Capstone Holding (OTC: CAPS) restates EPS and details new material weakness

Rhea-AI Filing Summary

Capstone Holding Corp., a masonry products distributor operating through subsidiary TotalStone, filed an amended quarterly report for the period ended June 30, 2025 to correct the weighted average share count and net loss per share. Previously, the company used period-end shares instead of time-weighted averages required under ASC 260. For the three months, weighted average shares were restated from 5,406,305 to 5,235,240 with net loss per share unchanged at $(0.13). For the six months, weighted average shares were restated from 5,406,305 to 3,405,568, changing net loss per share from $(0.58) to $(0.92), while net loss of $2.4 million remained the same.

As of June 30, 2025, Capstone reported net sales of $20.8 million, a net loss of $2.4 million, cash of $0.8 million, total assets of $51.9 million, total liabilities of $25.6 million and equity of $26.3 million. The company relies on an asset-based revolver with a balance of $8.7 million and long-term debt of $9.6 million. Management and the audit committee concluded prior financial statements should not be relied upon for the affected per-share data, and a material weakness was identified in controls over EPS calculations, in addition to existing control weaknesses. Management reports remediation efforts, including adding accounting staff and enhanced review layers, and believes liquidity is sufficient for at least one year, supported by the revolver, a $20 million equity line, and a $3.0 million initial senior secured convertible note financing.

Positive

• Equity position improved materially: Total equity increased from a deficit of $(3.1) million at December 31, 2024 to positive equity of $26.3 million at June 30, 2025, reflecting the IPO, restructuring and capital infusions.
• Additional financing capacity secured: The company entered into a $20 million common stock equity line and a senior secured convertible note facility of up to $10.9 million, with $3.0 million of gross proceeds already received, supporting near-term liquidity.

Negative

• Net loss widened: For the six months ended June 30, 2025, net loss increased to $2.4 million from $1.5 million a year earlier, reflecting weaker profitability.
• Restatement of EPS: Weighted average shares and net loss per share for the six months were materially misstated and required restatement, leading management and the audit committee to conclude prior per-share data should not be relied upon.
• Material weaknesses in internal control: Management concluded disclosure controls were not effective as of June 30, 2025, citing existing segregation-of-duties issues and a new material weakness in controls over EPS computations.
• Leverage and covenant history: The company carries $9.6 million in long-term debt and an $8.7 million revolver balance; it was previously out of compliance with certain revolver covenants in 2024 (subsequently waived), highlighting financing risk.

Filing Explained

This amendment is limited to the June 30, 2025 weighted-average-share and per-share restatement; it speaks as of the original report date and does not update later events, so the August 10, 2026 count of 20,578,551 common shares is not a revised June 30, 2025 figure.

Key Figures

Net sales H1 2025: $20,751 (in thousands) Net loss H1 2025: $2,428 (in thousands) Net loss per share H1 2025 (restated): $(0.92) per share +5 more

8 metrics

Net sales H1 2025 $20,751 (in thousands) Net sales for the six months ended June 30, 2025

Net loss H1 2025 $2,428 (in thousands) Net loss for the six months ended June 30, 2025

Net loss per share H1 2025 (restated) $(0.92) per share Net loss per share attributable to stockholders, six months ended June 30, 2025

Weighted average shares H1 2025 (restated) 3,405,568 shares Weighted average common shares outstanding basic and diluted, six months ended June 30, 2025

Line of credit balance $8.7 million Revolver outstanding as of June 30, 2025

Total long-term debt $9,607 (in thousands) Gross long-term debt as of June 30, 2025 before current portion and fees

Total assets $51,885 (in thousands) Consolidated assets as of June 30, 2025

Total equity $26,274 (in thousands) Total equity as of June 30, 2025

Key Terms

material weakness, original issue discount, equity line of credit, sale-leaseback, +2 more

6 terms

material weakness financial

"management identified an additional material weakness in the Company’s internal control"

A material weakness is a significant flaw in the systems and checks a company uses to ensure its financial reports are accurate, meaning errors or fraud could happen and not be caught. For investors it matters because it raises the risk that reported results are unreliable—similar to finding a hole in a ship’s hull—potentially leading to corrected financials, regulatory action, reduced trust, and negative effects on stock value and borrowing costs.

original issue discount financial

"convertible notes to the Buyer, in the aggregate original principal amount of up to $10,909,885, which are being issued with a 8.34% original issue discount"

Original issue discount (OID) is the difference between a debt security’s face value and the lower price at which it is first sold, treated as additional interest that accrues over the life of the instrument. For investors it matters because OID raises the effective yield and changes taxable income and the holding’s cost basis over time — think of buying a $100 voucher for $90 and recognizing the $10 gain as earned interest as the voucher approaches maturity.

equity line of credit financial

"common stock purchase equity line agreement with an accredited investor"

An equity line of credit is a loan that allows homeowners to borrow money against the value of their property, similar to having a flexible credit card secured by their home. It matters to investors because it provides a way for property owners to access cash for various needs, which can influence real estate markets and overall economic activity. This type of credit offers ongoing borrowing capacity, making it a valuable financial tool for those with significant property equity.

sale-leaseback financial

"sold its facility in Navarre, Ohio ... and concurrently entered into a leaseback transaction"

A sale-leaseback is a deal where an owner sells an asset—commonly real estate or equipment—to another party and immediately rents it back so they can keep using it. For investors, it matters because the seller converts a fixed asset into cash without disrupting operations, which can boost liquidity or pay down debt but also creates ongoing lease payments and long-term obligations that affect cash flow and the balance sheet.

Series B Preferred Stock financial

"designate two million shares of the Company’s authorized preferred stock as Series B Preferred Stock"

Series B preferred stock is a type of ownership share issued by a company that offers certain advantages over common stock, such as priority in receiving dividends or assets if the company is sold or liquidated. It is typically issued after an initial round of funding, making it a way for investors to support a company's growth while gaining some protections and benefits. This stock matters to investors because it often provides a more secure investment position with potential for future growth.

asset-based revolver financial

"Revolving Credit, Term Loan and Security Agreement, as amended, with Berkshire Bank"

An asset-based revolver is a credit line a company can borrow from and repay repeatedly that is secured by short-term assets such as inventory or customer invoices. It matters to investors because it provides short-term liquidity that expands or shrinks with the value of those assets — like a credit card tied to the worth of items in a store — and can signal how easily a company can meet cash needs or risk losing assets if it defaults.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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FAQ

Why did Capstone Holding Corp. (CAPS) amend its June 30, 2025 quarterly report?

Capstone amended its June 30, 2025 report to correct the weighted average share count and related net loss per share. The original filing used period-end shares instead of time-weighted averages, affecting per-share data but not total net loss or other financial statements.

How did the EPS restatement affect Capstone Holding (CAPS) for the first half of 2025?

For six months ended June 30, 2025, weighted average shares fell from 5,406,305 to 3,405,568, and net loss per share changed from $(0.58) to $(0.92). The underlying net loss remained $2.4 million; only the share and per-share metrics changed.

What were Capstone Holding’s (CAPS) key financial results as of June 30, 2025?

Capstone reported net sales of $20.8 million and a net loss of $2.4 million for the six months ended June 30, 2025. At period-end, it held $0.8 million in cash, $51.9 million in total assets and $26.3 million in equity.

What internal control issues did Capstone Holding (CAPS) disclose in this amendment?

Management disclosed that disclosure controls were not effective as of June 30, 2025, citing limited accounting resources, segregation-of-duties issues, and a new material weakness in EPS calculation controls identified in connection with the restatement.

How is Capstone Holding (CAPS) addressing liquidity and financing needs?

Capstone relies on an asset-based revolver with an $8.7 million balance and has $9.6 million in long-term debt. It also arranged a $20 million equity line and issued a senior secured convertible note with $3.0 million in initial gross proceeds to support liquidity.

What did Capstone Holding’s (CAPS) IPO and restructuring change in its capital structure?

On March 7, 2025, Capstone completed a 1,250,000-share IPO at $4.00 per share, raising about $3.25 million net. TotalStone preferred interests were exchanged for 3,782,641 common shares, authorized common stock rose to 50,000,000 shares, and legacy preferred units were eliminated.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number 001-41775

Capstone Holding Corp.

(Exact name of registrant as specified in its charter)

Delaware		86-0585310
(State or other jurisdiction of incorporation or organization)		(I. R. S. Employer Identification No.)

18400 76th Avenue Tinley Park, IL		60477
(Address of principal executive offices)		(Zip Code)

(708) 371-0660

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		CAPS		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of August 10, 2026 was 20,578,551 shares.

EXPLANATORY NOTE

Capstone Holding Corp. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to amend the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025, originally filed with the Securities and Exchange Commission (the “SEC”) on August 15, 2025 (the “Original Report”).

This Amendment restates the weighted average number of common shares outstanding and the related basic and diluted net loss per share in the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025. The weighted average share amounts reported in the Original Report were the number of shares outstanding at the end of the period rather than averages weighted for the portion of the period each share was outstanding. The restatement affects only the weighted average share amounts and the per share amounts. Net loss, net loss attributable to Capstone Holding Corp. stockholders, the consolidated balance sheets, the consolidated statements of stockholders’ equity (deficit) and the consolidated statements of cash flows are not affected.

The restatement has the following effect:

		Three Months Ended June 30, 2025
		As Previously Reported				Adjustment				As Restated
Net loss attributable to Capstone Holding Corp. stockholders (in thousands)		$	(700	)		$	—			$	(700	)
Weighted average number of common shares outstanding – basic and diluted			5,406,305				(171,065	)			5,235,240
Net loss per share attributable to Capstone Holding Corp. stockholders – basic and diluted		$	(0.13	)		$	—			$	(0.13	)

		Six Months Ended June 30, 2025
		As Previously Reported				Adjustment				As Restated
Net loss attributable to Capstone Holding Corp. stockholders (in thousands)		$	(3,133	)		$	—			$	(3,133	)
Weighted average number of common shares outstanding – basic and diluted			5,406,305				(2,000,737	)			3,405,568
Net loss per share attributable to Capstone Holding Corp. stockholders – basic and diluted		$	(0.58	)		$	(0.34	)		$	(0.92	)

On August 7, 2026, the Company’s Chief Financial Officer concluded that the Company’s previously issued unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025 should no longer be relied upon with respect to the weighted average share and per share amounts described above. The Audit Committee of the Company’s Board of Directors concurred in that conclusion on August 10, 2026. The Company reported that conclusion in a Current Report on Form 8-K filed with the SEC on August 12, 2026.

This Amendment sets forth the complete text of the following items, as amended:

●Part I, Item 1. Financial Statements, which is amended to restate the weighted average share and per share amounts in the consolidated statements of operations, to correct the schedule of potentially dilutive securities in Note 3, and to add Note 1A, Restatement of Previously Issued Financial Statements; and

●Part I, Item 4. Controls and Procedures, which is amended to describe a material weakness in internal control over financial reporting identified in connection with the restatement.

The Company’s principal executive officer and principal financial officer have provided new certifications dated as of the date of this Amendment, filed or furnished as Exhibits 31.1, 31.2, 32.1 and 32.2, and Part II, Item 6 is set forth in full to reflect the filing of those certifications. The financial statement information formatted in Inline XBRL (Exhibit 101) is also amended.

Except as described above, this Amendment does not amend, update or change any other item or disclosure in the Original Report. This Amendment speaks as of the date of the Original Report and does not reflect events occurring after the filing of the Original Report. This Amendment should be read together with the Original Report and the Company’s other filings with the SEC.

PART I

ITEM 1. FINANCIAL STATEMENTS

CAPSTONE HOLDING CORP.
CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)
(unaudited)

		June 30, 2025				December 31, 2024
ASSETS
Current Assets:
Cash		$	773			$	11
Accounts receivable, net			5,487				2,762
Inventories			9,590				9,635
Prepaid expenses			439				150
Other current assets			242				242
Total current assets			16,531				12,800
Long-term Assets:
Property and equipment, net			1,466				1,594
Goodwill			23,286				23,286
Other intangible assets			61				48
Right of use assets			3,185				2,068
Deferred tax asset			7,178				7,178
Other long-term assets			178				247
Total long-term assets			35,354				34,421
Total Assets		$	51,885			$	47,221
LIABILITIES & EQUITY
Current Liabilities:
Accounts payable		$	3,599			$	3,304
Accrued expenses			923				394
Line of credit			8,713				6,259
Current portion of long-term debt			2,910				1,855
Current portion, lease liability			826				738
Total current liabilities			16,971				12,550
Long-term liabilities:
Accrued related party management fee			351				351
Long term debt, net of current portion			5,827				6,323
Lease liability, net of current portion			2,462				1,437
Total long-term liabilities			8,640				8,111
Total Liabilities			25,611				20,661
TotalStone, LLC – Class B Preferred Units			—				28,475
TotalStone, LLC – Special Preferred Units			—				1,143
Equity:
Series B Preferred Stock, no par value; 2,000,000 shares authorized; 985,063 issued as of June 30, 2025. No shares were authorized or issued as of December 31, 2024.			30				—
Common Stock $0.0005 par value; 50,000,000 and 200,000 shares authorized; 5,406,305 and 157,610 issued as of June 30, 2025 and December 31, 2024, respectively.			3				—
Additional paid-in capital			225,476				193,044
Accumulated deficit			(199,235	)			(196,102	)
Total Equity			26,274				(3,058	)
Total Liabilities, TotalStone, LLC. Preferred Units & Equity		$	51,885			$	47,221

See notes to consolidated financial statements

1

CAPSTONE HOLDING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)
(unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2025 (As Restated)				2024				2025 (As Restated)				2024
Sales		$	13,193			$	13,151			$	21,358			$	22,734
Sales returns and allowances			(341	)			(265	)			(607	)			(489	)
Net sales			12,852				12,886				20,751				22,245
Cost of goods sold			9,722				10,122				16,296				17,737
Gross Profit			3,130				2,764				4,455				4,508
Selling, general and administrative expenses			3,390				2,750				6,143				5,211
Income (loss) from operations			(260	)			14				(1,688	)			(703	)
Interest expense			(440	)			(394	)			(740	)			(774	)
Net loss before taxes			(700	)			(380	)			(2,428	)			(1,477	)
Income tax expense			—				(1	)			—				(17	)
Net Loss			(700	)			(381	)			(2,428	)			(1,494	)
Less: Net loss attributable to:
Special preferred units			—				(44	)			—				(92	)
Class B units preferred return			—				(903	)			(705	)			(1,776	)
Net loss attributable to Capstone Holding Corp. stockholders		$	(700	)		$	(1,328	)			(3,133	)		$	(3,362	)
Earnings (loss) per share:
Net loss per share attributable to Capstone Holding Corp. stockholders – basic and diluted		$	(0.13	)		$	(8.43	)		$	(0.92	)		$	(21.33	)
Weighted average number of common shares outstanding – basic and diluted			5,235,240				157,610				3,405,568				157,610

See notes to consolidated financial statements

2

CAPSTONE HOLDING CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except Common Stock Shares)

																						Retained								TotalStone, LLC
		Common Stock (Shares)				Common Stock				Series B (Shares)				Series B Preferred Stock				Additional Paid-In Capital				Earnings (Accumulated Deficit)				Total Equity				Class B Preferred Units				Special Preferred Unit
Balance at January 1, 2025			157,610			$	—				—			$	—			$	193,044			$	(196,102	)		$	(3,058	)		$	28,475			$	1,143
Net Loss			—				—				—				—				—				(1,728	)			(1,728	)			—				—
Accrued Class B Distributions			—				—				—				—				—				(705	)			(705	)			705				—
Conversion of Class B Preferred Units to Common stock			3,782,641				1				—				—				29,180				—				29,181				(29,180	)			—
Conversion of Special Preferred Units to Debt			—				—				—				—				—				—				—				—				(1,143	)
Public Offering			1,250,000				2				—				—				3,250				—				3,252				—				—
Nectarine Management, LLC. Subscription Agreement			—				—				985,063				30				—				—				30				—				—
Balance at March 31, 2025			5,190,251			$	3				985,063				30			$	225,474			$	(198,535	)		$	26,972			$	—			$	—
Net Loss			—				—				—				—				—				(700	)			(700	)			—				—
Issuance of commitment shares pursuant to equity line of credit			215,054				—				—				—				—				—				—				—				—
Issuance of common stock pursuant to equity line of credit			1,000				—				—				—				2				—				2				—				—
Balance at June 30, 2025			5,406,305				3				985,063				30				225,476				(199,235	)			26,274			$	—			$	—

										Retained								TotalStone, LLC
		Common Stock				Additional Paid-In Capital				Earnings (Accumulated Deficit)				Total Equity				Class B Preferred Units				Special Preferred Unit
Balance at January 1, 2024			157,610			$	193,044			$	(190,607	)		$	2,437			$	25,871			$	815
Net Loss			—				—				(1,113	)			(1,113	)			—				—
Accrued Class B Preferred Units Distributions			—				—				(873	)			(873	)			873				—
Accrued Special Preferred Units Distributions			—				—				(48	)			(48	)			—				48
Balance at March 31, 2024			157,610			$	193,044			$	(192,641	)		$	403			$	26,744			$	863
Net Loss			—				—				(381	)			(381	)			—				—
Accrued Class B Preferred Units Distributions			—				—				(903	)			(903	)			903				—
Accrued Special Preferred Units Distributions			—				—				(44	)			(44	)			—				44
Balance at June 30, 2024			157,610			$	193,044			$	(193,969	)		$	(925	)		$	27,647			$	907

See notes to consolidated financial statements

3

CAPSTONE HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
(unaudited)

		Six Months Ended June 30, 2025				Six Months Ended June 30, 2024
OPERATING ACTIVITIES
Net loss		$	(2,428	)		$	(1,494	)
Non cash items:
Depreciation and amortization			230				242
Change in other operating items:
Accounts receivable and other assets			(2,988	)			(1,739	)
Change in operating leases, net			(25	)			—
Accounts payable and other accrued liabilities			1,219				1,856
Cash flows used in operating activities			(3,992	)			(1,135	)
INVESTING ACTIVITIES
Purchase of property and equipment, net			(2	)			(121	)
Cash flows used in investing activities			(2	)			(121	)
FINANCING ACTIVITIES
Payments on financing lease liabilities			(64	)			(80	)
Financing fees paid			(6	)			(6	)
Borrowings under line of credit, net			2,454				1,791
Debt payments			(910	)			(500	)
Proceeds from IPO and stock issuances			5,032				—
Cash paid for IPO and stock issuance costs			(1,750	)			—
Cash flows provided by financing activities			4,756				1,205
NET CHANGE IN CASH & CASH EQUIVALENTS			762				(51	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			11				51
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	773			$	—
SUPPLEIMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Operating cash flows from finance leases (interest)		$	5			$	8
Financing cash flows from finance leases (principal portion)			64				80
Operating cash flows from operating leases			399				387
Interest Paid			740				774
Taxes Paid			—				17

See notes to consolidated financial statements

4

CAPSTONE HOLDING CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Nature of Operations

Capstone Holding Corp. (the “Capstone”) is a holding company and its operations consist substantially of the operations of its consolidated subsidiary, TotalStone, LLC (“TotalStone”). On April 1, 2020, Capstone obtained controlling interest in TotalStone, a materials distribution company that distributes masonry stone products for residential and commercial construction in the Midwest and Northeast United States under the trade names Instone and Northeast Masonry Distributors (“NMD”).

Note 1A Restatement of Previously Issued Financial Statements

Subsequent to the issuance of the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, management determined that the weighted average number of common shares outstanding used to compute basic and diluted net loss per share for those periods was incorrect. The amounts previously reported were the number of shares outstanding at June 30, 2025 rather than averages weighted for the portion of the period each share was outstanding, as required by ASC 260, Earnings Per Share. The Company has restated the weighted average share amounts and the related per share amounts in the accompanying consolidated statements of operations in accordance with ASC 250, Accounting Changes and Error Corrections.

The correction to the weighted average share amounts and the per share amounts does not affect any other amount in the financial statements. The Company has separately corrected the schedule of potentially dilutive securities in Note 3 to include the Representative’s Warrant issued in March 2025 and to correct the stated totals. Net loss, net loss attributable to Capstone Holding Corp. stockholders, the consolidated balance sheets, the consolidated statements of stockholders’ equity (deficit) and the consolidated statements of cash flows are not affected. The weighted average share amounts for the comparable 2024 periods are also not affected.

The following table presents the effect of the restatement on the accompanying consolidated statements of operations:

		Three Months Ended June 30, 2025
		As Previously Reported				Adjustment				As Restated
Net loss attributable to Capstone Holding Corp. stockholders (in thousands)		$	(700	)		$	—			$	(700	)
Weighted average number of common shares outstanding – basic and diluted			5,406,305				(171,065	)			5,235,240
Net loss per share attributable to Capstone Holding Corp. stockholders – basic and diluted		$	(0.13	)		$	—			$	(0.13	)

		Six Months Ended June 30, 2025
		As Previously Reported				Adjustment				As Restated
Net loss attributable to Capstone Holding Corp. stockholders (in thousands)		$	(3,133	)		$	—			$	(3,133	)
Weighted average number of common shares outstanding – basic and diluted			5,406,305				(2,000,737	)			3,405,568
Net loss per share attributable to Capstone Holding Corp. stockholders – basic and diluted		$	(0.58	)		$	(0.34	)		$	(0.92	)

Note 2 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 Rule 424(b) of the Securities Act of 1933, as amended, pursuant to the Registration Statement on Form S-1 (File No. 333-284105) which was declared effective by the SEC on February 14, 2025. The Public Offering Shares were sold at a public offering price of $4.00 per share, which generated net proceeds of approximately $3,252,000 after deducting underwriting discounts and commissions and other offering expenses.

On March 7, 2025, TotalStone entered into a fifth 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 the 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 $1,006,377 plus 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.

5

Note 3 Summary of Significant Accounting Policies

Basis of Presentation and Preparation

The accompany consolidated financial statements include the accounts of Capstone and its consolidated subsidiaries (collectively, the “Company”). Intercompany accounts and transactions have been eliminated. Prior-year amounts may include instances of changes to prior-year amounts to achieve comparability to the most recent fiscal year.

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 Form 10-Q (“Form 10-Q”). Accordingly, they do not include all of the information and notes required by GAAP for annual consolidated financial statements.  

The consolidated balance sheet at  December 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of 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 Form 10-K for the fiscal year ended December 31, 2024 (“2024 Form 10-K”). This report should be read in conjunction with our 2024 Form 10-K filed with the SEC on March 31, 2025.

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 June 30, 2025 and its results of operations, cash flows, and changes in stockholders’ deficit for the three and six months ended  June 30, 2025 and 2024.  The results for the three and six months ending  June 30, 2025, are not 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 a number of 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 may impact on the Company in the future, actual results may differ from these estimates and assumptions.

Accounts Receivable

Accounts receivable 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 may affect the Company’s ability to collect from customers. As of June 30, 2025 and December 31, 2024, the allowance for doubtful accounts totaled approximately $104.0 thousand.

6

Note 3 Summary of Significant Accounting Policies (cont.)

Inventories

Inventories consisting of finished goods are stated at the lower of cost, determined by the average cost method, or net realizable value. Inventories also include deposits placed on inventory purchases for shipments not yet received. Significant prepaid inventory may be located overseas. At June 30, 2025 and December 31, 2024, the total prepaid inventory balance was $290.0 thousand and $163.0 thousand, respectively. The reserve for obsolete inventory at June 30, 2025 and December 31, 2024, totaled $596.0 and $576.0 thousand, respectively.

Property and Equipment

Property and equipment is stated at cost and is depreciated over the estimated useful lives ranging from three to forty 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. Maintenance and repairs are charged to expense as incurred. Depreciation and amortization expense on property and equipment for the three and six months ended June 30, 2025 and 2024 were $65.0 and $71.0 thousand and $130.0 and $139.0 thousand, respectively.

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 are not amortized but rather are tested for impairment annually as of the 1^st day of the fourth quarter of each year or more frequently if indications of potential impairment exist. The Company’s goodwill is recognized in one reporting unit, its consolidated subsidiary, TotalStone.

In evaluating potential goodwill impairment, we first assess qualitative factors to determine whether it is more likely than not 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 than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative analysis. If the quantitative analysis indicates the carrying value of a reporting unit exceeds its fair value, we measure any goodwill impairment losses 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. The Company determined that no impairment was required for the periods presented.

Intangible assets with finite lives, consist of a distribution agreement, amortized over the term of the agreement.

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 that no impairment was required for the periods presented.

Revenue Recognition

Sales are recognized when revenue is realized or becomes realizable and has been earned, net of sales tax. In general, revenue is recognized at a point in time, which is usually upon shipment of the product. Our sales predominantly contain a single delivery element and revenue is recognized at a point in time when ownership, risks and rewards transfer. For the six months ended June 30, 2025 and 2024, there are no estimates of variable consideration represented in revenue.

7

Note 3 Summary of Significant Accounting Policies (cont.)

Shipping and Handling

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

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. Potential common shares are excluded from the computation when their effect is antidilutive.

For the six months ended June 30, 2025 and 2024, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:

		June 30, 2025				June 30, 2024
Stock options			150				900
Warrants			6,322				6,322
Representative's warrant			62,500				—
Total			68,972				7,222

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires companies to disclose disaggregated information related to the effective tax rate reconciliation and income taxes paid. This guidance is effective for public entities for fiscal years beginning after December 15, 2024. We do not anticipate the adoption of this guidance will have a material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires disclosures about specific types of expenses included in expense captions presented on the face of the Consolidated Statement of Operations. This guidance is effective for public entities for fiscal years beginning after December 15, 2026. We are currently reviewing this guidance and its impact on our consolidated financial statements.

8

Note 4 Liquidity and Uncertainties

The Company has recognized operating losses and net losses on a year-to-date basis in 2025 and for the years ended December 31, 2024 and 2023. Although losses have been recognized, the Company recognized positive operating cash flows for the years ended December 31, 2024 and 2023. Operating results and cash flows fluctuate based on seasonality with the first and fourth quarter typically slower periods in our calendar year. Working capital as of June 30, 2025 excluding the current portion of long-term debt is $2.5 million. Our long-term debt classified as current liabilities in our balance sheet as of June 30, 2025 based on contractual maturity dates includes $1.9 million payable to Brookstone (notes payable to shareholder) and $989.0 thousand related to the seller note with Avelina Masonry. The maturity date of notes payable to Brookstone have historically been extended and subject to liquidity may be extended in future periods. The seller note is subordinated to our line of credit agreement and payments on that note are restricted while the line of credit is outstanding.

The Company primarily funds operations through cash provided from operations and available capacity under our ABL Facility (“Revolver”). In 2024 the Company was not in compliance with certain of the Revolver’s financial covenants which have been waived by our lender. As of June 30, 2025, the Company was in compliance with the Revolver’s financial covenants. In June 2025, the Company executed an amendment to the Revolver that extended the maturity date from June 2025 through December 2025. The Company believes the Revolver will continue to be available and the longer-term extension will be executed with financial covenants aligned to the Company’s anticipated future results.

Forecasted future results, the longer-term extension of the Revolver and future compliance with financial covenants are subject to risks and uncertainties which could have a material adverse effect on our business, financial condition and results of operations.

As more fully described in Note 9, on May 15, 2025, the Company entered into a common stock purchase equity line agreement with an accredited investor. Under that agreement, the Company has the right, but not the obligation, to sell to the Equity Line Investor, and the Equity Line Investor is obligated to purchase the Company’s common stock.

Additionally, on July 29, 2025, the Company entered into a securities purchase agreement with an institutional investor pursuant to which the Company authorized the issuance of senior secured convertible notes in the aggregate original principal amount of up to $10,909,885. The first Convertible Note was issued in the original principal amount of approximately $3,272,966. The Company received gross proceeds of $3,000,000, prior to the deduction of transaction related expenses, from the initial closing of the Convertible Note Financing (see Note 9).

The Company currently believes that it will have sufficient liquidity to operate for a period of at least one year from the issuance date of the June 30, 2025 interim consolidated financial statements.

Note 5 Related Party Transactions

TotalStone is party to an agreement with a related party, Brookstone Partners IAC (“Brookstone”), the Company’s majority shareholder. Pursuant to this agreement, Brookstone provides annual consulting services totaling $400.0 thousand. 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 to two percent (2%) of total consideration of any acquisition of a majority of the equity interests of any entity. Amounts accrued for such consulting services totaled $351.0 thousand as of June 30, 2025 and December 31, 2024. The management fees expensed for the six months ended June 30, 2025 and 2024 were $200.0 thousand and included in selling, general and administrative expenses. 

Stream Finance, LLC, which serves as a creditor on TotalStone’s mezzanine term loan of $2.5 million, accrued interest of $372.0 thousand and an accrued amendment fee of $85.0 thousand as of June 30, 2025, is managed by Brookstone.

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 (the “Capstone Capital Raising Transaction”).

9

Note 6 Line of Credit

TotalStone has a Revolving Credit Note (“Revolver”) available and outstanding pursuant to a Revolving Credit, Term Loan and Security Agreement, as amended, with Berkshire Bank. TotalStone’s maximum revolving advance amount is $11.5 million for working capital purposes. Advances under the credit agreement are limited to a formula-based amount of up to eighty-five (85%) percent of the face amount of the TotalStone “Eligible Accounts Receivable” plus approximately fifty (50%) percent of the face amount of the TotalStone, “Finished Goods Inventory” up to a maximum amount of $8.0 million. Interest charged on the unpaid principal amount of the Credit Agreement bears a rate per annum of SOFR plus 3.0% (7.44% and 7.19% at June 30, 2025 and December 31, 2024, respectively). The balance outstanding on the line of credit was $8.7 million and $6.3 million as of June 30, 2025 and December 31, 2024, respectively, with a maturity date of December 17, 2025.

Note 7 Debt

As of June 30, 2025, the Company had $5.8 million in long-term debt, with $2.9 million payable within 12 months. A summary of the Company’s long-term debt is as follows in (“000’s”):

		June 30, 2025				December 31, 2024
Long-term Debt
Note payable to BP Peptides, LLC “Brookstone”. The unsecured loan bears interest at 6% per annum, with interest earned quarterly and the amended maturity date is June 30, 2026. As of June 30, 2025 and December 31, 2024, the balance includes $137.0 thousand and $116.0 thousand of accrued interest, respectively.		$	837			$	817
Mezzanine term loan to Stream Finance, LLC, collateralized by substantially all of TotalStone’s assets and subordinated to the Bank term notes. Interest is calculated monthly as the Base Rate divided by an Adjustment Factor of 0.75, not to exceed 15% per annum (see further details below), with a maturity date of September 30, 2026. On March 7, 2025, the Special Preferred Membership Interests were exchanged for loans in an aggregate principal of $1,143,646 and an amendment fee of $695,000 payable on the deferral date of September 30, 2027 which are included in this amount. At June 30, 2025 and December 31, 2024, $372.0 thousand and $243.0 thousand of accrued interest remains unpaid and is included within this amount, respectively.			3,536				1,558
Seller’s note with Avelina Masonry, LLC, which required monthly payments of $48.0 thousand. The original maturity date was November 13, 2022 but the loan has not been paid in full and is in default. The loan bears interest at one-month SOFR plus 4.5% plus 3.0% default (11.94% and 12.14% at March 31, 2025 and December 31, 2024, respectively. At June 30, 2025 and December 31, 2024, $222.0 thousand and $165.0 thousand of accrued interest remains unpaid and is included within this amount, respectively.			989				932
Term note agreement with Berkshire Bank, due in 48 consecutive monthly payments of $83.0 thousand. The term note was paid in full on March 10, 2025. The loan was secured by all assets of TotalStone. Interest was charged at the one- month SOFR plus 3.5% (8.19% at December 31, 2024).			—				910
In December 2022, TotalStone sold its facility in Navarre, Ohio to a nonaffiliated third party for a purchase price of $3.2 million and concurrently entered into a leaseback transaction. The transaction is treated as a failed sale in accordance with U.S. GAAP. The Company therefore recorded a financing liability related to the sale-leaseback in the amount of the sale price. The obligation matures in January 2048 and requires monthly payments of principal and interest. With the sale leaseback, TotalStone signed a lease agreement with a 25-year lease term. The initial annual lease payment of $259.0 thousand increases 2% per annum. The imputed interest rate is 8.10%.			3,168				3,174
Unsecured promissory note with Brookstone plus accrued interest to acquire a minority interest in DPH. Interest accrues at 6% per annum and the maturity date is June 30, 2026. At June 30, 2025 and December 31, 2024 $277.0 thousand and $253.0 thousand of accrued interest remains unpaid and is included within this amount, respectively.			1,077				1,053
			9,607				8,444
Less: current portion			(2,910	)			(1,855	)
Less unamortized loan origination fees			(870	)			(266	)
Total Long-term debt		$	5,827			$	6,323

10

 

Note 7 Debt (cont.)

Scheduled maturities of long-term as of June 30, 2025, are as follows:

2025		$	2,910
2026			3,555
2027			27
2028			35
2029			44
Thereafter			3,036
Total		$	9,607

Note 8 Leases

As of June 30, 2025, the balance of our right-of-use (“ROU”) assets was $3.2 million, net and lease liabilities were $3.3 million, included in current portion, lease liability and lease liability, net of current portion. The maturity of our lease liabilities as of June 30, 2025 is as follows in (“000’s”):

Year		Finance				Operating
2025		$	168			$	812
2026			122				830
2027			64				519
2028			—				166
2029			—				169
Thereafter			—				780
Total undiscounted Lease Payments			354				3,276
Less: Present value discount			(12	)			(330	)
Total Lease Liability		$	342			$	2,946

Lease expense recognized on our leases is as follows in (“000’s”):

		Six months Ended June 30, 2025				Six months Ended June 30, 2024				Three months Ended June 30, 2025				Three months Ended June 30, 2024
Finance leases
Amortization expense		$	72			$	83			$	41			$	41
Interest expense			6				8				3				4
Operating leases
Straight-line rent expense			395				389				197				194
Total lease expense		$	473			$	480			$	241			$	239

The following summarizes additional information related to our leases for 2025 and 2024 in (“000’s”):

		Six months ended June 30, 2025								Three months ended June 30, 2024
		Finance				Operating				Finance				Operating
Weighted-average remaining lease terms (years)			2.3				5.7				2.6				3.4
Weighted-average discount rate			3.51	%			3.47	%			4.00	%			2.95	%
ROU assets obtained in exchange for new lease liabilities		$	180			$	1,395			$	63			$	—

11

Note 9 Stockholders’ Equity

Prior to 2025, Capstone had no outstanding shares of preferred stock.

Series B Preferred Stock:

In connection with the IPO and Restructuring. Capstone filed with the Delaware Secretary of State to designate two million shares of the Company’s authorized preferred stock as Series B Preferred Stock (“Series B Preferred Stock”), no par value.

In February 2025, Nectarine Management, LLC, an entity controlled by Michael Toporek, purchased 985,063 shares of Series B Preferred Stock for a purchase price of $30,000.

The holders of shares of Series B Preferred Stock (“Series B Preferred Stockholders”) have the right to vote, together with the holders of all the outstanding shares of Common Stock on all matters on which holders of Common Stock have the right to vote. The holders of shares of Series B Preferred Stock have the right to cast one vote for each share of Series B Preferred Stock held by them.

Series B Preferred Stock is convertible into Common Stock at the holder’s option any time after the two-year anniversary of the Company’s February 2025 initial public offering, provided the Common Stock’s closing price meets or exceeds $40 per share on the date of conversion. The number of shares of Common Stock issuable upon conversion of each share of Series B Preferred Stock is based on a specified formula as set forth in the Series B Certificate of Designation.

The Series B Preferred Stockholders have certain protective rights. Until less than 50% of the originally issued Series B Preferred Stock remains outstanding, holders of at least 50% of such shares may appoint two directors to the Board. Additionally, until less than 20% of shares of Series B Preferred Stock remains outstanding, the Company cannot take certain actions without the approval of at least 50% of the outstanding Series B Preferred Stock, including amending governing documents, altering the Board size, issuing or modifying Series B Preferred Stock, engaging in mergers, consolidations, or asset sales (except in the ordinary course), repurchasing shares (except under employment agreements), adopting equity incentive plans exceeding 10% of outstanding Common Stock, issuing additional shares (except under an approved plan), acquiring other entities, or incurring new indebtedness beyond refinancing existing debt.

Recent Transactions

As previously disclosed in Item 5 of the Quarterly Report on Form 10-Q for the period ended March 31, 2025 filed with the Securities and Exchange Commission on May 15, 2025, the Company entered into a common stock purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Equity Line Investor”), dated May 14, 2025. Under the terms and subject to the conditions set forth in the Purchase Agreement, the Company has the right, but not the obligation, to sell to the Equity Line Investor, and the Equity Line Investor is obligated to purchase, up to the lesser of (a) $20,000,000 in aggregate gross purchase price of the Company’s common stock (the “Equity Line Securities”) and (b) the Exchange Cap (as defined in the Purchase Agreement). The Equity Line Securities to be issued by the Company and purchased by the Equity Line Investor, if any, will be sold at a purchase price equal to 97% of the lowest daily volume-weighted average price of the Company’s common stock on the Nasdaq Capital Market during the three consecutive trading days immediately following the trading date on which a valid purchase notice is delivered to the Equity Line Investor by the Company.

12

 

Note 9 Stockholders’ Equity (cont.)

On June 26, 2025, the Company and the Equity Line Investor entered into a first amendment to the Purchase Agreement (the “First Amendment to Purchase Agreement”), which amended the definition of “VWAP Purchase Maximum Amount” in the Purchase Agreement to (a) remove the volume limitation on the number of Equity Line Securities that may be purchased pursuant to a single VWAP Purchase (as defined in the Purchase Agreement) based on 100% of the five-day average trading volume, and (b) increase the dollar-based limitation on the number of Equity Line Securities that may be purchased pursuant to a single VWAP Purchase from $2 million to $3 million. As amended, the term “VWAP Purchase Maximum Amount” now means the maximum number of Equity Line Securities that can be purchased in a single VWAP Purchase is equal to the lesser of (a) 40% of the trading volume in the Company’s common stock on the relevant exchange on the day the VWAP Purchase is exercised, or (b) $3 million divided by the volume-weighted average price of the common stock on the trading day immediately preceding the date the VWAP Purchase is exercised.

As more fully described in the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 4, 2025, on July 29, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Buyer”), pursuant to which the Company authorized the issuance of senior secured convertible notes to the Buyer, in the aggregate original principal amount of up to $10,909,885, which are being issued with a 8.34% original issue discount (each, a “Convertible Note”). The first Convertible Note was issued in the original principal amount of approximately $3,272,966 (the “Convertible Note Financing”). The Convertible Notes are convertible into shares of common stock, $0.0005 par value per share (the “Common Stock”), in certain circumstances in accordance with the terms of the Convertible Notes at an initial conversion price per share of $1.72. The Company received gross proceeds of $3,000,000, prior to the deduction of transaction related expenses, from the initial closing of the Convertible Note Financing.

Note 10 Segment Information

The Company has one operating and reportable segment which consists of the operations of TotalStone. The Company also has corporate-level activity, which is included in Capstone Holding Corp. (“Capstone” or “the Parent”) which consists primarily of board fees and, investor relations, filing, legal, insurance, accounting and consulting expenses and other non-operating income and expenses not identifiable and allocated to TotalStone. The Parent balance sheet information includes cash and cash equivalents, net deferred tax asset, debt and other assets and liabilities which are also not identifiable to the operations of TotalStone.

The Company’s chief executive officer is also the Company’s chief operating decision maker (“CODM”). The Company’s chief operating decision maker evaluates the performance of segments based on operating income (loss). Cost of goods sold and selling, general and administrative expenses, as reported on the statement of operations, are the significant segment expenses provided to the CODM on a regular basis.

13

 

Note 10 Segment Information (cont.)

The following tables present financial information regarding the Company’s reportable segment reconciled to the Company’s consolidated totals.

		Three Months Ended June 30,
		2025																2024
		TotalStone				Parent				Eliminations				Consolidated				TotalStone				Parent				Eliminations				Consolidated
Income (loss) from operations before taxes:
Sales		$	12,852			$	—			$	—			$	12,852			$	12,886			$	—			$	—			$	12,886
Cost of goods sold			9,722				—				—				9,722				10,122				—				—				10,122
Gross Profit			3,130				—								3,130				2,764				—				—				2,764
Selling, general and administrative expenses			2,545				845				—				3,390				2,718				92				(60	)			2,750
Income (loss) from operations		$	585			$	(845	)		$	—			$	(260	)		$	46			$	(92	)		$	60			$	14
Interest expense			(417	)			(23	)			—				(440	)			(382	)			(12	)			—				(394	)
Other income (expense) net			—				—				—				—				—				60				(60	)			—
Income (loss) from operations before taxes		$	168			$	(868	)		$	—			$	(700	)		$	(336	)		$	(44	)		$	—			$	(380	)
Other financial information:
Depreciation & amortization		$	114			$	—			$	—			$	114			$	121			$	—			$	—			$	121
Capital expenditures			2				—				—				2				21				—				—				21

		Six Months Ended June 30,
		2025																2024
		TotalStone				Parent				Eliminations				Consolidated				TotalStone				Parent				Eliminations				Consolidated
Income (loss) from operations before taxes:
Sales		$	20,751			$	—			$	—			$	20,751			$	22,245			$	—			$	—			$	22,245
Cost of goods sold			16,296				—				—				16,296				17,737				—				—				17,737
Gross Profit			4,455				—								4,455				4,508				—				—				4,508
Selling, general and administrative expenses			4,944				1,409				(210	)			6,143				5,153				178				(120	)			5,211
(Loss) income from operations		$	(489	)		$	(1,409	)		$	210			$	(1,688	)		$	(645	)		$	(178	)		$	120			$	(703	)
Interest expense			(695	)			(45	)			—				(740	)			(745	)			(29	)			—				(774	)
Other income (expense) net			150				60				(210	)			—				—				120				(120	)			—
Loss from operations before taxes		$	(1,034	)		$	(1,394	)		$	—			$	(2,428	)		$	(1,390	)		$	(87	)		$	—			$	(1,477	)
Other financial information:
Depreciation & amortization		$	230			$	—			$	—			$	230			$	242			$	—			$	—			$	242
Capital expenditures			2				—				—				2				121				—				—				121

		As of June 30, 2025																As of December 31, 2024
		TotalStone				Parent				Eliminations				Consolidated				TotalStone				Parent				Eliminations				Consolidated
Total assets		$	43,268			$	9,022			$	(405	)		$	51,885			$	40,468			$	7,858			$	(1,105	)		$	47,221

Note 11 Subsequent Events

As more fully described in the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 4, 2025, on July 29, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Buyer”), pursuant to which the Company authorized the issuance of senior secured convertible notes to the Buyer, in the aggregate original principal amount of up to $10,909,885, which are being issued with a 8.34% original issue discount (each, a “Convertible Note”). The first Convertible Note was issued in the original principal amount of approximately $3,272,966 (the “Convertible Note Financing”). The Convertible Notes are convertible into shares of common stock, $0.0005 par value per share (the “Common Stock”), in certain circumstances in accordance with the terms of the Convertible Notes at an initial conversion price per share of $1.72. The Company received gross proceeds of $3,000,000, prior to the deduction of transaction related expenses, from the initial closing of the Convertible Note Financing.

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ITEM 4. CONTROLS AND PROCEDURES

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, our principal executive officer and principal financial officer concluded that as of June 30, 2025, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to the following material weaknesses in our internal control over financial reporting.

Due to accounting resource constraints, we have had limited review controls. These constraints have resulted in (1) a lack of segregation of duties, since we have a limited administrative staff, and (2) lack of internal controls structure review.

Our management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. All responsibility for accounting entries and the creation of financial statements has historically been held primarily by a single person, though the Company engages multiple accounting consultants for accounting, tax and audit support. In April 2025, the Company hired a controller.

Material Weakness Identified in Connection with the Restatement

In connection with the restatement described in Note 1A to the consolidated financial statements included in this Amendment, 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. As a result, the weighted average share and per share amounts for the three and six months ended June 30, 2025 were misstated, and the Company has restated those amounts in this Amendment. This control deficiency existed as of June 30, 2025 and is in addition to the material weaknesses described above. It does not change management’s conclusion that the Company’s disclosure controls and procedures were not effective as of June 30, 2025.

The Company has designed and implemented a remediation plan directed at the material weaknesses described above. The Company has expanded its accounting staff so that the preparation of the financial statements is no longer dependent on a single individual, and it has established layers of review under which the preparer of a financial statement and the reviewer of that statement are different individuals. The error described above was identified through that review process.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting

15

ITEM 6: EXHIBITS

Exhibit
Number		Exhibit Description
10.1		Form of Common Stock Purchase Agreement (incorporated by reference to exhibit 10.1 to quarterly report on Form 10-Q filed with the SEC on May 15, 2025)
10.2		Form of Registration Rights Agreement (incorporated by reference to exhibit 10.2 to quarterly report on Form 10-Q filed with the SEC on May 15, 2025)
10.3		First Amendment to Common Stock Purchase Agreement, dated June 26, 2025, by and between Capstone Holding Corp. and Tumim Stone Capital, LLC (incorporated by reference to exhibit 10.1 to current report on Form 8-K filed with the SEC on June 27, 2025)
31.1*		Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer
31.2*		Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer
32.1**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer
32.2**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

** Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CAPSTONE HOLDING CORP.
Date: August 12, 2026	By:	/s/ Matthew E. Lipman
		Matthew E. Lipman
		Chief Executive Officer (Principal Executive Officer)

Date: August 12, 2026	/s/ Edward Schultz
	Edward Schultz
	Chief Financial Officer
	(Principal Financial and Principal Accounting Officer)

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