservation Plan adopted by the Board on* April 18, 2017between the Company and Computershare, which had been extended in May 2024through December 31, 2027,was cancelled on March 3, 2025*pursuant to the Master Exchange and Other Transaction Agreement.

Series B Preferred Stock: In* February 2025,the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock with the Delaware Secretary of State, designating 2,000,000 shares as Series B Preferred Stock, no par value. Nectarine Management, LLC, an entity controlled by Michael Toporek, the chairman of the board of directors, purchased 985,063 shares of Series B Preferred Stock for a purchase price of $30,000. The holders of Series B Preferred Stock have the right to vote together with common stockholders, castingone* vote per share. Series B Preferred Stock is convertible into Common Stock at the holder’s option after thetwo-year anniversary of the Company’s* February 2025initial public offering, provided the Common Stock’s closing price meets or exceeds $40 per share. Until less than 50% of the originally issued Series B Preferred Stock remains outstanding, holders of at least 50% of such shares mayappointtwo* directors to the Board and the Company cannot take certain corporate actions without the approval of at least 50% of the outstanding Series B Preferred Stock.

Series Z8% Non-Convertible Preferred Stock (Classified as Liability): On* September 30, 2025,the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series Z8%* Non-Convertible Preferred Stock with the Secretary of State of the State of Delaware, designating 3,500,000 shares as Series Z Preferred Stock, no par value. A total of 1,467,532 shares were issued to BP Peptides, LLC (642,364 shares) and Brookstone Partners Acquisition XXI Corporation (825,168 shares), both affiliates of Brookstone Partners, the Company’s majority shareholder, in exchange for the extinguishment of outstanding related party promissory notes with a combined principal and accrued interest balance of approximately $1.94 million. The shares were issued pursuant to the exemption from registration under Section4(a)(2) of the Securities Act of1933, as amended. The Series Z Preferred Stock is non-convertible and carries a cumulative dividend at the rate of 8% per annum, accruing daily on the $1.32 per share stated value based on a360-day year oftwelve 30-day months. Accrued but unpaid dividends compound quarterly. The Series Z Preferred Stock is mandatorily redeemable at the earlier of (a) theseventh anniversary of the original issue date (* September 30, 2032)or (b) the occurrence of a Fundamental Transaction, at a redemption price equal to the stated value plus all accrued and unpaid dividends. Because the Series Z Preferred Stock embodies an unconditional obligation requiring the Company to transfer assets to redeem the instrument at a specified date, and the instrument is non-convertible, the Company has classified the Series Z Preferred Stock as a liability in accordance with ASC480*-10-25-4, Distinguishing Liabilities from Equity. The Series Z liability was initially measured at fair value, which approximated the aggregate stated value of $1,936,893, and is subsequently measured using the interest method, with periodic accretion of interest expense at the 8% contractual rate. Interest expense of approximately $39,500 was recognized for the period from* December 31, 2025,through March 31, 2026.The carrying value of the Series Z liability, including accrued interest as of March 31, 2026* and* December 31, 2025,*was approximately $2,015 thousands and $1,976 thousands respectively.

In connection with the Public Offering that closed on* March 7, 2025,the Company issued to the underwriters warrants to purchase an aggregate of 62,500 shares of Common Stock (the “Representative’s Warrant”), representing 5% of the shares issued in the Public Offering. The Representative’s Warrant is exercisable commencing on September 5, 2025and expiring on September 7, 2026,at an exercise price of $4.00 per share. As of March 31, 2026,the Representative’s Warrant hadnot* been exercised.

The Company’s Senior Secured Convertible Notes (see Note11) are convertible into shares of Common Stock at conversion prices ranging from $0.75 to $1.10 per share. During the year ended* December 31, 2025,holders converted an aggregate principal amount of $2,897,196 into 3,166,667 shares of Common Stock at conversion prices ranging from $0.75 to $1.00 per share. As of December 31, 2025,the remaining outstanding principal of $3,859,541 would be convertible into approximately 4,393,933 shares of Common Stock at conversion prices ranging from $0.75 to $1.10 per share. As of March 31, 2026*, the remaining outstanding principal of $3,625,896 would be convertible into approximately 4,082,407 shares of Common Stock at conversion prices ranging from $0.75 to $1.10 per share. Subsequent to* March 31, 2026,the conversion price applicable to $500,000 of principal under the OctoberNote was reduced to $0.57 per share (see Note19*).

On* February 12, 2026,the Company and the Buyer entered into a Letter Agreement (the "February 2026Letter Agreement") deferring the $606,054 installment payment originally due January 22, 2026under the OctoberNote to the Maturity Date. As consideration for the deferral, the Company issued to the Buyer warrants to purchase 405,000 shares of Common Stock at an exercise price of $0.01 per share, with afive-year term expiring February 12, 2031.The Company evaluated the modification under ASC470*-50 and concluded that the change in the present value of cash flows under the modified terms didnot exceed10% of the present value of cash flows under the original terms, and accordingly accounted for the transaction as a modification rather than an extinguishment. The Company estimated the fair value of the warrants at $202,734 using the Black-Scholes option pricing model with the following inputs: stock price of $0.5077 (the closing price of the Common Stock on the issuance date), exercise price of $0.01, expected term of 5.0 years, risk-free rate of 3.67%, dividend yield of 0%, and annualized volatility of 100.5%. The warrants were classified as equity in accordance with ASC815-40, and the fair value was recorded as an increase to additional paid-in capital with a corresponding discount on the* OctoberNote, which is being amortized to interest expense over the remaining term to maturity. During thethree* months ended* March 31, 2026,*$37,812 of the discount was amortized to interest expense.

Note 16 TotalStone401(K) Retirement Savings Plan

TotalStone maintains a defined contribution pension plan, which covers all employees electing to participate after completing certain service requirements. Employer contributions are made at the Company’s discretion. Generally, the Company makes safe harbor matching contributions equal to 100% of employee contributions up to 4% of the employee’s Plan Compensation, as defined. Each participant is 100% vested in their salary deferral and the safe harbor matching contributions. Other employer discretionary contributions are subject to a graded vesting schedule. Company matching contribution expense was approximately $32.6 thousand for thethree months ended* March 31, 2026.*

Carolina Stone Distributors, LLC maintained a SIMPLE IRA plan covering eligible employees after90 days of service. Under the plan, Carolina Stone matched employee contributions up to 3% of eligible compensation. Employer matching contributions for the period from the acquisition date of* August 22, 2025through December 31, 2025totaled $10.0 thousand. The SIMPLE IRA was terminated effective December 31, 2025,and Carolina Stone employees became eligible to participate in TotalStone's401*(k) Plan effective* January 1, 2026;contributions on their behalf during thethree* months ended* March 31, 2026*are included within the TotalStone matching contribution expense disclosed above.

Canadian Stone Industries Inc. sponsors a Group Registered Savings Plan ("Group RSP") through RBC covering all employees afterthree months of continuous service. Under the plan, CSI matches employee contributions at 2% of eligible compensation with immediate vesting. Employer matching contributions for thethree months ended* March 31, 2026*totaled approximately $4.9 thousand.

Note 17 Income Taxes

The Company's effective tax rate for thethree months ended* March 31, 2026and2025* was 0.0%. In both periods, the Company maintained a full valuation allowance against its U.S. net deferred tax assets and accordingly recognizedno income tax benefit on its U.S. pretax losses. Thethree months ended* March 31, 2026income tax provision of approximately $2.0 thousand represents Canadian income taxes on the operations of Canadian Stone Industries Inc. Thethree* months ended* March 31, 2025effective tax rate of 0.0% represents U.S. state and local income tax expense for whichno* tax benefit was recognized.

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Note 18 Segment Information

The Company hastwo reportable segments: (i) the TotalStone segment, which includes the operations of TotalStone, LLC and the legacy Instone distribution business, together with Canadian Stone Industries Inc. and Continental Stone Industries, Inc. (collectively, "Fraser Canyon"), acquired in* December 2025;and (ii) the Carolina Stone segment, which includes the operations of Carolina Stone Distributors, LLC and its affiliated installation business, acquired in August 2025.The TotalStone segment distributes natural and manufactured stone and related building products. The Carolina Stone segment distributes and installs stone veneer and related masonry products. The Company also incurs corporate-level SG&A expenses at Capstone Holding Corp. ("Capstone" or the "Parent"), consisting primarily of board fees, investor relations, filing, legal, insurance, accounting and consulting expensesnot* identifiable or allocated to the operating segments.

The Company's Chief Executive Officer serves as the chief operating decision maker ("CODM"). The CODM evaluates segment performance based on segment revenue, gross profit, and income (loss) from operations. Corporate overhead and certain shared services costsnot directly attributable to a segment are reported within the Parent/Eliminations column. Interest expense, income taxes, and other non-operating items arenot allocated to segments. The accounting policies of the reportable segments are the same as those described in Note3.

The following tables present financial information regarding the Company's reportable segments, reconciled to the Company's consolidated totals.

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Note 19 Subsequent Events

The Company has evaluated subsequent events through the date these consolidated financial statements were issued and has identified the following events for disclosure.

Convertible Note Conversion Price Adjustment. On* April 16, 2026,pursuant to a unanimous written consent dated April 16, 2026,the Company and the Buyer entered into a Letter Agreement (the “April 2026Letter Agreement”) reducing the Conversion Price applicable to $500,000 of principal under the October*Note to $0.57 per share.

Subsequent Convertible Note Conversions. On* April 16, 2026,the Buyer submitted Eight Notices of Conversion that aggregated to $1,725,136 of principal and $120,762 of interest converted into 2,557,198 shares of Common Stock. Of the principal converted: (i) $213,084 was converted at the reduced $0.57 conversion price established under the April 2026Letter Agreement (thefirst* conversion at the reduced price), with approximately $286,916 of capacity remaining at$0.57; (ii) $250,372 of principal under the* JulyNote was converted at the prior $0.75 conversion price; and (iii) $1,261,680 of principal under the OctoberNote was converted at the prior $0.75 conversion price. Following these conversions, the outstanding principal balance was approximately $250,372 on the JulyNote and approximately $1,863,472 on the October*Note, before any further activity through the issuance date of these consolidated financial statements.

Subsequent Equity Line of Credit Draws. Between* April 6, 2026and May 7, 2026,the Company submittedfour* 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 640,000 shares of Common Stock for aggregate gross proceeds of approximately $244,408.

Revolving Credit Agreement Waiver. 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.The waiver applies to the noncompliance as of the measurement date and the Company remains subject to the financial covenants of the Revolving Credit Agreement on a forward basis. See Note10.*

Facility Consolidation. The Company’s lease at5141 W.122nd Street, Alsip, Illinois terminated effective* April 30, 2026.The Company entered into a new lease at18400* 76th Avenue, Tinley Park, Illinois, which commenced* April 1, 2026with a term of 62 months through May 31, 2031.*

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