About Capstone Holding Corp.

Capstone Holding Corp. (the “Company” or “we”), is traded on the OTCQB under the ticker symbol “CAPS”.  The Company has two assets that are being utilized in efforts to create shareholder value: (1) ownership of a wholly-owned subsidiary, TotalStone, LLC, which distributes masonry stone products for residential and commercial construction in the Midwest and Northeast United States; and (2) a significant Net Operating Loss (“NOL”) that may be utilized as a benefit in filing consolidated Company federal tax returns.

TotalStone, LLC:  Based in Alsip, IL the company operates stone veneer and hardscape distribution sites in Illinois, New Jersey, Massachusetts and Ohio.  Operating under the trade names Instone and Northeast Masonry, the company is a wholesale distributor of both manufactured and natural stone veneer siding, hardscapes and related moisture management products, lath products and fireplaces.  The company sells exclusively through its dealer network and offers expedited product delivery through its dedicated route truck network.  An affiliate of Brookstone Partners (New York private equity firm) is the lead equity investor.  Through a recapitalization and merger transaction in March 2020 involving the issuance of $20,500,000 in preferred stock from TotalStone to the prior shareholders, Capstone gained an initial 100% ownership in TotalStone common equity.  For additional information, please go to www.instoneco.com.

 

Prior Business Previously, we were focused on the development and commercialization of three pharmaceutical product platforms:

-Chrysalin (TP508) was a peptide molecule licensed from the University of Texas system and was developed for fresh fracture healing.  Human clinical data was positive, but regulatory hurdles precluded commercialization.  The license was terminated and returned to the inventor in 2012.

-AZX100 was a peptide molecule acquired in 2006 and was developed for dermal scarring and anti-inflammatory indications. Human clinical data was positive but was not licensed by strategics.  The IP license was returned to Arizona State University in 2014; and

-LipimetiX AEM-28 was a peptide molecule licensed in 2011 from the University of Alabama at Birmingham.  Developed for severe orphan hypercholesterolemia, human clinical trials were positive.  Formulation challenges and capital adequacy required industry strategic assistance and the IP platform was licensed to Anji Pharmaceuticals, Inc. in December 2020.  As a result, LipimetiX Development, Inc.is being reflected as a discontinued operation in the Company’s financial statements for 2020.

 

Significant Chronological Events

April 2017-The Company’s Board adopted a Tax Benefit Preservation Plan (the “Plan”)with Computershare to protect the Company’s ability to use its net operating loss carryforwards and other tax attributes to reduce future taxable income, if any.  We view our tax benefits as highly valuable assets that are likely to inure to the benefit of our shareholders if we are able to generate future taxable income.  However, if we experience an “ownership change” under Section 382 of the IRS code, our ability to use the tax benefits could be substantially limited.  As such, the above-referenced Plan is intended to act as a deterrent to persons acquiring our common stock (in excess of 4.90% of outstanding shares) in certain transactions that would constitute or contribute to such an “ownership change’ without the approval of the Board.  The Plan expires December 31, 2023.

July 2017-The Company entered into a Securities Purchase, Loan and Security Agreement (the”Agreement”) with BP Peptides, LLC (“Brookstone”) in the aggregate amount of $3,440,000.  The net proceeds have been used to retire debt and fund operations.  Brookstone also concurrently purchased Company common shares from another shareholder to bring its ownership to approximately 34.1% of Capstone outstanding stock.

January 2018-The Company and Brookstone amended the Agreement to provide for deferral of interest payable by Capstone under the Secured Debt in favor of warrants issued to Brookstone for additional Capstone common shares.

August 2019-The Company received approval from its shareholder for a 1-for-1000 reverse stock split of common shares to reduce the number of authorized common shares to 200,000 and to reduce the number of preferred shares to 5,000.  This split brought shareholders of record to below 300 and allowed Capstone to become exempt from standard reporting requirements of the SEC.  The Company continues to fully comply with the Alternate Reporting Format guidelines of the OTCQB, which, in part requires filing of quarterly financial statements and an annual independent audit.

August 2019-The Company adopted a Contingent Value Rights Agreement, filed on Form 8-K with the SEC on August 26, 2019, and under that agreement, the net proceeds, if any, from the Company’s investment in LipimetiX Development, Inc., will be distributed to the Company’s July 10, 2019 shareholders of record. Accordingly, the Company effectively has no financial interest in LipimetiX, Development, Inc. and it is reported as a discontinued operation in the Company’s financial statements.

March 2020The Company and Brookstone amended the Agreement to extend the Secured Debt’s maturity to March 31, 2022 and continued deferral of interest payable.  As consideration, the Company has provided an option, for a period ending December 31, 2021, to convert all or part of the aggregate outstanding principal amount and any accrued interest of the Secured Debt or exercise of any warrant into Capstone common stock at a conversion price range of between $10.00 and $30.00 per share, as determined by an independent valuation at the time of conversion.  Also, in March 2020, the Company completed the transaction with TotalStone, LLC as detailed above.

December 2020-Brookstone exercised its option to convert $572,700 of accrued interest and secured debt into 24,900 shares of Capstone common stock at an exercise price of $23 per share as supported by independent valuation.  With this acquisition, Brookstone owns 54.8% of the Company’s outstanding common stock.

December 2020– LipimetiX Development, Inc.(“LipimetiX”), an approximately 62% owned subsidiary of the Company, entered into a License Transfer and Royalty Agreement with Anji Pharmaceuticals Inc. The Agreement transfers all rights to the technology for AEM-28 and certain of its analogs owned by LipimetiX and licensed by LipimetiX under an Exclusive License Agreement with the University of Alabama at Birmingham Research Foundation in exchange for cash to retire LipimetiX liabilities.

March 2021-The Company and Brookstone amended the Agreement to extend the Secured Debt’s maturity to April 1, 2024 (subsequently extended to August 1, 2024) with continued interest deferral on the loan.  The Company has provided an option, for a period ending April 1, 2024, to convert all or part of the aggregate outstanding principal amount of the Loan, together with all accrued and unpaid interest thereon, into shares of the Company’s common stock at a conversion price between $10.00 and $30.00 per share as determined by an independent valuation and for exercise of the Warrants at a conversion price between $10.00 and $30.00 per share as determined by an independent valuation through February 1, 2024, and after that date, the lesser of (i) $75.00 per Warrant Share and (ii) the 10-day average closing price per Warrant Share).

February 2022-The Company legally changed its name from Capstone Therapeutics Corp. to Capstone Holding Corp. reflecting its evolving line of business.

March 2022Brookstone exercised its option to convert $688,104 of accrued interest and $1,951,260 of secured debt into 78,153 shares of Capstone common stock at an exercise price of $24.75 per share as supported by independent valuation.  With this acquisition, Brookstone owns 77.3% of the Company’s outstanding common stock.

May 2024 The Company’s Board reinstated it’s Tax Benefit Preservation Plan (the “Plan”)with Computershare to protect the Company’s ability to use its net operating loss carryforwards and other tax attributes to reduce future taxable income, if any.  We view our tax benefits as highly valuable assets that are likely to inure to the benefit of our shareholders if we are able to generate future taxable income.  However, if we experience an “ownership change” under Section 382 of the IRS code, our ability to use the tax benefits could be substantially limited.  As such, the above-referenced Plan is intended to act as a deterrent to persons acquiring our common stock (in excess of 4.90% of outstanding shares) in certain transactions that would constitute or contribute to such an “ownership change’ without the approval of the Board.  The Plan expires December 31, 2027.