Note 1 Nature of Operations

Capstone Holding Corp. (the "Company") is a holding company that operates through its consolidated subsidiaries: TotalStone, LLC ("TotalStone"), Carolina Stone Holdings, LLC ("Carolina Stone"), and Fraser Canyon Holdings Inc. ("FCHI" and together with its subsidiaries, the "CSI business"). Through these subsidiaries, the Company distributes and installs masonry and stone veneer products for residential and commercial construction across North America.

On April 1, 2020, the Company obtained a controlling interest in TotalStone, a materials distribution company that distributes masonry and stone veneer products for residential and commercial construction across the United States. TotalStone operates under the trade names Instone and Northeast Masonry Distributors ("NMD").

On August 22, 2025, the Company, through its subsidiary CS Purchase Holdings LLC, acquired all the issued and outstanding membership interests (the "Holdings Membership Interests") in Carolina Stone Holdings, which owns all the issued and outstanding membership interests of Carolina Stone Distributors, LLC. Carolina Stone is a stone supplier and installer specializing in both manufactured and natural stone veneer and offering end-to-end services, including material supply, installation, and project management for residential, commercial, and multi-family projects in the Raleigh-Durham and Charlotte, North Carolina markets.

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, Canadian Stone Industries Inc., 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 to consolidate West Coast operations; the CSI business today operates from two locations in British Columbia and Ontario.

Note 1A Restatement of Previously Issued Comparative Financial Information

Subsequent to the issuance of the Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2026, management determined that the weighted average number of common shares outstanding used to compute basic and diluted net loss per share for the comparative three months ended March 31, 2025 was incorrect. The amount previously reported was the number of shares outstanding at March 31, 2025 rather than an average weighted for the portion of the period each share was outstanding, as required by ASC 260, Earnings Per Share. The Company has restated that amount and the related per share amounts in accordance with ASC 250, Accounting Changes and Error Corrections.

The correction affects the comparative weighted average share amount, the related per share amounts and the comparative pro forma per share amount presented in Note 4. It does not affect any other amount in the financial statements. Weighted average shares for the three months ended March 31, 2025 were 5,190,251 as reported and are 1,555,566 as restated. Net loss per share for that period was $(0.47) as reported and is $(1.56) as restated. Pro forma net loss per share for that period was $(0.29) as reported and is $(0.97) as restated. Net loss of $2,433 thousand for that period is unchanged.

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