The Company’s fair value hierarchy policy is described in Note 3. There were no material changes in the carrying amount of goodwill between December 31, 2025 and June 30, 2026. The following table presents assets and liabilities measured at fair value by level:

On June 30, 2026, the Company’s Level 3 recurring fair value measurements consisted of derivative liabilities of $7.0 thousand and earn-out payable of $407.0 thousand, compared with $352.0 thousand at December 31, 2025. The increase reflects a $58.0 thousand remeasurement of the Carolina Stone earn-out, driven by updated EBITDA forecasts and the probability of achieving the EBITDA targets (see Note 4), partially offset by a $3.0 thousand decrease in the U.S. dollar carrying amount of the Canadian dollar denominated Fraser Canyon earn-out resulting from foreign currency translation. The non-recurring Level 3 measurement of goodwill — Instone reporting unit was $17,086.0 thousand at both June 30, 2026 and December 31, 2025; no triggering events for interim impairment testing were identified during the six months ended June 30, 2026. In reaching that conclusion, management considered the Company’s operating results for the period, the decline in the trading price of the Common Stock and the related Nasdaq minimum bid price deficiency described in Note 11, the relationship of the Company’s market capitalization to the carrying amount of its net assets, and the headroom indicated by the October 1, 2025 quantitative test. The goodwill of each of the Company's three reporting units - TotalStone (Instone), Canadian Stone Industries, and Carolina Stone - is evaluated for impairment at least annually, or more frequently if impairment indicators arise. Goodwill of the Canadian Stone Industries reporting unit ($631.0 thousand at June 30, 2026 and $616.0 thousand at December 31, 2025) and Carolina Stone reporting unit ($758.0 thousand at both dates) was recognized at acquisition-date fair value in the respective 2025 business combinations (see Note 4); no impairment indicators were identified for these reporting units, and no remeasurement was required, through June 30, 2026. The February 2026 warrants issued to 3i, LP — a non-recurring Level 3 fair value measurement during the period — are described in Note 14.

Note 8 Fair Value Measurements (cont.)

Derivative Liability

The Level 3 derivative liabilities, representing the embedded conversion features bifurcated from the Senior Secured Convertible Notes, decreased from $702.0 thousand as of December 31, 2025 to $7.0 thousand as of June 30, 2026, reflecting the derecognition of $53.0 thousand to additional paid-in capital upon partial conversions of the underlying notes and a net decrease in fair value of $642.0 thousand recognized in unrealized gain on derivative instruments in the accompanying unaudited condensed consolidated statements of operations. The fair value was remeasured at each conversion date and at period end using the Black-Scholes option-pricing model with the inputs described above, including the effect of the April 16, 2026 conversion price adjustment under the October 2025 Senior Secured Convertible Note, which was accounted for as a modification of the embedded derivative (see Note 11).

Significant unobservable inputs used in the Level 3 measurement of the derivative liabilities (Black-Scholes option-pricing model) are summarized below:

In addition to the embedded derivative liabilities described above, the fair value of each earn-out was determined at the respective acquisition date using an option-pricing model implemented through a Monte Carlo simulation of the underlying EBITDA of each acquired business.

The significant unobservable inputs used in the Carolina Stone earn-out valuation included EBITDA volatility of 35.0%, a risk-adjusted discount rate of 15.00% to 15.50%, and risk-free rates of 3.75% to 4.37% across the three annual measurement periods through 2027, with forecasted annual EBITDA ranging from $285 to $1,021.0 thousand. The Carolina Stone earn-out is capped at $825.0 thousand per annual measurement period subject to EBITDA floors and targets of $800.0 to $1,000.0 thousand. For the Fraser Canyon earn-out valuation, the significant unobservable inputs included EBITDA volatility of 40.0%, a risk-adjusted discount rate of 11.50%, and risk-free rates of 3.55% to 3.63% across the three annual measurement periods through 2028, with forecasted annual EBITDA ranging from CAD $776.0 to CAD $1,065.0 thousand.

The fair value of the contingent earn-out consideration is most sensitive to changes in projected EBITDA, EBITDA volatility, and the risk-adjusted discount rate. Significant increases (decreases) in expected EBITDA would result in a higher (lower) fair value measurement. Significant increases (decreases) in EBITDA volatility generally result in a higher (lower) fair value given the option-like payoff structure. Increases (decreases) in the risk-adjusted discount rate would result in a lower (higher) fair value. Changes in the fair value of the earn-out liabilities are recognized within operating expenses in the consolidated statements of operations.

The fair value of the embedded derivative liabilities is highly sensitive to changes in the expected volatility input. Significant increases (decreases) in the expected annualized volatility would result in a significantly higher (lower) fair value measurement of the derivative liabilities, which would be recognized as a non-operating loss (gain) in the consolidated statements of operations.