Capstone Holding Corp.

Previous wording

We were not in compliance with the minimum Cash Flow Coverage Ratio under our Revolving Credit Agreement as of March 31, 2026, and although we have received a written waiver from our lender, there can be no assurance that we will maintain compliance in future periods or that our lender will grant additional waivers, which could result in acceleration of our outstanding indebtedness and materially impair our liquidity.

Current wording

The Company was in compliance with its financial covenants under our Revolving Credit Agreement as of June 30, 2026, and although we received a written waiver from our lender for the prior quarter, there can be no assurance that we will maintain compliance in future periods or that our lender will grant additional waivers, which could result in acceleration of our outstanding indebtedness and materially impair our liquidity.

Previous wording

As of March 31, 2026, we were not in compliance with the minimum Cash Flow Coverage Ratio covenant under our Revolving Credit Agreement with Beacon Bank & Trust. On May 18, 2026, we received a written waiver limited to this specific violation; the waiver does not extend to any future defaults or events of default.

Current wording

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 our Revolving Credit Agreement with Beacon Bank & Trust. We were not in compliance with that covenant as of March 31, 2026. On May 18, 2026, we received a written waiver limited to that specific violation; the waiver did not extend to any future defaults or events of default. On June 17, 2026, we entered into the Sixteenth Amendment to the Revolving Credit Agreement, which extended the maturity date by six months from June 19, 2026 to December 31, 2026. There can be no assurance that we will maintain compliance with the financial covenants of the amended Revolving Credit Agreement in future periods or that our lender will grant additional waivers if we do not.

Previous wording

On April 16, 2026, we reduced the conversion price applicable to $500,000 of the principal amount outstanding under the October Note to $0.57 per share. On the same date, the buyer converted an aggregate of $1,725,136 of principal and $120,762 of accrued interest into 2,557,198 shares of common stock, increasing our outstanding share count by approximately 22% in a single day.

Current wording

On April 16, 2026, we reduced the conversion price applicable to $500,000 of the principal amount outstanding under the October Note to $0.57 per share. On the same date, the buyer converted an aggregate of $1,725,136 of principal and $120,762 of accrued interest into 2,557,198 shares of common stock, increasing our outstanding share count by approximately 22% in a single day. On August 10, 2026, we further reduced the conversion price of both Notes to $0.2949 per share with respect to all $1,900,759.78 of principal then outstanding. At that price the outstanding principal is convertible into approximately 6,445,438 shares of Common Stock, compared with approximately 2,115,154 shares at the conversion prices in effect at June 30, 2026.

Previous wording

In January 2026, the Company received a notification from the Nasdaq Stock Market indicating that the closing bid price of its Common Stock had been below $1.00 per share for 30 consecutive business days, and that the Company was therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The Company has until July 6, 2026, to regain compliance, which requires the closing bid price of its Common Stock to be at least $1.00 per share for a minimum of 10 consecutive business days. If the Company does not regain compliance within the initial compliance period, it may be eligible for an additional 180-day compliance period, subject to meeting certain requirements. There can be no assurance that the Company will be able to regain compliance. If the Company fails to regain compliance, its Common Stock may be subject to delisting from Nasdaq, which could materially adversely affect the liquidity and trading price of its Common Stock and its ability to raise capital. In January 2025, the SEC approved amendments to Nasdaq Listing Rule 5810(c)(3)(A) that restrict the ability of listed companies to use reverse stock splits as a compliance tool. Under the amended rules, if a company effects a reverse stock split and subsequently fails to maintain the minimum bid price requirement within one year, the company will not be eligible for any compliance period and Nasdaq will issue a delisting determination. In addition, companies that effect reverse stock splits with a cumulative ratio of 250-to-1 or greater over any two-year period are subject to immediate delisting without a compliance period. The Company’s Board of Directors is seeking shareholder authorization at the 2026 Annual Meeting to effect a reverse stock split as a potential backstop measure to regain compliance if necessary. However, even if authorized and effected, a reverse stock split may not result in sustained compliance with the minimum bid price requirement, and the amended Nasdaq rules would preclude the Company from relying on an additional compliance period if the stock price subsequently falls below $1.00 within one year of such reverse split.

Current wording

In January 2026, the Company received a notification from the Nasdaq Stock Market indicating that the closing bid price of its Common Stock had been below $1.00 per share for 30 consecutive business days, and that the Company was therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The Company had until July 6, 2026, to regain compliance, which required the closing bid price of its Common Stock to be at least $1.00 per share for a minimum of 10 consecutive business days. The Company did not regain compliance within that period, and Nasdaq granted the Company an additional 180-day compliance period through January 4, 2027. There can be no assurance that the Company will be able to regain compliance within that period. If the Company fails to regain compliance, its Common Stock may be subject to delisting from Nasdaq, which could materially adversely affect the liquidity and trading price of its Common Stock and its ability to raise capital. In January 2025, the SEC approved amendments to Nasdaq Listing Rule 5810(c)(3)(A) that restrict the ability of listed companies to use reverse stock splits as a compliance tool. Under the amended rules, if a company effects a reverse stock split and subsequently fails to maintain the minimum bid price requirement within one year, the company will not be eligible for any compliance period and Nasdaq will issue a delisting determination. In addition, companies that effect reverse stock splits with a cumulative ratio of 250-to-1 or greater over any two-year period are subject to immediate delisting without a compliance period. At the 2026 Annual Meeting held on June 18, 2026, the Company’s stockholders authorized the Board of Directors to effect a reverse stock split as a potential measure to regain compliance. However, even if authorized and effected, a reverse stock split may not result in sustained compliance with the minimum bid price requirement, and the amended Nasdaq rules would preclude the Company from relying on an additional compliance period if the stock price subsequently falls below $1.00 within one year of such reverse split.

Previous wording

On February 12, 2026, in connection with the Letter Agreement with 3i, LP (see Note 15 to the consolidated financial statements included in this Quarterly Report), the Company issued warrants to purchase 405,000 shares of Common Stock at an exercise price of $0.01 per share. The warrants were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction not involving a public offering. The shares of Common Stock issuable upon exercise of the warrants have not been registered as of the date of this filing.

Current wording

On February 12, 2026, in connection with the Letter Agreement with 3i, LP (see Note 15 to the consolidated financial statements included in this Quarterly Report), the Company issued warrants to purchase 405,000 shares of Common Stock at an exercise price of $0.01 per share. The warrants were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction not involving a public offering. The warrants were exercised in full on July 10, 2026 (See Note 19), and the Company has filed a registration statement on Form S-1 registering the resale of the shares issued upon the exercise.