What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-16 compared with 2025-03-17 · 83 added, 99 removed, 165 unchanged (52% of the section changed)

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This discussion and analysis should be read in conjunction with the consolidated financial statements and the accompanying notes presented elsewhere in this Annual Report on Form 10-K.

Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “ Part II – Item 7.

– Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 26, 2024.

This discussion and analysis contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in Part I, Item 1A.

Risk Factors .

and elsewhere in this Annual Report on Form 10-K.

See “Cautionary Note Regarding Forward-Looking Statements” above for further explanation.

Recent Developments

CEO Transition

On October 24, 2024, the Board of Directors of the Company terminated Xiao Mou (Peter) Zhang as Chief Executive Officer of the Company, without cause, effective immediately.

In connection with Mr.

Zhang’s departure, the Company entered into a Severance Agreement and General Release (the “Severance Agreement”) with Mr.

Zhang on November 21, 2024.

Pursuant to the Severance Agreement, which includes a general release of claims by Mr.

Zhang against the Company, Mr.

Zhang will be entitled to receive standard severance benefits provided to a Chief Executive Officer under the Company’s Amended and Restated Severance Plan.

Zhang continues to serve as a Director on the Board of Directors.

On October 24, 2024, Xi (Felix) Lin was appointed to serve as Interim Chief Executive Officer, effective immediately, and continued to serve as the Company’s Chief Operating Officer and President.

On December 17, 2024, the Board of Directors of HF Foods Group Inc.

appointed Felix Lin to serve as the Company’s Chief Executive Officer and President, effective January 1, 2025.

Credit Facility Amended

On February 12, 2025, the Company amended certain terms and conditions of the JPM Credit Agreement, by, among other things, (i) increasing the Revolving Commitment (as defined in the Credit Agreement) from $100.0 million to $125.0 million, (ii) joining three new subsidiaries of the Company to the Credit Agreement, each as a “Borrower” thereunder, (iii) joining Wells Fargo Bank, N.A.

to the JPM Credit Agreement as a “Lender” thereunder, (iv) amending certain affirmative covenants commensurate with the increase in the Revolving Facility, and (v) amending certain restrictions regarding incurring obligations under real property leases and equipment financings in the ordinary course of business.

CFO Transition

On October 15, 2025 (the “Separation Date”), Cindy Yao, departed from the Company as its Chief Financial Officer.

In connection with Ms.

Yao’s departure, the Company entered into a Separation Agreement (the “Separation Agreement”) with Ms.

Yao effective November 6, 2025.

Effective October 15, 2025, Paul McGarry, who previously served as the Company’s Vice President and Corporate Controller was appointed Interim Chief Financial Officer.

Effective January 27, 2026, the Board of Directors appointed Mr.

McGarry to serve as the Company’s Chief Financial Officer.

Opening of a State-of-the-Art Distribution Warehouse in Powder Springs, GA

On December 18, 2025, the Company officially opened its newest 182,000 square foot distribution center located outside Atlanta, in Powder Springs, Georgia.

This brand-new facility includes warehouse, freezer, cooler, and office space and provides significant opportunities for expanding our existing operations in Atlanta and the surrounding cities and states.

The Company plans to incorporate automated material handling and warehouse management technologies at the facility to support operating efficiency.

The new distribution center will continue to service over 1,000 customers from HF Food’s previous Atlanta location and is now open to deliver more business throughout Georgia, Alabama, Mississippi, and Tennessee.

The distribution center is located at 4795 Innovative Highway, Powder Springs, GA 30127, and currently employs over 50 individuals with plans to expand operations throughout 2026.

Business Overview

We market and distribute Asian specialty food products, seafood, fresh produce, frozen and dry food, and non-food products primarily to Asian restaurants and other foodservice customers throughout the United States.

HF Foods was formed through a merger between two complementary market leaders, HF Foods Group Inc.

and B&R Global.

On December 30, 2021, HF Foods acquired a leading seafood supplier, the Great Wall Group, resulting in the addition of three distribution centers, located in Illinois and Texas (the “Great Wall Acquisition”).

On April 29, 2022, HF Foods acquired substantially all of the assets of Sealand Food, Inc.

(the “Sealand Acquisition”), one of the largest frozen seafood suppliers servicing the Asian restaurant market along the eastern seaboard, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

See Note 7 - Acquisitions to the consolidated financial statements in this Annual Report on Form 10-K for additional information regarding recent acquisitions.

With sixteen distribution centers and three cross-docks and a fleet of over 400 vehicles, our distribution network now spans 46 states covering approximately 95% of the contiguous United States.

Capitalizing on our deep understanding of Asian cultures, strong relationships with growers and suppliers of food products primarily in North America, South America, and Asia, with over 1,000 employees, and supported by two outsourced call centers in China, we have become a trusted partner serving approximately 15,000 customer locations throughout the United States.

We are dedicated to serving the vast array of Asian restaurants in need of high-quality and specialized food ingredients at competitive prices.

HF Foods is a leading marketer and distributor of fresh produce, frozen and dry food, and non-food products to Asian restaurants and other foodservice customers throughout the United States.

We operate a national distribution platform comprised of sixteen distribution centers and four cross-docks, supported by a fleet of over 400 vehicles, which collectively spans 46 states and covers approximately 95% of the contiguous United States.

We serve approximately 15,000 customer locations through a high-frequency, service-oriented distribution model designed to meet the operational needs of independent restaurants, including timely delivery and consistent product availability.

We believe we are differentiated by our deep cultural and language understanding of the Asian restaurant community, long-standing relationships with growers and suppliers, and specialized sourcing capabilities across North America, South America, and Asia.

These strengths are reinforced by nearly 1,000 employees and a centralized outsourced call center in China, which supports order taking and customer service in customers’ primary language and enables coordinated marketing and promotional campaigns.

Our product portfolio is supported by long-term partnerships with both domestic and international suppliers, which we believe enhances our ability to provide a broad and differentiated assortment at competitive prices.

Our supplier relationships and market knowledge strengthen our purchasing and negotiating position and support continuity of supply, including improving our ability to manage potential supply chain disruptions, reduce stockouts, obtain pricing concessions, and maintain reliable delivery schedules.

While Asian restaurants remain our core customer base, we intend to selectively broaden our customer reach into other ethnic and specialty foodservice segments over time as we execute our long-term growth strategy.

How to Assess HF Foods’ Performance

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Gross profit is equal to net revenue minus cost of revenue.

Cost of revenue primarily includes inventory costs (net of supplier consideration), inbound freight, customs clearance fees and other miscellaneous expenses.

Cost of revenue primarily includes inventory costs (net of supplier consideration), inbound freight, tariffs, customs clearance fees and other miscellaneous expenses.

Cost of revenue generally changes as we incur higher or lower costs from suppliers and as the customer and product mix changes.

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Net revenue was $1,228.3 million in 2025, compared to $1,201.7 million in 2024, an increase of $26.6 million, or 2.2%.

This increase was primarily attributable to volume growth associated with new wholesale accounts, case count growth, product cost inflation and improved pricing in certain categories, partially offset by the $13.3 million loss in revenue from the exit of our chicken processing businesses during the second half of 2023.

The increase was primarily attributable to volume growth and improved pricing in Seafood and Meat & Poultry and volume growth in Commodity, partially offset by volume decreases within other categories.

• Gross profit :

Gross profit was $207.6 million in 2025 compared to $205.2 million in 2024, an increase of $2.4 million, or 1.2%.

The increase was primarily attributable to increased net revenue partially offset by increased costs.

Gross profit margin of 17.1% for 2024 decreased from 17.8% in the prior year.

The increase was primarily attributable to volume growth and improved pricing in Seafood and Meat and Poultry and volume growth in Commodity, partially offset by volume decreases in other categories.

Gross profit margin of 16.9% for 2025 decreased from 17.1% in the prior year due to a shift in sales mix from Asian Specialty with higher margin to Meat and Poultry and Commodity with lower margins.

• Distribution, selling and administrative expenses :

Distribution, selling and administrative expenses increased by $3.0 million, or 1.5%, in 2024 compared to 2023, mainly due to an increase in payroll and related labor costs of $4.3 million as well as insurance costs of $1.1 million partially offset by a reduction in professional fees of $2.8 million.

Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.5% in 2024 from 17.0% in 2023, primarily due to lower professional fees and increased net revenue, partially offset by increased payroll and related labor costs and insurance costs.

Distribution, selling and administrative expenses increased by $3.7 million, or 1.9%, in 2025 compared to 2024, mainly due to increases in depreciation expense of $2.3 million, occupancy expenses of $1.4 million, auto & truck expense of $1.4 million and insurance costs of $1.2 million partially offset by a reduction in professional fees of $2.8 million.

Distribution, selling and administrative expenses as a percentage of net revenue remained relatively consistent at 16.4% in 2025 compared to 16.5% in 2024.

• Net loss attributable to HF Foods Group Inc .:

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was $38.8 million in 2025 compared to net loss of $48.5 million in 2024.

The increase of $46.3 million was primarily driven by goodwill impairment charges of $46.3 million in 2024.

The improvement of $9.7 million was primarily driven by an increase in income tax benefit of $7.9 million, due to the result of current year goodwill impairment charges, as well as an improvement in loss from operations of $6.1 million compared to 2024 which was offset by one time gain from the termination of a lease guarantee liability of $5.5 million within other income in the prior year and an increase in fair value of interest rate swap expense year over year of $3.6 million.

Results of Operations

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Goodwill impairment charges 38,815 46,303 (7,488)

(Loss) income from operations (39,135) 8,969 (48,104)

Loss from operations (33,001) (39,135) 6,134

Interest expense 11,467 11,425 42

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Loss before income taxes

Income tax expense 1,965 41 1,924

(45,281) (46,137) 856

Income tax expense (benefit)

(5,970) 1,965 (7,935)

Net loss and comprehensive loss (39,311) (48,102) 8,791

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Goodwill impairment charges 3.2 % 3.9 %

(Loss) income from operations (3.3) % 0.8 %

Loss from operations (2.7) % (3.3) %

Interest expense 0.9 % 0.9 %

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Loss before income taxes

Income tax expense 0.2 % — %

(3.7) % (3.8) %

Income tax expense (benefit)

(0.5) % 0.2 %

Net loss and comprehensive loss (3.2) % (4.0) %

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Net revenue for the year ended December 31, 2025 increased by $26.6 million, or 2.2%, compared to the same period in 2024.

This increase was primarily attributable to volume growth associated with new wholesale accounts, case count growth, product cost inflation and improved pricing in certain categories, partially offset by the $13.3 million loss in revenue resulting from the exit of our chicken processing businesses during the second half of 2023.

T he increase was primarily attributable to volume growth and improved pricing in Seafood and Meat & Poultry and volume growth in Commodity, partially offset by volume decreases within other categories.

Gross profit was $207.6 million for the year ended December 31, 2025 compared to $205.2 million in the same period in 2024 , an increase of $2.4 million, or 1.2% .

The gross profit increase was primarily attributable to increased net revenue partially offset by increased costs.

Gross profit margin for the year ended December 31, 2024 decreased to 17.1% compared to 17.8% in the same period in 2023.

The gross profit increase was attributable to increased net revenue partially offset by increased costs.

Gross profit margin for the year ended December 31, 2025 decreased slightly to 16.9% compared to 17.1% in the same period in 2024.

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses of $198.0 million for the year ended December 31, 2024 increased compared to prior year expenses of $195.1 million primarily due to an increase of $4.3 million in payroll and related labor costs and an increase of $1.1 million in insurance costs, partially offset by a decrease of $2.8 million in professional fees.

Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.5% for the year ended December 31, 2024 from 17.0% in the same period in 2023, primarily due to lower professional fees and increased net revenue, partially offset by increased payroll and related labor costs and insurance costs.

Distribution, selling and administrative expenses of $201.8 million for the year ended December 31, 2025 increased by $3.7 million, or 1.9%, in 2025 compared to $198.0 million in 2024, mainly due to increases in depreciation expense of $2.3 million, occupancy expenses of $1.4 million, auto & truck expense of $1.4 million and insurance costs of $1.2 million partially offset by a reduction in professional fees of $2.8 million.

Distribution, selling and administrative expenses as a percentage of net revenue remained relatively consistent at 16.4% in 2025 compared to 16.5% in 2024.

Interest Expense

Interest expense for the year ended December 31, 2024 decreased by $0.1 million or 0.5% , compared to the year ended December 31, 2023, primarily due to a decrease in our average daily JPMorgan Chase mortgage-secured term loan balance of $5.1 million, partially offset by an increase in our average daily line of credit balance of $10.6 million combined with a slightly higher interest-rate environment.

Average floating interest rates on our floating-rate debt for the year ended December 31, 2024 increased by approximately 0.2% on the line of credit and 0.1% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2023.

Our average daily line of credit balance increased by $10.6 million, or 23.7%, to $55.5 million for the year ended December 31, 2024 from $44.9 million for the year ended December 31, 2023, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5.1 million, or 4.7%, to $103.6 million for the year ended December 31, 2024 from $108.6 million for the year ended December 31, 2023.

Income Tax Expense

Income tax expense was $2.0 million for the year ended December 31, 2024, compared to $41,000 for the year ended December 31, 2023.

The increase in income tax expense of $1.9 million was due to non-deductible items including the impact of the Company’s goodwill impairment charges, SEC settlement, and state taxes, partially offset by the change in valuation allowance, tax credits, the expiration of the statute of limitations in relation to unrecognized tax benefits, and other tax adjustments during the year ended December 31, 2024.

Interest expense for the year ended December 31, 2025 increased slightly to $11.47 million, compared to $11.43 million for the year ended December 31, 2024, an increase of $0.04 million or 0.4%.

The increase was driven by an increase in our average daily line of credit balance of $1.3 million, partially offset by a decrease in our average daily JPMorgan Chase mortgage-secured term loan balance of $5.1 million combined with a slightly lower interest-rate environment.

Average floating interest rates on our floating-rate debt for the year ended December 31, 2025 decreased by approximately 0.9% on the line of credit and 0.9% on the JPMorgan Chase mortgage-secured term loan, compared to 2024.

Our average daily line of credit balance was $56.8 million for the year ended December 31, 2025, up from $55.5 million for the year ended December 31, 2024, while our average daily JPMorgan Chase mortgage-secured term loan balance decreased to $98.5 million for the year ended December 31, 2025 from $103.6 million for the year ended December 31, 2024.

Income Tax Expense (Benefit)

Income tax benefit was $6.0 million for the year ended December 31, 2025, compared to an income tax expense of $2.0 million for the year ended December 31, 2024.

The $7.9 million increase in income tax benefit was primarily driven by lower nondeductible goodwill impairment charges in 2025, as well as the impact of the SEC settlement recognized in 2024.

Net Loss Attributable to HF Foods Group, Inc.

Net loss attributable to HF Foods Group Inc.

was $48.5 million for the year ended December 31, 2024 , compared to net loss of $2.2 million for the year ended December 31, 2023.

The increase in loss of $46.3 million was primarily driven by goodwill impairment charges of $46.3 million recorded during the year ended December 31, 2024.

was $38.8 million for the year ended December 31, 2025, compared to a net loss of $48.5 million for the year ended December 31, 2024.

The $9.7 million improvement in net loss was primarily attributable to a $7.9 million favorable change in income taxes, a $6.1 million improvement in loss from operations due to a lower goodwill impairment charge in 2025 compared to 2024.

These favorable variances were partially offset by the absence of the $5.5 million non-recurring gain recognized in the prior year from the termination of a lease guarantee liability, which was recorded in other income, and by a $3.6 million unfavorable year-over-year change in the fair value of the Company’s interest rate swap.

Following the 2025 impairment, the Company has no remaining goodwill.

EBITDA and Adjusted EBITDA

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Net loss $ (39,311) $ (48,102) $ 8,791

Interest expense 11,425 11,478 (53)

Income tax expense 1,965 41 1,924

Interest expense, net

11,431 11,425 6

Income tax expense (benefit)

(5,970) 1,965 (7,935)

Depreciation and amortization 28,382 26,677 1,705

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Goodwill impairment charges 38,815 46,303 (7,488)

Settlement gain (1)

— (10,000) 10,000

Other asset impairment charges — 1,200 (1,200)

Business transformation costs (1)

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_________________

(1) As discussed in Note 17 - Commitments and Contingencies to the consolidated financial statements in this Annual Report on Form 10-K, the Company recovered approximately $10.0 million related to the Settlement Agreement.

The Company accounted for the settlement as a recovery of previously recorded expenses related to the litigation.

The Company has adjusted for the $10.0 million recovery.

(2) Represents costs associated with the launch of strategic projects including supply chain management improvements and technology infrastructure initiatives.

(3) Includes contested proxy and related legal and consulting costs and facility closure costs.

(1) Represents costs associated with the launch and continued implementation of strategic projects including supply chain management improvements and technology infrastructure initiatives.

(2) Includes legal and consulting costs related to various corporate projects and other strategic initiatives.

(3) Includes severance and related expenses for the Company’s transition of executive officers and organizational redesign.

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Pursuant to the agreement, we will pay the swap counterparty a fixed rate of 4.11% in exchange for floating payments based on CME Term SOFR.

Our liquidity is also affected by the entry of an administrative civil cease-and-desist order by the SEC, whereby we agreed to payment of a civil monetary penalty of $3.9 million.

We made this payment during the year ended December 31, 2024.

Management believes we have sufficient funds to meet our working capital requirements and debt obligations in the next twelve months.

Management believes we have sufficient access to funds to meet our working capital requirements and debt obligations in the next twelve months.

However, there are a number of factors that could potentially arise which might result in shortfalls in anticipated cash flow, such as the demand for our products, economic conditions, competitive pricing in the foodservice distribution industry, and our bank and suppliers being able to provide continued support.

If the future cash flow from operations and other capital resources is insufficient to fund our liquidity needs, we may have to resort to reducing or delaying our expected acquisition plans, liquidating assets, obtaining additional debt or equity capital, or refinancing all or a portion of our debt.

If the future cash flow from operations and other capital resources is insufficient to fund our liquidity needs, we may have to resort to reducing or delaying our expected capital investment plans, liquidating assets, obtaining additional debt or equity capital, or refinancing all or a portion of our debt.

As of December 31, 2025, we have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial position, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

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(In thousands) 2025 2024 Change

Net cash provided by (used in) operating activities $ 22,636 $ (1,648) $ 24,284

Net cash provided by operating activities $ 25,480 $ 22,636 $ 2,844

Net cash used in investing activities (20,373) (12,548) (7,825)

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Net decrease in cash and cash equivalents

$ (5,826) $ (765) $ (5,061)

Operating Activities

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, asset impairment charges, changes in deferred income taxes and others, and includes the effect of working capital changes.

Checks issued not presented for payment was reclassified from financing to operating activities for both the current and prior year which resulted in a $1.2 million increase to net cash provided by operating activities in the current year and a $17.5 million decrease in the prior year.

Net cash provided by operating activities increased by $24.3 million primarily due to the timing of working capital outlays such as the increase of $18.6 million resulting from checks issued not presented for payment and was partially offset by decreased operating income (excluding the $46.3 million non-cash goodwill impairment charge) and the $3.9 million SEC settlement payment.

Net cash provided by operating activities consists primarily of net loss adjusted for non-cash items, including depreciation and amortization, goodwill impairment charges, changes in deferred income taxes and others, and includes the effect of working capital changes.

Net cash provided by operating activities increased by $2.8 million primarily due to an increase in non-cash expense add-backs and increases in accounts payable balances, offset by the timing of working capital outlays mainly for inventory purchases and increases in our accounts receivable balances.

Investing Activities

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Financing Activities

Net cash used in financing activities increased by $5.0 million to $10.9 million during the year ended December 31, 2024 primarily due to the change in line of credit activity from net proceeds for the year ended December 31, 2023 to net payments for the year ended December 31, 2024.

Net cash used in financing activities remained relatively consistent at $10.9 million during the year ended December 31, 2025 primarily due to the higher overall net proceeds from line of credit activity, offset by overall lower interest rates as compared to the year ended December 31, 2024.

Critical Accounting Estimates

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Accordingly, we believe these are the most critical to fully understand and evaluate our financial condition and results of operations.

Business Combinations

We account for our business combinations using the purchase method of accounting in accordance with ASC Topic 805 (“ASC 805”), Business Combinations .

The purchase method of accounting requires that the consideration transferred be allocated to the assets, including separately identifiable assets and liabilities we acquired, based on their estimated fair values.

The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date.

Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests.

The excess of (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over, (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill.

If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings.

We estimate the fair value of assets acquired and liabilities assumed in a business combination.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement.

Significant estimates in valuing certain intangible assets include, but are not limited to future expected revenues and cash flows, useful lives, discount rates, and selection of comparable companies.

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain.

During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

On the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations and comprehensive income (loss).

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination.

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We review the carrying value of goodwill whenever events or changes in circumstances indicate that such carrying values may not be recoverable and annually for goodwill as required by ASC Topic 350, Intangibles — Goodwill and Other .

Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill may not be recoverable, include a sustained decline in stock price and market capitalization, reduced future cash flow estimates and slower growth rates in our industry.

Factors that may

be considered a change in circumstances, indicating that the carrying value of our goodwill may not be recoverable, include a sustained decline in stock price and market capitalization, reduced future cash flow estimates and slower growth rates in our industry.

This guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

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If the quantitative analysis indicates the carrying value of a reporting unit exceeds its fair value, we measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

As a result of our 2023 financial performance in comparison to previous forecasts, combined with our level of stock price, we performed a quantitative impairment assessment as of December 31, 2023.

A quantitative goodwill impairment analysis requires valuation of the respective reporting unit, which requires complex analysis and judgment.

The results of the testing as of December 31, 2023, concluded that the estimated fair value exceeded carrying value by approximately 10%, and no impairment existed as of that date.

As of September 30, 2024, the Company concluded that a triggering event occurred due to a sustained decline in the Company’s stock price since December 31, 2023, which required interim testing for goodwill impairment in accordance with ASC 350.

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A goodwill impairment charge of $46.3 million was recorded in the consolidated statements of operations during the year ended December 31, 2024.

For the December 31, 2024, September 30, 2024 and December 31, 2023 impairment tests, we used a combination of discounted cash flow (“DCF”) model and market approaches, such as public company comparable analysis and comparable acquisitions analysis to determine fair value of the reporting unit.

As a result of declines in the stock price during the fourth quarter of 2025, the Company performed a quantitative impairment assessment as of December 31, 2025.

The results of the testing at December 31, 2025, resulted in the conclusion that the estimated fair value of the Company’s single reporting unit was less than its carrying value, and its goodwill was impaired.

A goodwill impairment charge was recorded in the consolidated statement of operations during the year ended December 31, 2025 of $38.8 million.

For the impairment tests conducted in 2025 and 2024, we used a combination of an income approach or a discounted cash flow (“DCF”) model and market approaches, such as public company comparable analysis and comparable acquisitions analysis to determine fair value of the reporting unit.

The income approach and market approaches were weighted equally to estimate fair value.

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Our market capitalization is calculated using the number of common shares outstanding and common stock publicly traded price.

We determined that the implied control premium was reasonable which corroborates our fair value estimates.

We determined that the implied control premiums used in each analysis were reasonable which corroborates our fair value estimates.

We categorize the fair value determination as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

See Note 8 - Goodwill and Acquired Intangible Assets to the consolidated financial statements in this Annual Report on Form 10-K for additional information.

See Note 7 - Goodwill and Intangible Assets to the consolidated financial statements in this Annual Report on Form 10-K for additional information.

Assumptions used in impairment testing are made at a point in time and require significant judgment;

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Additionally, these assumptions are generally interdependent and do not change in isolation.

We performed sensitivity analyses on the key inputs and assumptions used in determining the estimated fair value of our reporting unit by utilizing changes in assumptions that would reasonably likely occur.

Assuming all other assumptions and inputs used in the fair value analysis are held constant, for the December 31, 2024 impairment test, a 100 basis point increase in the discount rate assumption, a 1x decrease in the respective EBITDA multiple assumptions, a 25 basis point decrease in the gross profit margin assumption, and a 50 basis point decrease in the revenue growth rate assumption would result in a decrease in the fair value of our reporting unit of approximately $11.6 million, $31.0 million, $7.3 million, and $5.5 million, respectively, which would likely result in further impairment.

These estimated changes in fair value are not necessarily representative of the actual impairment that would be recorded in the event of a fair value decline.

If, in future periods, the financial performance of the reporting unit does not meet forecasted expectations, or a prolonged decline occurs in the market price of our common stock, it may cause a change in the results of the impairment assessment and, as such, could result in further impairment of goodwill.

Following the impairment test conducted as of December 31, 2025, the Company’s goodwill was fully impaired.

Impairment of Long-lived Assets

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If property and equipment and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair value.

No impairment of long-lived assets was recognized during the year ended December 31, 2024.

We impaired machinery used in the operations within HF Foods Industrial, Inc.

and recognized impairment expense of $1.2 million in distribution, selling and administrative expenses in the consolidated statements of operations during the year ended December 31, 2023 .

We impaired our acquired developed technology attributable to Syncglobal, Inc.

and recognized impairment expense of $0.4 million in distribution, selling and administrative expenses in the consolidated statements of operations during the year ended December 31, 2022.

The testing for impairment of long-lived assets occurs prior to any testing related to goodwill.

The Company assessed whether the carrying amounts of the Company’s long-lived assets were impaired and determined no events or changes in circumstances indicated that the carrying amounts may not be recoverable.

No impairment of long-lived assets was recognized during the years ended December 31, 2025 or 2024 .

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis