Capstone Holding Corp.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our Company’s disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation and in light of the remediation action plan that has been designed and implemented by the management as described below, our principal executive officer and principal financial officer concluded that as of June 30, 2026, our disclosure controls and procedures were not effective, due to the previously identified material weaknesses, which remain under remediation and the additional material weakness described below.

Remediation Material Weakness Identified in Connection with the Restatement. In connection with the restatement described in Note 3, management identified an additional material weakness in the Company’s internal control over financial reporting. The Company’s controls over the computation and review of the weighted average number of common shares outstanding used to compute net loss per share did not operate effectively. The Company has implemented an independent re-computation of the weighted average number of common shares outstanding from the share register each reporting period. Remediation of Previously Reported Material Weakness and Changes in Internal Control Over Financial Reporting.

Our management has historically been composed of a small team, which resulted in limitations on segregation of duties. During the quarter ended June 30, 2026, management began a remediation action plan restructuring the accounting and financial reporting function and addressing the reported internal control weaknesses including the following steps:

While management believes the foregoing actions address the underlying causes of material weaknesses, the material weaknesses will not be considered fully remediated until the remediated controls have operated for a sufficient period of time and management has concluded, through testing, that they are operating effectively. Management expects to complete this evaluation during the remainder of the fiscal year 2026.

Process and review enhancements. The Company has implemented additional review procedures over journal entries, account reconciliations, and the consolidation process. Management is documenting key accounting policies, formalizing close calendars and review checklists, and engaging multiple external accounting, tax, and audit consultants to supplement internal staffing during the remediation period.

Post-acquisition disclosure controls. Following the acquisitions of Carolina Stone Holdings on August 22, 2025 and Fraser Canyon Holdings on December 1, 2025, the Company has integrated each acquired business into its quarterly disclosure controls and procedures, including expanding the close calendar to incorporate the acquired entities, aligning the chart of accounts and reporting packages, and extending review and certification responsibilities to the acquired-entity finance leads.

Expected timing. The Company expects the remediation action plan described above, taken together with the completion of the additional accounting staff hired across the organization and the continuing engagement of external accounting consultants, to substantially remediate the identified material weaknesses by the end of the fiscal year 2026, subject to the operating effectiveness of the new controls being demonstrated for a sufficient period of time.

The Company will continue to evaluate the design and operating effectiveness of its internal control over financial reporting, and management will reassess and test the remediation status quarterly until the remediation is complete and the relevant controls have operated effectively for a sufficient period of time.

Changes in Internal Control Over Financial Reporting

During the three months ended June 30, 2026, we implemented the remediation actions described above, including the expansion of our accounting staff, the reorganization of the financial reporting function under a defined organizational structure with named owners, and the implementation of segregation of duties and multi-level review controls across the close, reporting, and reconciliation processes. These changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act, have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.