NASDAQ: CAPS

We are committed to being the preferred partner for our customers by providing high-quality products, expert support, and exceptional service. Our success is driven by our deep industry expertise, long-standing customer and supplier relationships, an expanding North American footprint, digital infrastructure that supports our customers and a relentless focus on operational excellence.

Our Business Strategy and Operating Model

Capstone Long-Term Growth Strategy. Our long-term growth strategy is built on the foundational strengths of our operating subsidiaries and the strategic opportunities available in the building products distribution and manufacturing industry. Our strategy has the following characteristics:

Deep Team. Capstone is controlled by Brookstone Partners, a private equity group with 25 years of deep expertise in building products investment. Brookstone Partners is controlled by Matthew Lipman, our chief executive officer, a member of our board of directors, and Michael Toporek, the chairman of our board. The Capstone leadership team includes seasoned operating executives and building products acquisition and investment professionals. Capstone’s leadership team includes its Lead Independent Director, Charles “Chuck” Dana. Mr. Dana spent 19 years at Owens Corning, a leading building materials company. At Owens Corning, Mr. Dana held various positions including Controller, President Global Composites and then Group President Building Materials. In addition, from the Company’s acquisition of Instone in April 2020 through December 31, 2025, Instone’s revenues have increased from approximately $32.2 million to approximately $44.2 million. In February 2008, a Brookstone Partners affiliate invested $8.8 million in Woodcrafter’s Home Products Holdings LLC. Brookstone’s team worked with Woodcrafter’s management to grow earnings and Brookstone completed the sale of all of its interests in Woodcrafter’s for $32 million in December 2013. The ability to identify, acquire and integrate acquisition candidates is a critical skill set to augment the operating expertise that drives organic growth. The current operating company has successfully executed multiple acquisitions and integrations, laying a solid foundation for continued expansion.

Strategic Timing. We believe we are strategically positioned to capitalize on market conditions within the building products sector. Historically, acquiring companies at interest rate peaks has yielded strong returns, and we are poised to leverage these strategic investment opportunities as the market evolves.

Industry Dynamics. According to the Bain & Company Global M&A Report published in 2024 (the “Bain Report”), this is “just the type of environment that has proved to offer opportunities to companies that are willing to make bold moves.” The Bain Report goes on to say, “building products companies that make frequent and material acquisitions substantially outpace inactive companies in total shareholder returns, 9.6% vs 2.7%” and “the most successful companies will pursue scope M&A to build product, geography, and capability adjacencies.”

The M&A environment for the building products sector is expected to improve because, according to the Bain Report, “there are ample one-off opportunities to acquire struggling assets”, and “financial investors have taken a step back, especially in North America, removing a potentially formidable layer of competition.”

Scale. For scale M&A, opportunities in core businesses allow for more operational synergies. The Bain Report states that “allowing management to focus on a more related group of products with some level of shared channels, end markets, or manufacturing processes helps focus efforts and tells a clearer equity story.”

1

Table of Contents

Scope. Given macroeconomic uncertainty, companies who leverage their parenting advantage, the ability to effectively manage and integrate acquisitions, will be the most successful with regards to scope M&A. The Bain Report states that “the path to leadership generally means overlooking smaller assets in favor of bigger players for a first move in a new space.”

The “Annual total shareholder returns for building products companies” chart and quotes from the Bain Report are used with permission from Bain & Company. The Bain Report was not commissioned by the Company. The Company does not currently and has not in the past had a direct or indirect business relationship with Bain & Company. The Bain Report is publicly available via the Insight — Featured Topics portion of Bain & Company’s website.

Strategic Positioning. We believe we are strategically well-positioned to take advantage of the current market opportunities because of:

Team strength. The industry experience of the Board and Instone management provides the Company with the expertise to evaluate, acquire, and integrate acquisitions.

Experience integrating acquisitions. Since 2006, the Company has successfully integrated six acquisitions. The team believes the Company has the resources and expertise to continue to integrate acquisitions successfully.

Geographic distribution footprint. The current service area of the Company, which includes 38 U.S. states and two Canadian provinces, provides a good basis on which to make both “scale” and “scope” acquisitions.

Growth Premium. As Capstone continues to scale, growing its EBITDA, we anticipate benefiting from valuation premiums associated with increased size. This growth, coupled with consistent earnings performance, is expected to drive substantial shareholder value and enhance our market positioning.

2

Table of Contents

During fiscal year 2025, the Company completed two material acquisitions that significantly expanded its geographic footprint, product offerings, and revenue base:

Fraser Canyon Holdings Inc. / Canadian Stone Industries. On December 1, 2025, through its indirect subsidiary Instone Canada Corp., the Company acquired 100% of the outstanding equity interests of Fraser Canyon Holdings, Inc. (“FCHI”) and substantially all assets of Continental Stone Industries, Inc. (“CSIA”), collectively the CSI business. FCHI is the parent company of Canadian Stone Industries Partnership (“CSIP”), Canadian Stone Industries Inc. (“CSII”), and CSIA, which together distribute natural and manufactured stone products wholesale from locations in Langley, British Columbia, North York, Ontario, and San Leandro, California. Effective at the closing of the CSI acquisition, the San Leandro, California operations were integrated into Instone’s U.S. distribution network; the CSI business today operates from two locations in British Columbia and Ontario. The purchase consideration for the combined Fraser Canyon Acquisition consisted of: (i) C$6,200,000 in cash (approximately US$4,447,000 at the closing-day exchange rate of US$1.00 = C$1.3943), of which approximately US$459,000 (C$647,000) represented the Continental Cash Purchase Price paid by TotalStone, LLC for the CSIA Asset Purchase, less a working capital reduction of C$473,189 (approximately US$339,000) that reduced the Cash Purchase Price payable to the FCHI sellers; (ii) a First SPA Note in the principal amount of C$1,600,000 (approximately US$1,148,000), maturing March 31, 2027; (iii) a Second SPA Note in the principal amount of C$2,000,000 (approximately US$1,434,000), maturing December 1, 2028; and (iv) contingent earn-out consideration of up to C$3,000,000 (approximately US$2,152,000) based on Average EBITDA during the 2026–2027 and 2027–2028 measurement periods. The acquisition-date fair value of the contingent earn-out consideration, as determined with the assistance of Loop Capital, was approximately US$100,000 and is reflected in the purchase price allocation (see Note 4). The seller notes, working capital adjustment, and earn-out provisions relate solely to the FCHI Share Purchase. U.S. dollar amounts have been translated from Canadian dollars at the closing-day exchange rate of US$1.00 = C$1.3943. This acquisition marked the Company's entry into the Canadian market and the U.S. West Coast, and is reported within the Company's Instone/TotalStone segment. FCHI reported net revenue of $16.4 million for the year ended December 31, 2024.

Carolina Stone Holdings, LLC. On August 22, 2025, through its indirect subsidiary CS Purchase Holdings, LLC, the Company acquired 100% of the membership interests of Carolina Stone Holdings, LLC (“CSH”). CSH, together with its subsidiary Carolina Stone Distributors, LLC, operates a stone distribution and installation business under the trade name “Carolina Stone Products” in the Raleigh-Durham and Charlotte, North Carolina markets. The aggregate purchase consideration consisted of (i) $2,625,000 in cash, subject to a working capital adjustment, (ii) a seller note in the original principal amount of $1,250,000, and (iii) contingent earn-out consideration of up to $825,000 (acquisition-date fair value of approximately $250,000), payable based on Carolina Stone’s achievement of specified Adjusted EBITDA thresholds during the fiscal years ending December 31, 2025, 2026, and 2027. The final working capital true-up resulted in additional cash consideration of $76,500 paid at closing and $200,000 released from holdback in December 2025, plus $56,047 added to the seller note principal, for total cash consideration of $2,758,000. Aggregate purchase consideration, including the earn-out at fair value, was approximately $4.2 million. The acquisition was financed in part with proceeds from the Company’s convertible note facility. Carolina Stone’s operations include both wholesale distribution and professional stone installation services for residential, commercial, and multi-family construction projects, and are reported in the Company’s Carolina Stone segment.

Capstone intends to drive sustainable growth, expand its geographic presence in the building products industry, and deliver superior value to its customers, shareholders, and other stakeholders. We expect to work with our businesses to achieve this through the following strategic pillars:

Expand Market Presence. We are committed to expanding our geographic footprint, increasing penetration in existing markets, and entering new, underserved regions. Our sales and marketing team continues to seek new opportunities to onboard customers in markets we are not currently servicing. In 2025, we onboarded customers in 6 new states, which are included in our distribution network of 38 U.S. states and two Canadian provinces. We will achieve this through both organic growth and strategic acquisitions that complement our existing business and provide opportunities to broaden our product offerings and customer base.

Enhance Product Portfolio. We continuously strive to expand and diversify our product offerings to meet the evolving needs of our customers. This includes introducing new textures, colors, and materials within our stone product lines, as well as expanding into adjacent building products and stone substitutes. By broadening our portfolio, we aim to increase our share of wallet with existing customers and attract new customers.

Operational Excellence. We are focused on optimizing our operations to improve efficiency, reduce costs, and enhance customer satisfaction. This involves investing in advanced technologies, streamlining our supply chain, and implementing best practices across all aspects of our business. Operational excellence is key to maintaining our competitive edge and ensuring long-term profitability.

Customer-Centric Approach. Our customers are at the heart of everything we do. We are committed to building strong, long-lasting relationships by providing high-quality products, exceptional service, and expert support. Our goal is to be the preferred partner for our customers, helping them succeed in their projects and achieve their business objectives.

Innovation. We recognize the importance of innovation in the building products sector and prioritize it, continually seeking new ways to improve our products, processes, and services to stay ahead of industry trends and meet the demands of a changing market. The most recent example is our introduction of the Toro® family of manufactured stone products. We used our 30 years of market knowledge to formulate a product offering that is well thought out to meet the needs of end use customers and distributors. We painstakingly designed each color family. We honed in on key manufacturing steps to drive quality and consistency then thoughtfully designed packaging to meet the needs of distributors. The end result was a set of products that competes with high-end alternatives in the sector on aesthetics, but for a better value. We expect Toro® to help drive significant organic revenue growth in the next three years.

Operating Model

Our operating model is designed to support our business strategy and drive consistent, profitable growth. Key elements of our operating model include:

Integrated Supply Chain. We operate an integrated supply chain that connects our network of suppliers, manufacturing partners, and distribution centers. This allows us to efficiently manage inventory, optimize logistics, and ensure timely delivery of products to our customers. Our supply chain capabilities are a critical component of our ability to provide reliable service and meet the needs of our diverse customer base.

Strategic Distribution Network. Our strategically located distribution centers enable us to serve 38 U.S. states and two Canadian provinces with speed and efficiency. Our nine distribution and warehouse facilities across the United States and Canada are designed to optimize inventory management, reduce lead times, and ensure that our customers have access to the products they need, when they need them. Our expanded North American distribution network is a key competitive advantage that supports our market position and provides a robust base for integrating additional distributors or manufacturers.

Scalable Infrastructure. We have invested in scalable infrastructure that can support our growth objectives and adapt to changing market conditions. This includes state-of-the-art facilities, advanced technology, and robust business processes that enable us to efficiently manage our operations and deliver consistent performance.

Experienced and Committed Workforce. Our employees are the foundation of our success. We have a highly experienced and committed workforce that shares our dedication to excellence, innovation, and customer satisfaction. We invest in the training and development of our employees to ensure they have the skills and knowledge needed to drive our business forward and meet the challenges of a dynamic industry.

Financial Discipline. We are committed to maintaining financial discipline and leveraging our resources to drive sustainable growth. This includes prudent capital allocation, cost management, and a focus on generating strong cash flow. We intend to invest in strategic initiatives, pursue growth opportunities, and return value to our shareholders.

3

Table of Contents

Through the execution of our business strategy and the strength of our operating model, we are well-positioned to capitalize on the opportunities in the thin veneer stone and masonry products industry and deliver long-term value to our stakeholders.

Industry Overview

The building products industry in the United States is an essential segment of the broader construction market, contributing to both the structural integrity and aesthetic enhancement of buildings. The stone veneer subsector comprises several key segments, including natural stone, manufactured stone, and masonry products, each serving distinct roles within the construction process. The North American stone and masonry products industry represents a significant segment of the broader building products market, with continued growth expected to be supported by demand in both residential and commercial construction, as well as ongoing trends towards sustainability and enhanced building aesthetics.

Market Dynamics

Residential Construction Growth. The new residential construction market, a significant driver of demand in the stone industry, has softened as interest rates have increased. This is also in part driven by the timing of weakening new single and multi-family construction and renovation spending. New construction activity is sensitive to interest rate trends and housing supply dynamics. With a significant backlog of units authorized but not yet started, changes in interest rates could influence construction timing and spending patterns.

Renovation and Remodeling. The renovation and remodeling market has seen substantial growth, particularly following the COVID-19 pandemic, which spurred increased investment in home improvement. In 2022, U.S. homeowners spent over $500 billion on renovation projects, with a significant portion directed towards exterior upgrades and outdoor living spaces. Thin veneer stone, known for its durability and aesthetic versatility, is increasingly favored for these applications. Remodeling activity has been influenced by interest rate trends and the normalization of pandemic-era savings patterns. Industry forecasts generally point to a recovery in remodeling spend driven by pent-up demand, home equity access, and aging housing stock.

Commercial Construction. The commercial construction sector, particularly in hospitality, retail, and office buildings, continues to present growth opportunities for the stone industry. Stone products are highly valued in commercial construction for their durability, fire resistance, and ability to convey a sense of luxury. Continued investment in commercial construction is expected to support ongoing demand for stone and masonry products.

Competitive Landscape

The U.S. stone distribution market is highly fragmented, with a mix of large national distributors, regional players, and numerous smaller local suppliers. Despite this fragmentation, Capstone has achieved a leadership position by leveraging its extensive product offerings, strategic distribution network, and strong customer relationships.

Consolidation Trends. The industry is experiencing consolidation, with larger players acquiring smaller distributors to expand their geographic reach and product portfolios. This trend is expected to continue as companies seek to achieve economies of scale and enhance their market positioning.

Technological Advancements. Technology is playing an increasingly important role in the stone industry. From advanced manufacturing techniques that produce more realistic manufactured stone products to digital tools that improve inventory management and customer service, technology is helping distributors like Capstone improve efficiency and meet evolving customer needs.

Labor and Supply Chain Challenges. The stone and masonry industry faces challenges related to labor shortages and supply chain disruptions, which have been exacerbated by the pandemic. Navigating these challenges through strategies like vertical integration, strategic partnerships, and our unique delivery network is critical for maintaining competitiveness.

4

Table of Contents

Outlook for 2026 and Beyond

Near-term residential construction activity is expected to remain relatively flat as the market contends with elevated mortgage rates and affordability pressures, though a persistent national housing deficit and growing repair-and-remodel spending provide a supportive baseline for building materials demand. The global natural stone market is projected to grow at a compound annual growth rate of approximately 4–5% through 2031, and companies with broad product assortments serving both new construction and renovation channels are well-positioned to benefit.

Our Competitive Strengths

Capstone’s success is underpinned by several competitive strengths that differentiate us in the market:

Extensive Product Offering. With over 3,000 SKUs, we offer one of the most comprehensive selections of stone products in the industry, including a variety of manufactured and natural stone options. Our diverse product line allows us to meet the needs of a broad customer base and cater to a wide range of construction applications.

Optimized Distribution Network. Our nine distribution and warehouse facilities across seven states and two Canadian provinces enable us to efficiently serve customers throughout the eastern and midwestern United States and key Canadian markets. Instone operates five facilities in Massachusetts, New Jersey, Ohio, California and Illinois; Carolina Stone operates two facilities in North Carolina; and CSI operates facilities in British Columbia and Ontario. These strategically located facilities are designed to optimize inventory management and reduce delivery times, ensuring that our customers receive the products they need when they need them.

Strong Customer Relationships. We have cultivated deep and lasting relationships with our customers, including some of the largest and most respected names in the construction industry. Our ability to provide a one-stop shop for stone and masonry products, combined with our commitment to service excellence, has made us a trusted partner for over 1,000 active customers across our three operating subsidiaries.

Operational Excellence. We maintain the highest standards of operational efficiency, supported by state-of-the-art distribution facilities and a team of experienced professionals.

Experienced Management Team. Our leadership team has extensive experience in the stone and masonry industry with a proven track record of driving growth and delivering results. Our senior management team is supported by a talented group of managers and employees who share a commitment to continuous improvement and a passion for customer service.

Our Growth Strategy

Capstone’s growth strategy is focused on expanding our market presence, enhancing our product offerings, and optimizing our operations:

●

Strategic Acquisitions: We intend to pursue strategic acquisitions that complement our existing business and provide opportunities for growth. Potential targets include other distributors of stone products, manufacturers of complementary building products, and companies offering innovative products or technologies.

●

Product Line Expansion: We are continuously expanding our product offerings to meet the evolving needs of our customers, including new textures, colors, and materials of stone, as well as adjacent building products and stone substitutes.

5

Table of Contents

●

Increased Marketing Efforts: We have invested in marketing initiatives to increase brand awareness and drive demand for our products. These efforts are focused on our dealers but also reach a broader audience of end-users and contractors, as well as promoting the benefits of our products to architects, designers, and builders.

●

Geographic Expansion: We see significant opportunities to expand our geographic footprint and increase our market penetration in underserved regions. This will be achieved through a combination of organic growth and strategic acquisitions.

●

Operational Efficiency: We are focused on improving our operational efficiency to reduce costs, enhance productivity, and improve customer satisfaction. This includes investing in technology and process improvements, optimizing our supply chain, and leveraging our scale to achieve cost advantages.

Product Categories

The Company offers a diverse range of stone and masonry products through its three operating subsidiaries, organized into the following categories: (i) manufactured stone veneer, including Cultured Stone®, Dutch Quality Stone®, and our proprietary Toro Stone™ brand; (ii) natural stone, including Pangaea Stone® and our Interloc™ panelized stone system; (iii) mechanically attached stone veneer systems, including Beon Stone with its patented D-Rain™ moisture management system; (iv) landscape and hardscape products, including our Aura™ Natural Landscapes line of pavers, steps, and coping; and (v) modular masonry fireplaces under the Isokern® brand. These product categories enable the Company to serve as a consolidated sourcing platform for masonry dealers, contractors, and builders across residential and commercial construction markets.

6

Table of Contents

Customers and Markets

Capstone serves a diverse customer base, including masonry dealers, brick distributors, landscape yards, hearth and home dealers, building material dealers, contractors, builders, and homeowners. We have built strong, long-lasting relationships with our customers, who rely on us for our extensive product selection, reliable delivery, and expert support.

Our primary markets include residential and commercial construction, with a focus on both new construction and repair-and-remodel projects. We serve customers across the United States and Canada through our three operating subsidiaries.

Sales and Marketing

Our sales and marketing efforts are centered on building strong relationships with our customers and promoting the benefits of our products and services provided on our business to business website, allowing customers to review inventory, pricing, our route truck delivery, and place orders without worrying about the logistics. We believe giving customers the ability to see all of these options in one website differentiates Instone from other suppliers. We employ a direct sales force that works closely with customers to understand their needs and provide personalized service. Our sales team is supported by a marketing team that develops targeted campaigns, product promotions, and educational materials. We give customers the ability to buy the quantities they need across many product lines instead of needing to buy a single product line from different manufacturers or quarries. Giving customers this ability we believe helps them manage their cash and allows them to, in turn, offer a higher level of service to their own customers.

We also invest in digital marketing, including our websites, social media, and online advertising, to reach a broader audience and generate leads. The Company operates www.instoneco.com as a key resource for customers, www.carolinastoneproducts.com for Carolina Stone, www.allthingsstone.com for CSI, www.budsboneyard.com to sell discounted products, www.torostone.com to market our proprietary manufactured stone veneer brand, and www.indigital-media.com to promote our digital media capabilities.

Competition

The stone distribution industry is competitive, with numerous regional and local distributors vying for market share, in addition to competition from quarry operators, manufacturers, and brokers who sell directly into the market. Key competitive factors include product selection, pricing, logistics, lead times, customer service, and industry expertise. While the industry is fragmented, Capstone has established a leadership position through its comprehensive product offering, logistics capability, strategic distribution network, and commitment to customer service.

We compete with both large national distributors and smaller regional players, as well as manufacturers, quarry operators and brokers. In Canada, CSI competes with regional wholesale distributors. In the Southeast installation and distribution market, Carolina Stone competes with numerous smaller regional and local competitors. Our ability to offer a one-stop shop for stone and masonry products, combined with our focus on operational efficiency and customer satisfaction, gives us a competitive advantage.

Supply Chain and Operations

Capstone’s supply chain is designed to support our extensive product offering and ensure timely delivery to our customers. We source our products from a network of trusted suppliers, including both domestic and international manufacturers. Our distribution centers are strategically located to optimize inventory management and minimize lead times.

We continuously invest in our operations to enhance efficiency and reduce costs. This includes upgrading our facilities, implementing new technologies, and improving our logistics capabilities. Our commitment to operational excellence allows us to deliver high-quality products while maintaining competitive pricing.

7

Table of Contents

Following our 2025 acquisitions, the Company sources products from an expanded network of domestic and international suppliers. Key supplier relationships now include Eldorado Stone, Cultured Stone (Boral), Dutch Quality Stone, Pangaea Natural Stone, Stonecraft, and Horizon Stone, among others. Horizon Stone is a new supplier relationship established through the Carolina Stone acquisition. Our combined nine distribution and warehouse facilities are strategically positioned to serve markets across North America.

Regulatory and Environmental Matters

Our operations are subject to various federal, state, and local laws and regulations, including those related to environmental protection, health and safety, and labor practices. We are committed to complying with all applicable regulations and maintaining high standards of environmental stewardship and workplace safety.

We also recognize the importance of sustainability in our industry and are committed to reducing our environmental impact through initiatives to minimize waste, reduce energy consumption, and promote the use of environmentally friendly products.

Employees

As of December 31, 2025, the Company and its subsidiaries employed approximately 93 full-time employees and 3 independent contractors across our corporate office and nine distribution, warehouse, and installation facilities. This includes approximately 44 employees at Instone, 23 employees at Carolina Stone (including installation crews), and 29 employees at CSI. None of our employees are represented by a labor union or subject to a collective bargaining agreement.

Seasonality

The Company historically experiences higher sales during its second and third quarters due to the favorable weather in the Midwestern, Northeastern, and Southeastern United States and in Canada for new constructions and remodels. The seasonal impact on consolidated results does not change materially as a result of the 2025 acquisitions.

TotalStone, LLC

On April 1, 2020, the Company obtained controlling interest in TotalStone, a company that distributes masonry stone products for residential and commercial construction in the Midwest and Northeast United States under the trade name Instone. TotalStone, LLC (dba “Instone”), a Delaware limited liability company, was formed on October 4, 2006. TotalStone is the Company’s primary business activity and it is consolidated in the Company’s financial statements.

Contingent on the Company raising at least $3,000,000 in gross proceeds from an offering priced on or prior to March 10, 2025 (the “Restructuring Condition”), a series of restructuring transactions were to take place. The Company raised $5,000,000 in gross proceeds from the Public Offering (as defined below), which closed on March 7, 2025, satisfying the Restructuring Condition. On the Restructuring Date, the Company acquired 100% of the equity interests of TotalStone.

TotalStone Management Agreement

On April 1, 2020, the Company and TotalStone entered into a Management Agreement (as defined below) (the "TotalStone Management Agreement"), whereby Capstone agreed to provide advisory services to TotalStone for (i) a monthly fee of $20,000; and (ii) an upside fee, calculated annually and equal to 7% of income before federal taxes of TotalStone and its affiliates, less the aggregate monthly fee. In connection with the Restructuring on March 7, 2025, TotalStone became a wholly-owned subsidiary of Capstone, and this agreement was effectively superseded. Fees under this agreement are eliminated in consolidation for all periods following the Restructuring.

TotalStone Membership Information before March 2025

Class A Membership

Holders of TotalStone’s Class A Common Interests (the “Class A Members”) hold the only voting rights of TotalStone. The Class A Members may designate three TotalStone managers. In the event of a distribution of residual proceeds, Class A Members are inferior to the Special Preferred Members, Class B Members and Class C Members. Additionally, Class A Members shall receive distributions with respect to income tax in an amount equal to such member’s tax distribution. The Company owns all of the outstanding Class A Common Interests. Further, TotalStone issued warrants to certain members of its management team to purchase Class A Common Interests of TotalStone (the “Class A TS Warrants”).

Class B Membership

Holders of TotalStone’s Class B Preferred Interests (the “Class B Members”) had no voting rights and were entitled to designate two TotalStone managers. The TotalStone managers could not take certain actions without the express consent of the Class B Members, who also had preemptive rights such as a right of first refusal over new securities of TotalStone and the right of overallotment. With the Restructuring Condition having been met on March 7, 2025, all Class B Preferred Interests were exchanged for shares of Common Stock pursuant to the Master Exchange Agreement, and no Class B Membership interests remain outstanding.

On July 23, 2023, a Redemption Default pursuant to the TotalStone operating agreement occurred, allowing Class B Members to receive warrants to purchase common stock of Capstone in an aggregate amount of 2%. The Class B Members have waived and not exercised their rights in accordance with the terms of the TotalStone operating agreement.

8

Table of Contents

Class C Membership

Prior to the Restructuring on March 7, 2025, there were 75 TotalStone’s Class C Preferred Interests outstanding. TotalStone’s Class C Preferred Interests are treated as profit interests and the one holder of TotalStone’s Class C Preferred Interests (the “Class C Member”) has no voting rights in TotalStone and receives no tax distributions. In the event of a distribution of proceeds, the Class C Member receives Class C Incentive Distributions concurrently with distributions made to Class B Members, but only after $5,000,000 in distributions have been made to the Special Preferred Members and the Class B Members since the date of grant of such Class C Preferred Interests.

Special Preferred Membership

Holders of TotalStone’s Special Preferred Membership Interests (the “Special Preferred Membership Interests”, and the holder thereof, the “Special Preferred Members”) had no voting rights. On the Restructuring Date, the Special Preferred Membership Interests held by Stream Finance, LLC were exchanged for additional term loans under the Stream Finance Credit Agreement (see Note 11). As of December 31, 2025, no Special Preferred Membership Interests remain outstanding.

TotalStone Equity Interests Transactions in March 2025 (the “Restructuring”)

Class A TS Warrants to purchase 1,125 TotalStone’s Class A Common Interests were cancelled on the Restructuring Date.

On the Restructuring Date, pursuant to a master exchange agreement (the “Master Exchange Agreement”) entered into by the Company, 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 the Company’s shares prior to the restructuring, owns approximately 3% of the Company’s shares. Following the restructuring, the largest holder of the Company’s shares (approximately 48%) is 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.

In total, on the Restructuring Date, in exchange for TotalStone’s outstanding Class B and Class C preferred interests, 3,782,641 shares of Common Stock were issued pursuant to the restructuring transactions.

The Special Preferred Membership Interests were issued by TotalStone in connection with the restructuring of its mezzanine indebtedness. This indebtedness is documented pursuant to that certain Second Amended and Restated Credit Agreement, dated as of March 8, 2023, with Stream Finance, LLC, as agent, and the lenders from time to time party thereto (as amended, the "Stream Finance Credit Agreement"). The maturity date of the Stream Finance Credit Agreement is September 30, 2027, as extended pursuant to the Third Amendment dated June 11, 2025 (the "Stream Finance Maturity Date"). On March 7, 2025, the Special Preferred Membership Interests were exchanged for additional term loans under the Stream Finance Credit Agreement in an aggregate principal amount of $1,143,646 (representing $1,006,377 of original principal plus $137,269 of accrued interest).

9

Table of Contents

Other provisions of the Stream Finance Credit Agreement include that no financial covenants will be tested until the fiscal quarter ending March 31, 2026 (and will continue to be tested each quarter ending thereafter). An amendment fee of $695,000 shall be payable on the earliest to occur of (i) the date of repayment or prepayment of the entire outstanding principal balance of the loan, (ii) the acceleration of the entire outstanding principal balance of the loan and (iii) the Stream Finance Maturity Date, which was extended to September 30, 2027 pursuant to the Third Amendment dated June 11, 2025. The earliest of the date of repayment, the acceleration date, and the Stream Finance Maturity Date is referred to as the "Deferral Date." In addition, interest accrued during the period commencing on August 1, 2023 through the Restructuring Date will be due and payable on the Deferral Date; the standard interest rate will be an annual rate of 14 percent; the portion of such accrued interest at a rate of 2 percent during each applicable period shall be paid in kind with the balance paid in cash. Pursuant to the Third Amendment, certain cash interest payments totaling approximately $225,458 originally due on July 1, 2025, October 1, 2025, and January 1, 2026 were deferred to September 30, 2027, and an additional $18,805 cash interest payment was deferred from July 1, 2025 to April 1, 2026.

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 is now only the Company.

Berkshire Bank Credit Agreement

On December 20, 2017, TotalStone executed a Revolving Credit, Term Loan and Security Agreement with Berkshire Bank (the "Revolving Credit Agreement"). The Revolving Credit Agreement has been amended fifteen times through the fiscal year ended December 31, 2025. In connection with the Carolina Stone acquisition, CS Purchase Holdings LLC, Carolina Stone Holdings, LLC, and Carolina Stone Distributors, LLC were added as co-borrowers under the Fourteenth Amendment, dated August 22, 2025. Under the Fifteenth Amendment, executed December 19, 2025, the lender is now Beacon Bank & Trust (successor by merger to Berkshire Bank), and the maturity date was extended to June 19, 2026. TotalStone's maximum revolving advance amount is $11,500,000 for working capital purposes. Advances under the credit agreement are limited to a formula-based amount of up to eighty-five (85%) percent of the face amount of "Eligible Accounts Receivable" plus approximately fifty-four (54%) percent of the face amount of the TotalStone and Carolina Stone "Finished Goods Inventory" up to a maximum inventory amount of $8.0 million. Interest charged on the unpaid principal amount bears a rate per annum of Term SOFR plus 3.00%. The Borrower is required to minimum undrawn availability of $317,000 at all times. The balance outstanding on the line of credit was $10.3 million as of December 31, 2025 and $6.2 million as of December 31, 2024, respectively. Financial covenants include a minimum Cash Flow Coverage Ratio of 1.15x and a minimum Tangible Net Worth of $1,250,000, with which the Company was in compliance at December 31, 2025.

TD Bank Credit Facilities

On November 7, 2025, Canadian Stone Industries and Klad Envelope Solutions Inc. (collectively, the "CSI Borrowers") entered into a Letter of Agreement with The Toronto-Dominion Bank ("TD Bank") providing for the following credit facilities in connection with the CSI acquisition:

Facility 1 — Operating Loan. TD Bank provides Canadian Stone Industries with a revolving operating loan with a credit limit of CAD $5,000,000 for working capital purposes. Advances are available as Prime Rate Based Loans at Prime Rate + 0.50% per annum or United States Base Rate Loans at USBR + 0.50% per annum. The facility is uncommitted and repayable on demand. Advances are limited to a formula-based amount equal to the lesser of (i) CAD $5,000,000 and (ii) the sum of 80% of eligible Canadian and U.S. accounts receivable (excluding over-90-day receivables, priority payables, and related AR) plus 50% of inventory held in Canada net of 30-day accounts payable. The facility carries a monthly administration fee of CAD $300. The balance outstanding on the operating loan was $2.4 million as of December 31, 2025.

Facility 2 — Term Loan. In connection with the CSI acquisition, TD Bank provided Canadian Stone Industries with a term loan in the original principal amount of CAD $2,559,462 for the purpose of paying out the previous owner of Canadian Stone Industries. The term loan was repaid in full during the fiscal year ended December 31, 2025. As of December 31, 2025, there was no balance outstanding on the term loan.

The TD Bank credit facilities are secured by first-priority General Security Agreements from Canadian Stone Industries, Fraser Canyon Holdings Inc., Canadian Stone Industries (2022) Inc., Klad Envelope Solutions Inc., and Instone Canada Corp., covering all present and after-acquired personal property. Instone Canada Corp. has provided an unlimited guarantee in support of the CSI Borrowers. Additional security includes Section 427 Bank Act security over inventory at the Langley, BC and North York, ON locations, assignment of fire insurance, and subordination and priorities agreements for the seller notes issued in connection with the CSI acquisition. Financial covenants require a minimum Debt Service Coverage ratio of 1.25x at all times, tested on a trailing twelve-month basis. Negative covenants prohibit any change of control, ownership, or senior management without TD Bank's prior consent, and restrict distributions or payments on the seller notes unless financial covenants are satisfied on a pre- and post-payment basis. The CSI Borrowers are required to provide monthly aged receivables and payables listings, monthly management-prepared financial statements with a compliance certificate within 20 days of month-end, quarterly company-prepared financial statements within 45 days of quarter-end, and annual review engagement financial statements within 120 days of fiscal year-end. Annual compilation engagement financial statements are also required for Fraser Canyon Holdings Inc., Klad Envelope Solutions Inc., and Instone Canada Corp., and Capstone Holding Corp. financial statements must be provided at TD Bank's request.

10

Table of Contents

Our Public Offering and Uplisting on Nasdaq Capital Market

On March 7, 2025, the Company closed its follow-on public offering (the "Public Offering") of 1,250,000 shares of common stock. In connection with the Public Offering, the Company entered into an Underwriting Agreement (“Underwriting Agreement”), dated March 5, 2025, with Joseph Gunnar & Co., LLC as representative of the underwriters named therein for the offer and sale of 1,250,000 shares of the Company’s common stock at a public offering price of $4.00 per share for gross proceeds, before deducting underwriting discounts and other related expenses, of $5 million. The Underwriting Agreement is filed herewith as Exhibit 1.1 and is incorporated herein by reference.

On March 6, 2025, the Company’s Common Stock began trading on the Nasdaq Capital Market under the symbol “CAPS”.

Pursuant to the Underwriting Agreement, as partial compensation for its services, the Company issued to the underwriters on the closing date of the Public Offering, warrants to purchase an aggregate of 62,500 shares of our common stock (the “Representative’s Warrant”), representing 5% of the shares issued on the Closing Date. The Representative’s Warrant will be exercisable, in whole or in part, commencing on September 5, 2025 and expiring on September 7, 2026, at an initial exercise price per share of common stock of $4.00, which is equal to 100% of the Offering price.

Convertible Note Financing

The aggregate outstanding principal balance under the Convertible Note Financing as of December 31, 2025, was approximately $3,859,541. Joseph Gunnar & Co., LLC acted as sole placement agent for the Convertible Note Financing and received cash fees equal to 7% of gross proceeds upon each closing. The Company registered a total of 8,388,336 shares of common stock for issuance upon conversion of the notes under effective registration statements on Form S-1.

Second Convertible Note. On October 22, 2025, the Company issued a second note in the original principal amount of $3,545,712 (the "October 2025 Note"), with gross proceeds of $3,250,000. The October 2025 Note bears interest at 7.0% per annum, matures on October 22, 2026, and was initially convertible at $1.10 per share. On November 28, 2025 (as disclosed in the Company's 8-K filed November 28, 2025, as later corrected to reflect November 24, 2025), the conversion price for $1,772,856 of principal was reduced to $0.75 per share, with the remaining $1,772,856 of principal continuing at $1.10 per share. In December 2025, the Buyer converted $186,916 of principal and $13,084 of accrued interest into 266,667 shares of common stock at a conversion price of $0.75 per share. As of December 31, 2025, the outstanding principal balance of the October 2025 Note was $3,358,797, of which $1,585,940 was convertible at $0.75 per share and $1,772,856 continued at $1.10 per share.

First Convertible Note. On July 29, 2025, the Company issued the first note in the original principal amount of $3,272,966 (the "July 2025 Note"). The July 2025 Note bears interest at 7.0% per annum, with principal and interest repaid in quarterly installments, and matures on July 26, 2026. The initial conversion price was $1.72 per share. On August 15, 2025, the conversion price was voluntarily reduced to $1.00 per share for up to $1,363,736 of principal. Between August and November 2025, the Buyer converted $2,710,280 of principal into 2,900,000 shares of common stock at a conversion price of $1.00 per share. Separately, the Company redeemed $61,942 of principal in cash on September 3, 2025. On November 28, 2025, the conversion price for the remaining principal balance of $500,744 was reduced to $0.75 per share. As of December 31, 2025, the outstanding principal balance of the July 2025 Note was $500,744.

On July 29, 2025, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Buyer”) authorizing the issuance of senior secured convertible notes in the aggregate original principal amount of up to $10,909,885, with an 8.34% original issue discount (the “Convertible Note Financing”).

Corporate History

The Company was formed in 1987 as OrthoLogic Corp. In 2005, the Company filed its restated certificate of incorporation (the “Restated Certificate of Incorporation”). In 2010, the Company changed its name to Capstone Therapeutics Corp. On August 22, 2019, the Company filed a certificate of amendment to its Restated Certificate of Incorporation effecting a 1 for 1,000 reverse stock split of the common stock of the Company, whereby each 1,000 shares of common stock of the Company became 1 share of common stock. In 2021, the Company filed a certificate of amendment to its Restated Certificate of Incorporation decreasing the total number of shares of common stock authorized to be issued by the Company from 150,000,000 shares to 205,000 shares, consisting of 200,000 shares of common stock, par value $0.0005 per share and 5,000 shares of preferred stock, par value $0.0005 per share. On February 18, 2022, the Company filed a certificate of amendment to its Restated Certificate of Incorporation, changing the Company’s name from Capstone Therapeutics Corp. to Capstone Holding Corp. On February 20, 2025, following the Company’s controlling shareholder’s approval, the Company filed an amendment to its Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to increase the authorized shares of Common Stock to 50,000,000 shares and increase the authorized shares of preferred stock to 25,000,000 shares. On February 20, 2025, the Company filed a Certificate of Designation (the “Series B Certificate of Designation”) with the Delaware Secretary of State which designated 2 million shares of the Company’s authorized preferred stock as Series B Preferred Stock (“Series B Preferred Stock”), no par value.

11

Table of Contents