Note 11 Debt 

As of June 30, 2026, the Company had $8.6 million in long-term debt, with $4.2 million payable within 12 months. A summary of the Company’s long-term debt is as follows in (“000’s”):

Mezzanine Term Loan — Stream Finance, LLC.

TotalStone, LLC is party to the Second Amended and Restated Credit Agreement, dated March 8, 2023, with Stream Finance, LLC (a related party), as agent (as amended, the "Stream Finance Credit Agreement"). The mezzanine term loan bears interest at 12% per annum payable in cash plus 2% paid-in-kind. As of June 30, 2026 and December 31, 2025, the outstanding principal balance was $2,518,844 and $2,493,664, respectively, and the Company’s total obligation to Stream Finance — including accrued and deferred interest and the $695,000 amendment fee — was $3,889,359 and $3,713,095, respectively, as presented in the long-term debt table above. The amendment fee is payable on the Deferral Date, defined as the earliest to occur of (i) repayment or prepayment of the entire outstanding principal balance, (ii) acceleration of the loan, and (iii) the Stream Finance Maturity Date. The loan is secured by a second-priority lien on substantially all assets of TotalStone, LLC.

The following table summarizes the activity in the Stream Finance mezzanine term loan for the six months ended  June 30, 2026:

(1) The table above presents principal activity only; accrued and deferred interest and the $695,000 amendment fee are included in the long-term debt table.

Prior to the Fourth Amendment, the interest rate on the Credit Facility was determined on a performance-based sliding scale, with the applicable rate set each quarter by reference to trailing Adjusted EBITDA of TotalStone as measured under the two tables below (Table A excluding the Northeast operations and Table B including them):

Subordinated Promissory Note — Carolina Stone. In connection with the acquisition of Carolina Stone Holdings, LLC on August 22, 2025, CS Purchase Holdings LLC issued a subordinated promissory note to the seller in the original principal amount of $1,250,000 (the “CS Seller Note”). Following the final working capital adjustment of $56,047 added to the principal balance, the CS Seller Note had a balance of approximately $1,306,000 closing at the date of acquisition. The CS Seller Note bears interest at a rate of SOFR plus 1.25%, payable quarterly beginning December 31, 2025. Quarterly principal payments of $100,000 commence December 31, 2026, with the remaining balance due at maturity on February 22, 2028. The CS Seller Note is subordinated unsecured, and is pre-payable without penalty. The balance outstanding as of June 30, 2026 was approximately $1,281,608.

Seller Notes — Fraser Canyon. In connection with the acquisition of Fraser Canyon Holdings Inc. and the assets of Continental Stone Industries, Inc. on December 1, 2025, Instone Canada Corp. issued two subordinated promissory notes to the sellers:

The First Seller Note was issued in the original principal amount of CAD $1,600,000 and matures on March 31, 2027. The note bears interest at TD Bank’s prime rate plus 1.00% through November 30, 2026, stepping up to prime rate plus 3.00% thereafter, payable quarterly. Principal payments of CAD $400,000 each are due on July 31, 2026 and October 31, 2026, with the remaining balance due at maturity. The note is guaranteed by Capstone Holding Corp. and includes a mandatory prepayment provision requiring 50% of net cash proceeds from Capstone equity or debt raises in excess of US $1,100,000. As of June 30, 2026, the outstanding principal balance was CAD $1,600,000 (approximately USD $1,127,000), excluding accrued interest. The CAD $400,000 principal payment due July 31, 2026 was not made. Payment of the seller notes is subject to a Postponement and Assignment of Creditors Claim and Postponement of Security dated December 1, 2025 among the sellers, Instone Canada Corp. and TD Bank. Under Sections 2(a) and 2(d) of that agreement, the Company may make, and the holders may accept, payment on the seller notes only if the Company is not in default under its credit agreement with TD Bank and the payment would not create or cause such a default. The Company did not make the payment because doing so would have caused a default under the financial covenants in the TD Bank facilities. The note remains outstanding and continues to accrue interest. Under Section 2(b) of that agreement, the holders may not accelerate the notes or exercise remedies while the TD Bank indebtedness is outstanding. The Second Seller Note was issued in the original principal amount of CAD $2,000,000 and matures on December 1, 2028. The note bears interest at 30-day average SOFR plus an escalating margin: 1.25% through November 30, 2026; 2.50% from December 1, 2026 through November 30, 2027; and 3.75% thereafter, payable quarterly. Quarterly principal payments of CAD $50,000 commence March 31, 2027, with the remaining balance due at maturity. The note includes a mandatory prepayment provision requiring 50% of quarterly fixed charge excess cash flow to be applied to principal. As of June 30, 2026, the outstanding principal balance was CAD $2,000,000 (approximately USD $1,408,000), excluding accrued interest. Both notes are subordinated to the TD Bank credit facilities.

Liquidity and NASDAQ Listing Compliance

For the three months ended June 30, 2026, net sales were $21,480 thousand compared with $12,852 thousand for the same period in 2025, gross profit was $5,999 thousand compared with $3,130 thousand, gross margin was 27.9% compared with 24.4%, and the Company recorded income from operations of $432 thousand compared with a loss from operations of $260 thousand. For the six months ended June 30, 2026, net sales were $34,116 thousand compared with $20,751 thousand, gross profit was $8,969 thousand compared with $4,455 thousand, gross margin was 26.3% compared with 21.5%, and the loss from operations narrowed to $1,065 thousand from $1,688 thousand.

The Company has nonetheless generated recurring net losses, including a net loss of $3,295.0 thousand for the six months ended June 30, 2026, and had negative cash flow from operations in the year ended December 31, 2025.  In January 2026, the Company received a notification from the Nasdaq Stock Market indicating that the closing bid price of its Common Stock had been below $1.00 per share for 30 consecutive business days and that the Company was therefore not in compliance with Nasdaq Listing Rule 5550(a)(2). The minimum bid price is the only listing deficiency for which the Company has received notice from Nasdaq. At the Annual Meeting of Stockholders held June 18, 2026, the Company’s stockholders approved an amendment to the Certificate of Incorporation to effect a reverse stock split of all outstanding shares of common stock at a ratio of not less than 1-for-5 and not more than 1-for-50, with the exact ratio and timing to be determined by the Board in its sole discretion at any time within twelve months of stockholder approval. Continued listing on Nasdaq supports the Company’s access to capital markets, including its ability to issue shares under the ELOC.

These conditions, together with the Company’s accumulated deficit and near-term debt maturities, initially indicated that substantial doubt existed about the Company’s ability to meet its obligations and to continue as a going concern within one year after the date these condensed consolidated financial statements are issued. Management has concluded that the following plans and resources, in the aggregate, alleviate that doubt:

Senior Secured Convertible Notes. 

The embedded conversion features are bifurcated as derivative liabilities and measured at fair value at each reporting date with changes in fair value recognized in earnings, in accordance with ASC 815-15. In July 2025, the Company issued a Senior Secured Convertible Note to 3i, LP (the "July Note") in the original principal amount of $3,272,966 (net of an 8.34% original issue discount), maturing July 29, 2026. In October 2025, the Company issued a second Senior Secured Convertible Note to 3i, LP (the "October Note") in the original principal amount of $3,545,712, maturing October 22, 2026. Both notes bear interest at 7.0% per annum, with quarterly cash amortization beginning after 90 days. The notes are secured by a first-priority lien on substantially all of the Company's assets. The embedded conversion features were bifurcated and accounted for as derivative liabilities at fair value in accordance with ASC 815 (see the derivative instruments disclosure below). During the year ended December 31, 2025, the Company entered into three amendments to the July Note and one amendment to the October Note that reduced the applicable conversion prices, from $1.72 to $1.00 and subsequently to $0.75 per share on the July Note, and from $1.10 to $0.75 per share on $1,772,856 of October Note principal with the remaining $1,772,856 continuing at $1.10 per share. During that year the Buyer converted $2,897,196 of principal and $202,804 of accrued interest into 3,166,667 shares of common stock, and the Company redeemed $61,942 of July Note principal and $4,336 of accrued interest in cash on September 3, 2025. Conversion activity for the six months ended June 30, 2026 and the resulting principal balances are set out below.

On April 16, 2026, pursuant to a unanimous written consent dated April 16, 2026, the Company and the Buyer entered into a Letter Agreement (the “April 2026 Letter Agreement”) reducing the Conversion Price applicable to $500,000 of principal under the October Note to $0.57 per share. On the same date, the Buyer submitted eight Notices of Conversion that aggregated to $1,725,136 of principal and $120,762 of interest converted into 2,557,198 shares of Common Stock. Of the principal converted: (i) $213,084 was converted at the reduced $0.57 conversion price established under the April 2026 Letter Agreement (the first conversion at the reduced price), with approximately $286,916 of capacity remaining at $0.57; (ii) $250,372 of principal under the July Note was converted at the prior $0.75 conversion price; and (iii) $1,261,680 of principal under the October Note was converted at the prior $0.75 conversion price. Following these conversions, the outstanding principal balance was approximately $250,372 on the July Note and approximately $1,650,388 on the October Note, before any further activity through the issuance date of these consolidated financial statements.

The following table summarizes the carrying value of the Company's senior secured convertible notes by note as of  June 30, 2026:

The following table summarizes the carrying value of the Company’s senior secured convertible notes as of each period end:

The following table presents a roll forward of the derivative liabilities associated with the embedded conversion features for the six month ended June 30, 2026:

As of June 30, 2026, the following shares of common stock were issuable upon conversion of the outstanding senior secured convertible notes:

Scheduled maturities of long-term debt as of June 30, 2026, are as follows: