Capstone Holding Corp.
For the period ended Jun 30, 2026. Filed Aug 12, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 12, 2026
CAPS$1.90+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-20.
0001437749-26-017870
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-12.
0001437749-26-027150
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 103 previous paragraphs and 136 current paragraphs.
77 unchanged; 18 reworded; 36 added; 7 removed; 1 previous and 5 current paragraphs rearranged.
Tables are not compared: 3 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (36)
Current report
In addition to events previously disclosed, the following significant developments occurred during the financial period covered by this Quarterly Report:
Current report
• Convertible Note, Price Adjustment (April 16, 2026). The Company and the holder of the Senior Secured Convertible Notes entered into a letter agreement to adjust the conversion price on $500,000 of principal outstanding under the October 2025 Convertible Note from $1.10 to $0.57 per share. The adjustment is accounted for as a modification of the embedded conversion feature, with the change in fair value of the bifurcated derivative liability reflected in earnings for the period (see Note 11).
Current report
• Convertible Note, Price Adjustment (August 10, 2026). The Company and the holder of the Senior Secured Convertible Notes entered into a Conversion Price Voluntary Adjustment Notice reducing the conversion price of both Notes to $0.2949 per share with respect to all $1,900,759.78 of principal then outstanding. At that price the outstanding principal is convertible into approximately 6,445,438 shares of Common Stock. The adjustment is accounted for as a modification of the embedded conversion features, with the change in fair value of the bifurcated derivative liabilities reflected in earnings in the third quarter of 2026 (see Note 19).
Current report
• Convertible Note Conversions. During the six months ended June 30, 2026, aggregate of $1,958,781 of principal and $137,115 of accrued interest was converted into 2,890,533 shares of Common Stock under the Senior Secured Convertible Notes (See Note 11).
Current report
• Revolving Credit Facility Waiver and Sixteenth Amendment. On May 18, 2026, the Company received a written waiver from Beacon Bank & Trust of the Company’s noncompliance with the minimum Cash Flow Coverage Ratio under the Revolving Credit Agreement as of March 31, 2026. On June 17, 2026, the Company entered into the Sixteenth Amendment to the Revolving Credit Agreement, extending the maturity date by six months from June 19, 2026 to December 31, 2026 (see Note 11).
Current report
• Stream Finance Mezzanine Loan Extension. On June 17, 2026, the Company entered into the Fourth Amendment to the Stream Finance Credit Agreement, extending the maturity date by one year from September 30, 2027 to September 30, 2028 (see Note 11).
Current report
• 2026 Annual Meeting of Stockholders. On June 18, 2026, the Company held its 2026 Annual Meeting of Stockholders. The stockholders approved each proposal set forth in the proxy statement, including the election of Class I and Class II directors, authorization to effect a reverse stock split, approval of an amendment to the 2025 Stock Incentive Plan and ratification of the Company’s independent registered public accounting firm (see Note 15).
Current report
• Equity Line of Credit Draws. Between April 5, 2026 and June 18, 2026, the Company submitted ten VWAP Purchase Notices under the May 2025 Equity Line of Credit agreement with Tumim Stone Capital, LLC, resulting in the issuance of an aggregate of 1,222,268 shares of Common Stock for aggregate gross proceeds of approximately $425,277.
Current report
• 2025 Stock Incentive Plan; Restricted Stock Awards. The 1,995,000 restricted stock awards granted on March 30, 2026 began amortizing stock-based compensation expense over their respective requisite service periods during the three and six months ended June 30, 2026 (see Note 15). Stock-based compensation expense recognized was approximately $398.8 thousand for the six months ended June 30, 2026 The March 30, 2026 grant date resulted in de minimis expense in the first quarter.
Current report
During the six months ended June 30, 2026, the Company completed twelve conversions of principal under the October Note; eleven conversions totaling $1,495,325 of principal and $104,673 of accrued interest, which were converted into 2,133,335 shares of common stock at a conversion price of $0.75 per share and one conversion totaling $213,084 of principal and $14,916 of accrued interest, which were converted into 400,000 shares of common stock at a conversion price of $0.57 per share.
Current report
The Company completed twenty draws under its Equity Line of Credit during the six months ended June 30, 2026, generating gross proceeds of approximately $619,848 for 1,544,768 shares of common stock.
Current report
Cost of goods sold increased by $5.8 million or 59.2%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.
Current report
Change in fair value of contingent consideration
Current report
Change in fair value of contingent consideration increased by $58.0 thousand for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, related to the remeasurement of the Carolina Stone earn-out payable.
Current report
Unrealized gain on derivative instruments
Current report
Unrealized gain on derivative instruments increased by $166.0 thousand for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, related to the Company's Senior Secured Convertible Notes.
Current report
Realized foreign currency loss, net
Current report
Realized foreign currency loss, net, increased by $14.0 thousand for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, related to the Fraser Canyon acquisition.
Current report
Provision for income taxes
Current report
The Company recorded a provision for income taxes of $3.0 thousand for the three months ended June 30, 2026, compared to no provision for the three months ended June 30, 2025. The provision consists of Canadian income taxes on the operations of Canadian Stone Industries Inc., which the Company did not own during the 2025 period. No U.S. tax benefit was recognized on the pretax loss in either period because of the full valuation allowance against U.S. net deferred tax assets.
Current report
Sales
Current report
Cost of goods sold
Current report
Cost of goods sold increased by $8.9 million or 54.3%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
Current report
Gross profit margin was 26.3% for the six months ended June 30, 2026 compared to 21.5% for the six months ended June 30, 2025. Gross margin for the six months ended June 30, 2026 benefited from the $438.0 thousand tariff refund recorded as a reduction of cost of goods sold (see Note 3), which contributed approximately 1.3 percentage points of the improvement. The remaining improvement reflects gross margin gains within the Company's TotalStone segment, together with the addition of Carolina Stone, whose stone distribution and installation mix carries a higher gross margin of approximately 36.0%.
Current report
Selling general and administrative expenses
Current report
Selling, general and administrative expenses increased by $3.8 million or 62.4%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily driven by the full-period effect of the Carolina Stone ($1.7 million) and Fraser Canyon ($1.8 million) acquisitions.
Current report
Change in fair value of contingent consideration
Current report
Change in fair value of contingent consideration increased by $58.0 thousand for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, related to the remeasurement of the Carolina Stone earn-out payable.
Current report
Unrealized gain on derivative instruments
Current report
Unrealized gain on derivative instruments increased by $642.0 thousand for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, related to the Company's Senior Secured Convertible Notes.
Current report
Realized foreign currency loss, net
Current report
Realized foreign currency loss, net. increased by $14.0 thousand for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, related to the Fraser Canyon acquisition.
Current report
Interest expense
Current report
Provision for income taxes
Current report
The Company recorded a provision for income taxes of $5.0 thousand for the six months ended June 30, 2026, compared to no provision for the six months ended June 30, 2025, for the same reasons.
Current report
Net cash used in investing activities was $131.0 thousand for the six months ended June 30, 2026, consisting of $93.0 thousand of property and equipment purchases and $38.0 thousand paid to settle the working capital adjustment under the Fraser Canyon purchase agreement (see Note 4).
Removed paragraphs (7)
Previous report
On April 16, 2026, the Company entered into a Letter Agreement with 3i, LP reducing the conversion price on a $500,000 portion of the principal amount outstanding under the October Note to $0.57 per share.
Previous report
Cost of goods sold changed by $3.1 million or 47.0%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Previous report
Transaction expenses
Previous report
Acquisition-related transaction expenses changed by $99 thousand for the three months ended March 31, 2026, primarily related to professional fees associated with subsequent-event activities and the integration of recently acquired businesses.
Previous report
Income Tax Expense
Previous report
Income tax expense changed by $2 thousand for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Previous report
The above discussion of consolidated operating results through operating income (loss) is in substance the operating results of TotalStone for the comparable periods presented. The elimination of selling, general and administrative expenses reflect the elimination of management fees incurred by TotalStone and earned by the Company. The Company classifies the management fee income earned as a component of net non-operating income (expense) and the corresponding income is also eliminated in the Company’s consolidated results.
Reworded paragraphs (18)
Previous wording
The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included in this Quarterly Report and our audited consolidated financial statements and related notes thereto for the year ended December 31, 2025, included in our 2025 Form 10-K. Throughout this discussion, unless the context specifies or implies otherwise the terms the“Company”,“we”,“us”* and*“our”* refer to the business and operations of Capstone Holding Corp and its operating subsidiary, TotalStone, LLC (dba Instone).*
Current wording
The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included in this Quarterly Report and our audited consolidated financial statements and related notes thereto for the year ended December 31, 2025, included in our 2025 Form 10-K. Throughout this discussion, unless the context specifies or implies otherwise the terms the“Company”,“we”,“us”* and*“our”* refer to the business and operations of Capstone Holding Corp and its operating subsidiary, TotalStone, LLC (dba Instone), Carolina Stone Holdings, LLC, and Canadian Stone Industries (Fraser Canyon Holdings Inc. and its subsidiaries).*
Previous wording
On January 21, 2026, the Company entered into a fee waiver agreement with Brookstone Partners IAC under which Brookstone agreed to waive its $400.0 thousand annual management fee for fiscal year 2026, and the Company's Chief Executive Officer agreed to reduce his annual base cash salary to $1.00, in each case effective January 1, 2026.
Current wording
On January 21, 2026, the Company entered into a fee waiver agreement with Brookstone Partners IAC under which Brookstone agreed to waive its $400.0 thousand annual management fee for fiscal year 2026, and the Company's Chief Executive Officer agreed to reduce his annual base cash salary to $1.00 with the fee waiver effective January 1, 2026 and the salary reduction effective February 1, 2026.
Previous wording
During the three months ended March 31, 2026, the Company completed five conversions of principal under the October Note totaling $233,645 of principal and $16,356 of accrued interest, which were converted into 333,335 shares of common stock at a conversion price of $0.75 per share. The Company also completed ten draws under its Equity Line of Credit during the quarter, generating aggregate net proceeds of approximately $194,571.
Current wording
During the six months ended June 30, 2026, the Company completed one conversion of principal under the July Note totaling $250,371 of principal and $17,526 of accrued interest, which were converted into 357,198 shares of common stock at a conversion price of $0.75 per share.
Previous wording
On March 30, 2026, the Compensation Committee of the Board of Directors granted 1,995,000 restricted stock awards to executive officers and non-employee directors under the Company's 2025 Plan, with a grant-date fair value of $1,294,755. The awards generally vest at the third anniversary of the grant date for management recipients (with continued service required) and upon separation from the Board for non-employee director recipients.
Current wording
On March 30, 2026, the Compensation Committee of the Board of Directors granted 1,995,000 restricted stock awards to executive officers and non-employee directors under the Company's 2025 Plan, with a grant-date fair value of $1,294,755. The awards generally vest at the third anniversary of the grant date for management recipients (with continued service required) and for non-employee director recipients, only upon the qualifying terminations of Board service described in Note 15; other terminations, including voluntary resignation, result in forfeiture.
Previous wording
Sales were $12.6 million for the three months ended March 31, 2026 compared to $7.9 million for the three months ended March 31, 2025. The period-over-period change in revenue was $4.7 million, primarily driven by the full-period contributions from the Carolina Stone (August 2025) and Fraser Canyon (December 2025) acquisitions. Revenue from the Company's legacy Instone operations was approximately flat period-over-period; the increase reflects approximately $2.4 million contributed by Carolina Stone and approximately $2.5 million contributed by Fraser Canyon.
Current wording
Sales were $21.5 million for the three months ended June 30, 2026 compared to $12.9 million for the three months ended June 30, 2025. The period-over-period change in revenue was $8.6 million, primarily driven by the full-period contributions from the Carolina Stone (August 2025) and Fraser Canyon (December 2025) acquisitions. Revenue from the Company's legacy Instone operations increased approximately $0.9 million period-over-period; the increase reflects approximately $3.2 million contributed by Carolina Stone and approximately $4.5 million contributed by Fraser Canyon.
Previous wording
The change in cost of goods sold was driven primarily by the change in sales attributable to the Carolina Stone and Fraser Canyon acquisitions.
Current wording
The change in cost of goods sold was driven primarily by the increase in sales attributable to the Carolina Stone and Fraser Canyon acquisitions.
Previous wording
Gross profit margin was 23.5% for the three months ended March 31, 2026 compared to 16.8% for the three months ended March 31, 2025. The improvement reflects gross margin gains within the Company's TotalStone segment, together with the addition of Carolina Stone, whose stone distribution and installation mix carries a higher gross margin of approximately 37.8%.
Current wording
Gross profit margin was 27.9% for the three months ended June 30, 2026 compared to 24.4% for the three months ended June 30, 2025. Gross margin for the three months ended June 30, 2026 benefited from the $438.0 thousand tariff refund recorded as a reduction of cost of goods sold (see Note 3), which contributed approximately 2.0 percentage points of the improvement. The remaining improvement reflects gross margin gains within the Company's TotalStone segment, together with the addition of Carolina Stone, whose stone distribution and installation mix carries a higher gross margin of approximately 34.7%.
Previous wording
Selling, general and administrative expenses changed by $1.7 million or 62.3%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by the full-period effect of the Carolina Stone and Fraser Canyon acquisitions and transaction-related professional fees of $99 thousand recognized during the period, partly offset by the January 2026 cost rationalization program initiated by the Company.
Current wording
Selling, general and administrative expenses increased by $2.1 million or 62.5%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily driven by the full-period effect of the Carolina Stone ($877.0 thousand) and Fraser Canyon ($897.0 thousand) acquisitions.
Previous wording
Interest expense changed by $0.6 million or 197.0%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily driven by the amortization of debt discount and issuance costs on the Company’s Senior Secured Convertible Notes.
Current wording
Interest expense increased by $1.5 million or 346%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily driven by the amortization of debt discount and issuance costs on the Company’s Senior Secured Convertible Notes.
Previous wording
Working capital excluding the current portion of long-term debt was $2.9 million and $3.8 million as of March 31, 2026 and December 31, 2025, respectively. The $0.9 million decrease was primarily driven by a $2.4 million increase in borrowings under our revolving line of credit and a $2.0 million increase in accounts payable, partially offset by a $2.0 million increase in accounts receivable and a $1.0 million increase in inventory.
Current wording
Working capital was negative $244.0 thousand as of June 30, 2026 compared to positive $78.0 thousand as of December 31, 2025. Excluding the current portion of long-term debt, working capital was $4.0 million and $3.8 million as of June 30, 2026 and December 31, 2025, respectively. The $200.0 thousand increase was primarily driven by a $4.5 million increase in accounts receivable, offset by a $1.9 million increase in accounts payable and a $2.3 million increase in borrowings under our revolving line of credit.
Previous wording
As of March 31, 2026, the Company had $12.7 million outstanding under its Revolver, which matures on June 19, 2026, as extended by the Fifteenth Amendment to the Credit Agreement dated December 19, 2025. As of March 31, 2026, the Company was not in compliance with the minimum Cash Flow Coverage Ratio under the Revolving Credit Agreement. The Company received a written waiver of the covenant noncompliance from Beacon Bank & Trust dated May 18, 2026. See Note 10. Management is in discussions with Beacon Bank & Trust regarding a longer-term extension of the Revolver with financial covenants aligned to the Company's anticipated future results.
Current wording
As of June 30, 2026, the Company had a combined balance of $12.6 million outstanding under its revolving credit facilities. Our Revolving Credit Agreement with Beacon Bank matures on December 31, 2026, as extended by the Sixteenth Amendment to the Credit Agreement dated June 17, 2026. As of June 30, 2026, the Company was in compliance with both the minimum Cash Flow Coverage Ratio and the minimum Tangible Net Worth covenants under the Revolving Credit Agreement. See Note 11. Management is in discussions with Beacon Bank & Trust regarding a longer-term extension of the Revolver with financial covenants aligned to the Company's anticipated future results.
Previous wording
The Company’s ability to continue as a going concern depends on its ability to generate sufficient cash flows from operations, access additional capital, and manage its debt maturities. The Senior Secured Convertible Notes mature in July and October 2026. The Company’s U.S. revolving credit facility with Beacon Bank & Trust (successor by merger to Berkshire Bank) matures in June 2026, and Canadian Stone Industries’ operating loan with TD Bank is subject to annual renewal. The mezzanine term loan with Stream Finance, LLC matures in September 2027. Management is evaluating alternatives to refinance or extend these obligations and believes that the Company’s existing cash, availability under its revolving credit facilities, and expected operating cash flows will be sufficient to fund operations for at least the next twelve months from the date of this filing.
Current wording
The Company’s ability to continue as a going concern depends on its ability to generate sufficient cash flows from operations, access additional capital, and manage its debt maturities. The July 2025 Senior Secured Convertible Note matured on July 29, 2026 and has since been extended to August 29, 2026, and the October 2025 Note matures on October 22, 2026. The Company’s U.S. revolving credit facility with Beacon Bank & Trust (successor by merger to Berkshire Bank) matures in December 2026, as extended by the Sixteenth Amendment, and Canadian Stone Industries’ operating loan with TD Bank is subject to annual renewal. The mezzanine term loan with Stream Finance, LLC matures in September 2028, as extended by the Fourth Amendment dated June 17, 2026. Management is evaluating alternatives to refinance or extend these obligations and believes that the Company’s existing cash, availability under its revolving credit facilities, and expected operating cash flows will be sufficient to fund operations for at least the next twelve months from the date of this filing.
Previous wording
Net cash used in operating activities was $2.8 million for the three months ended March 31, 2026, primarily resulting from the Company’s net loss of $1.9 million and a $1.1 million build in working capital, partially offset by $0.5 million of non-cash items including depreciation, amortization, and accrued interest.
Current wording
Net cash used in operating activities was $3.2 million for the six months ended June 30, 2026, primarily resulting from the Company’s net loss of $3.3 million and a $2.2 million build in working capital, partially offset by $2.2 million of non-cash items including depreciation, amortization, and accrued interest.
Previous wording
Net cash used in operating activities was $2.3 million for the three months ended March 31, 2025, primarily resulting from our net loss of $1.7 million and a $0.7 million build in working capital, partially offset by $0.1 million of depreciation and amortization.
Current wording
Net cash used in operating activities was $4.0 million for the six months ended June 30, 2025, primarily resulting from our net loss of $2.4 million and a $1.8 million build in working capital.
Previous wording
Net cash used in investing activities was $29.0 thousand for the three months ended March 31, 2026, related to purchases of property and equipment.
Current wording
Net cash used in investing activities was $2.0 thousand for the six months ended June 30, 2025, related to purchases of property and equipment.
Previous wording
Net cash provided by financing activities was $2.5 million for the three months ended March 31, 2026, primarily consisting of net borrowings under our revolving line of credit of $2.4 million and net proceeds from our equity line of credit of $0.2 million.
Current wording
Net cash provided by financing activities was $2.8 million for the six months ended June 30, 2026, primarily consisting of net borrowings under our revolving line of credit of $2.4 million and net proceeds from our equity line of credit of $620.0 thousand.
Previous wording
Net cash provided by financing activities was $4.0 million for the three months ended March 31, 2025, primarily consisting of net proceeds from our March 2025 public offering of $3.3 million and net borrowings under our revolving line of credit of $1.5 million, partially offset by debt repayments of $0.9 million.
Current wording
Net cash provided by financing activities was $4.8 million for the six months ended June 30, 2025, primarily consisting of net proceeds from our March 2025 public offering of $3.3 million and net borrowings under our revolving line of credit of $2.5 million, partially offset by debt repayments of $910.0 thousand.
Previous wording
Through October 22, 2025, the Company received an aggregate of $6,250,000 in gross proceeds pursuant to its Senior Secured Convertible Notes financings (the July 29, 2025 issuance and the October 22, 2025 issuance), as described in Note 11 to the consolidated financial statements included in this Quarterly Report and in the Recent Developments section of this Management's Discussion and Analysis. In addition, as described in Note 11 and Note 15, the Company may receive up to $20.0 million from the sale of the Equity Line Securities to the Equity Line Investor. The Company plans to raise additional funds to finance the growth of our operations through equity financing or debt financing arrangements. If we raise additional funds through the issuance of equity, equity-related or debt securities, those securities may have rights, preferences or privileges senior to the rights of our existing Common Stock, and our existing stockholders may experience dilution.
Current wording
Through October 22, 2025, the Company received an aggregate of $6,250,000 in gross proceeds pursuant to its Senior Secured Convertible Notes financings (the July 29, 2025 issuance and the October 22, 2025 issuance), as described in Note 11 to the consolidated financial statements included in this Quarterly Report and in the Recent Developments section of this Management's Discussion and Analysis. In addition, as described in Note 11 and Note 15, the Company may receive up to $19.1 million from the sale of the Equity Line Securities to the Equity Line Investor. The Company plans to raise additional funds to finance the growth of our operations through equity financing or debt financing arrangements. If we raise additional funds through the issuance of equity, equity-related or debt securities, those securities may have rights, preferences or privileges senior to the rights of our existing Common Stock, and our existing stockholders may experience dilution.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
The following is management’s discussion of the Company’s consolidated financial statements and results of operations for the six months ended June 30, 2026 and 2025 in thousands:
Current report — wording carried from elsewhere
Results of Operations Comparing Six Months Ended June 30, 2026 to 2025.
Current report — wording carried from elsewhere
Sales were $34.1 million for the six months ended June 30, 2026 compared to $20.8 million for the six months ended June 30, 2025. The period-over-period change in revenue was $13.4 million, primarily driven by the full-period contributions from the Carolina Stone (August 2025) and Fraser Canyon (December 2025) acquisitions. Revenue from the Company's legacy Instone operations increased approximately $857.0 thousand period-over-period; the increase reflects approximately $5.5 million contributed by Carolina Stone and approximately $7.0 million contributed by Fraser Canyon.
Current report — wording carried from elsewhere
The change in cost of goods sold was driven primarily by the increase in sales attributable to the Carolina Stone and Fraser Canyon acquisitions.
Current report — wording carried from elsewhere
Interest expense increased by $2.1 million or 286%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily driven by the amortization of debt discount and issuance costs on the Company’s Senior Secured Convertible Notes.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net cash used in investing activities was $17.0 thousand for the three months ended March 31, 2025, related to purchases of property and equipment.