Note 4 Business Combination

During the fiscal year ended December 31, 2025, the Company completed two acquisitions, each accounted for as a business combination under ASC Topic 805, Business Combinations. The Company engaged Loop Capital Financial Consulting Services, LLC (“Loop Capital”) as an independent third-party valuation firm to assist with the purchase price allocations.

Carolina Stone Distributors, LLC

On August 22, 2025, the Company, through its subsidiary CS Purchase Holdings LLC, completed its acquisition of all the issued and outstanding membership interests in Carolina Stone Holdings, LLC (“Carolina Stone Holdings”), which owns all of the issued and outstanding membership interests of Carolina Stone Distributors, LLC (“Carolina Stone”). Carolina Stone is a Morrisville, North Carolina-based distributor and installer of stone veneer and masonry products serving the Raleigh-Durham and Charlotte metropolitan areas.

Purchase Consideration. The aggregate purchase consideration for the Carolina Stone Companies was approximately $4,202.0 thousand, consisting of the following: cash at closing of $2,625.0 thousand (less preliminary working capital adjustment of $124.0 thousand for net cash transferred of $2,501.0 thousand), a subordinated promissory note of $1,250.0 thousand, final working capital adjustment of $77.0 thousand, and contingent consideration (earn-out) at fair value of $250.0 thousand at the date of acquisition.

Note 4 Business Combination (cont.)

The subordinated promissory note was issued to D22L, Inc. in the original principal amount of $1,250.0 thousand, maturing February 22, 2028. The note bears interest at the Secured Overnight Financing Rate (“SOFR”) plus 1.25%, payable quarterly commencing December 31, 2025, with quarterly principal payments of $100.0 thousand beginning December 31, 2026. After application of the working capital true-up of approximately $56.0 thousand, the outstanding principal balance at closing was approximately $1,306.0 thousand.

As initially recognized in fiscal year 2025, contingent consideration of up to $825.0 thousand is payable as a singular payment based on Carolina Stone’s EBITDA performance during three annual measurement periods (fiscal years 2025, 2026, and 2027). Only one payment can be earned across all three periods. If Carolina Stone achieves EBITDA of at least $1,000.0 thousand in either the first or second measurement period, the seller receives the full $825.0 thousand, payable in equal quarterly installments through June 30, 2028. If the EBITDA threshold is not met in the first two periods, the seller may receive up to $825.0 thousand in the third measurement period in the full amount if EBITDA exceeds $1,000 thousand, or a pro-rata amount determined by linear interpolation if EBITDA falls between $800.0 thousand and $1,000.0 thousand. If EBITDA does not reach $800.0 thousand in any measurement period, no earn-out is payable. Based on Carolina Stone's financial results in the audited consolidated financial statements for the year ended December 31, 2025, the EBITDA threshold of $1,000.0 thousand was not achieved for the First Earn-out Period, and accordingly no Earn-Out Payment is payable in respect of the First Earn-out Period.

The fair value of contingent consideration at acquisition date of $250.0 thousand was estimated using a Monte Carlo simulation model with key assumptions including asset volatility of 35.0%, risk-free rate of 3.69%, and EBITDA projections based on management forecasts. The contingent consideration liability is remeasured to fair value at each reporting date until the contingency is resolved, with changes in fair value recognized in change in fair value of contingent consideration in the consolidated statements of operations. As of June 30, 2026, the Company recognized an increase of $58.0 thousand resulting from the change in the fair value of the contingent consideration, primarily driven by updated EBITDA forecasts and the probability of achievement of the EBITDA targets. As of June 30, 2026 and December 31, 2025, the fair value of the contingent consideration was $308.0 and $250.0 thousand, respectively.

The following table presents the purchase price allocation for the Carolina Stone Holdings acquisition as finalized at December 31, 2025, measured in accordance with ASC 805 (in thousands):

Goodwill of $758.0 thousand is attributable to the assembled workforce (valued at approximately $170.0 thousand) and expected synergies from integrating Carolina Stone’s distribution and installation capabilities with the Company’s existing platform. All goodwill is allocated to the Carolina Stone reporting unit and is deductible for income tax purposes.

Post-Acquisition Results. Carolina Stone contributed revenue of $3.3 million and net income (loss) of ($169.0) thousand to the Company’s consolidated results for the period from August 22, 2025 through December 31, 2025. Acquisition-related costs of $131.0 thousand were expensed as incurred and were included in selling, general and administrative expenses during the three months ended September 30, 2025.

Fraser Canyon Holdings Inc. / Canadian Stone Industries

On December 1, 2025, the Company completed the acquisition of Fraser Canyon Holdings Inc. (“FCHI”) and its subsidiaries, including Canadian Stone Industries Inc. (“CSI”), through two simultaneous transactions: (i) TotalStone, LLC acquired substantially all of the assets and assumed certain liabilities of Continental Stone Industries, Inc. (the “Asset Purchase”), and (ii) a subsidiary of TotalStone acquired all of the outstanding shares of FCHI (the “Share Purchase”). CSI is a Langley, British Columbia-based distributor of manufactured and natural stone products serving Western and Eastern Canada.

Purchase Consideration. The Fraser Canyon Acquisition comprises two simultaneous transactions: (i) the CSIA Asset Purchase, in which TotalStone, LLC acquired substantially all of the assets and assumed certain liabilities of Continental Stone Industries, Inc. for cash consideration of approximately US$459.0 thousand (CAD $647.0 thousand); and (ii) the FCHI Share Purchase, in which Instone Canada Corp., a wholly-owned subsidiary of TotalStone, acquired all of the outstanding shares of Fraser Canyon Holdings Inc. for consideration of approximately US$6,299.0 thousand (representing the FCHI Share Purchase portion of the combined transaction). Under ASC 805, both transactions have been accounted for as a single combined business combination because they were entered into in contemplation of one another and effected concurrently. The purchase consideration for the combined Fraser Canyon Acquisition consisted of: (i) C$6,200,000 in cash (approximately US$4,447 thousand at the closing-day exchange rate of US$1.00 = C$1.3943), of which US$459.0 thousand (C$647 thousand) represented the Continental Cash Purchase Price paid by TotalStone, LLC for the CSIA Asset Purchase, reduced by a working capital adjustment of C$473,189 (approximately US$339.0 thousand) that lowered the Cash Purchase Price payable to the FCHI sellers; (ii) Seller Note I in the principal amount of C$1,600,000 (approximately US$1,148.0 thousand), maturing March 31, 2027; (iii) Seller Note II in the principal amount of C$2,000,000 (approximately US$1,434.0 thousand), maturing December 1, 2028; and (iv) contingent earn-out consideration of up to C$3,000,000 (approximately US$2,152.0 thousand) based on Average EBITDA during the 2026–2027 and 2027–2028 measurement periods, with an acquisition-date fair value of US$99.0 thousand (US$79.0 thousand for Earn-Out Provision I and US$20.0 thousand for Earn-Out Provision II) as measured with the assistance of Loop Capital and reflected in the purchase price allocation set forth below. 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. During the six months ended June 30, 2026, the Company settled the working capital adjustment under the purchase agreement, which increased the cash purchase price payable to the FCHI sellers by $38.0 thousand. The Company paid that amount in cash during the period and presented it within investing activities in the consolidated statements of cash flows. The increase in consideration resulted in a corresponding increase in goodwill.

Note 4 Business Combination (cont.)

The Company engaged Loop Capital to assist with the valuation of identifiable intangible assets and contingent consideration; the purchase price allocation presented below is based on valuations performed with the assistance of Loop Capital. The purchase price allocation was final at December 31, 2025, other than the working capital adjustment under the purchase agreement, which the Company settled during the six months ended June 30, 2026 as described above. The allocation below reflects that settlement. The aggregate purchase consideration of approximately US$6,299.0 thousand reflected in the purchase price allocation below represents the FCHI Share Purchase only, stated net of the Continental Cash Purchase Price paid separately for the CSIA Asset Purchase and net of the working capital reduction described above, with U.S. dollar amounts translated at the exchange rates used for purchase accounting purposes.

Goodwill of $601.0 thousand was recognized in connection with the FCHI Share Purchase and is attributable primarily to the assembled workforce and expected synergies from integrating Canadian Stone Industries' western Canadian distribution operations with the Company's existing platform. The CSIA Asset Purchase did not result in goodwill, as the purchase consideration approximated the fair value of the net assets acquired; tax-basis goodwill arising from the CSIA Asset Purchase is amortizable for U.S. income tax purposes under Section 197 of the Internal Revenue Code. Goodwill arising from the FCHI Share Purchase is not deductible for Canadian income tax purposes. Goodwill related to the Fraser Canyon acquisition is allocated to the TotalStone reporting unit.

The carrying amount of goodwill was $631.0 thousand and $616.0 thousand as of June 30, 2026 and December 31, 2025, respectively. The increase from the acquisition-date amount of $601.0 thousand to December 31, 2025, reflects a foreign currency translation adjustment by $15.0 thousand. During the six months ended June 30, 2026, the Company recorded a measurement-period adjustment of $38.0 thousand that increased goodwill, resulting from the settlement of the working capital adjustment described above. This increase was partially offset by a foreign currency translation decrease of $23.0 thousand, resulting in a net increase in goodwill of $15.0 thousand for the six months ended June 30, 2026. The Fraser Canyon earn-out liability was $99.0 thousand and $102.0 thousand as of June 30, 2026 and December 31, 2025, respectively, with the decrease resulting from foreign currency translation. Together with the Carolina Stone earn-out described above, the earn-out payable presented on the consolidated balance sheets was $407.0 thousand and $352.0 thousand as of those dates.

CSI contributed revenue of $592.0 thousand and net loss of $92.0 thousand for the period from December 1, 2025 through December 31, 2025. Acquisition-related costs, including the Nectarine consent fee of $89.0 thousand and legal and advisory fees, were expensed as incurred.

The following table presents the final purchase price allocation for the FCHI acquisition, updated for the working capital settlement described above, measured in accordance with ASC 805 (in thousands):

Pro Forma Financial Information

The following unaudited pro forma information presents the Company’s consolidated results of operations for the six months ended June 30, 2025 as though both acquisitions had been completed as of January 1, 2025:

The Company prepared this unaudited pro forma information under ASC 805-10-50-2(h), presenting consolidated results as if the Carolina Stone Holdings and the Fraser Canyon acquisitions had closed on January 1, 2025. Pro forma loss per share uses the restated weighted average number of common shares outstanding of 3,405,568 for the six months ended June 30, 2025 (see the restatement described in Note 3); neither acquisition involved share consideration.

Note 4 Business Combination (cont.)

The pro forma results include the following adjustments directly attributable to the acquisitions, consistent with the Company's prior pro forma disclosures in Forms 8-K/A filed with the SEC:

(a) Acquisition-related transaction expenses — Under the assumed acquisition date of January 1, 2025, $99.0 thousand of acquisition-related transaction expenses recorded in the six months ended June 30, 2026 is excluded from pro forma 2026 results because all transaction-related costs would have been incurred prior to the comparative period.

(b) Incremental amortization expense —$83.0 thousand for the six months ended June 30, 2026, on the identifiable intangible assets recognized in the finalized purchase price allocations for the Carolina Stone acquisition (trade names of $670.0 thousand amortized over 20 years; customer relationships of $740.0 thousand amortized over 12 years; and non-compete agreements of $60.0 thousand amortized over 5 years) and the Fraser Canyon acquisition (trade names of $190.0 thousand amortized over 20 years and customer relationships of $170.0 thousand amortized over 17 years). For the six months ended June 30, 2026, the related amortization expense is already reflected in reported results.

(c) Income taxes — No incremental tax effect has been recognized on Carolina Stone or other U.S.-jurisdiction pro forma adjustments because the Company maintains a full valuation allowance against its U.S. net deferred tax assets. Canadian income tax effects on the Fraser Canyon-related pro forma adjustments are not material to the pro forma presentation and have not been separately reflected.

The pro forma results do not represent what the Company would have reported had the acquisitions closed on the assumed date, nor do they predict future performance.