Capstone Holding (CAPS) risk factors, FY2024 10-K

Risks related to our industry and economic and market conditions

1. 01The construction industry is highly sensitive to national and regional macroeconomic conditions
2. 02In addition to commercial and residential market indicators, we also depend to a significant extent upon the levels of home repair and remodeling and new construction spending, affected by such factors as interest rates, inflation, consumer confidence, unemployment and the availability of consumer credit
3. 03Uncertainty and volatility in the financial markets and worldwide economic conditions may adversely affect our operating results

Risks related to our business

1. 04An inability to successfully develop new products or improve existing products could negatively impact our ability to attract new customers and/or retain existing customers, including our significant customers
2. 05Although we historically have been able to retain the majority of our customers on a year to year basis, if we fail to attract new customers, retain existing customers, or maintain or increase sales to customers, our business, financial condition, results of operations, and growth prospects will be harmed
3. 06Our business may be adversely affected by weather conditions and other external factors beyond our control
4. 07Price volatility and supply constraints for raw materials could prevent us from meeting delivery schedules to our customers or reduce our profit margins
5. 08Failure to retain or replace key personnel could hurt our operations
6. 09If we are unable to enforce our intellectual property rights, or if such intellectual property rights become obsolete, our competitive position could be adversely affected
7. 10We could incur significant costs as a result of compliance with, violations of or liabilities under applicable environmental, health and safety laws
8. 11Changes in building codes and standards could increase the cost of our products, lower the demand for our products, or otherwise adversely affect our business
9. 12The industries in which we operate are highly competitive
10. 13We may be significantly affected by global climate change or by legal, regulatory or market responses to global climate change
11. 14We rely on third-party suppliers, some of which are international, for materials and if we fail to identify and develop relationships with a sufficient number of qualified suppliers, or if there is a significant interruption in our supply chains, our business and results of operations could be adversely affected
12. 15Loss of key suppliers and manufacturers would be highly disruptive and could affect our financial health
13. 16Breaches of our information system security measures could disrupt our internal operations
14. 17Damage to our computer infrastructure and software systems could harm our business
15. 18We risk liabilities and losses due to property damage or product liability claims, which may not be covered by insurance
16. 19Increases in labor costs, potential labor disputes, union organizing activity and work stoppages at our facilities or the facilities of our suppliers could delay or impede our production, reduce sales of our products and increase our costs

Risks related to our company

1. 20We may expand through investments in, acquisitions of, or the development of new products with assistance from, other companies, any of which may not be successful and may divert our management’s attention
2. 21If we are unable to obtain additional financing, business operations will be harmed and if we do obtain additional financing then existing shareholders may suffer substantial dilution
3. 22Our success is substantially dependent on the continued service of our senior management
4. 23We may not be able to hire or retain other key personnel required for our business, which could disrupt the development and sales of our products and limit our ability to grow
5. 24Affiliates of Brookstone (BPA XIV, LLC, Nectarine Management LLC and BP Peptides LLC) have significant control over shareholder matters and the minority shareholders will have little or no control over our affairs
6. 25We may not have sufficient resources to effectively introduce and market our services and products, which could materially harm our operating results
7. 26We could be impacted by unfavorable results of legal proceedings
8. 27We operate in a highly competitive industry
9. 28We have material weaknesses in our internal control over financing reporting. If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed
10. 29The liquidity of the Company is largely dependent on our ability to borrow funds on our ABL Facility
11. 30We may be adversely affected by the effects of inflation

Risks related to our securities

1. 31Capstone Holding Corp. is a holding company with no operations of its own, and it depends on its operating subsidiary for cash to fund all of its operations and expenses, including to make future dividend payments, if any
2. 32Sales of a significant number of shares of our Common Stock in the public market or the perception of such possible sales, could depress the market price of our Common Stock
3. 33Our share price could be volatile and our trading volume may fluctuate substantially
4. 34A decline in the price of our shares of Common Stock could affect our ability to raise further capital and adversely impact our ability to continue operations
5. 35Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our Common Stock
6. 36We currently do not intend to pay dividends on our Common Stock. As result, your only opportunity to achieve a return on your investment is if the price of our Common Stock appreciates
7. 37We could issue additional Common Stock, which might dilute the book value of our Common Stock
8. 38We may issue preferred stock with terms that could adversely affect the voting power or value of our Common Stock
9. 39Future issuance of our Common Stock, preferred stock, options and warrants could dilute the interests of existing stockholders
10. 40Future debt issuance may adversely affect the market price of our Common Stock
11. 41Anti-takeover provisions in our certificate of incorporation, by-laws could discourage, delay or prevent a change of control of our company and may affect the trading price of our common stock