What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-16 compared with 2025-03-17 · 293 added, 401 removed, 866 unchanged (44% of the section changed)

9 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Cash Flows

1 unchanged sentence

Notes to Consolidated Financial Statements

Note 1 - Organization and Description of Business

Note 2 - Summary of Significant Accounting Policies

Note 3 - Revenue

Note 4 - Balance Sheet Components

Note 5 - Fair Value Measurements

Note 6 - Leases

Note 7 - Goodwill and Intangible Assets

Note 8 - Derivative Financial Instruments

Note 9 - Long-Term Debt

Note 10 - S hareholder s ’ Equity

Note 11 - Earnings (Loss) Per Share

Note 12 - Income Taxes

Note 13 - Related Party Transactions

Note 14 - Stock-Based Compensation

Note 15 - Employee Benefit Plan

Note 16 - Segment Information

Note 17 - Commitments and Contingencies

Note 18 - Subsequent Events

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of HF Foods Group Inc.

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 16, 2026, expressed an adverse opinion thereon.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Consolidated Financial Statements - Impact of Control Environment and Information Technology General Controls

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Consolidated Financial Statements - Impact of Material Weaknesses on Substantive Audit

As disclosed in management’s report on internal control over financial reporting, the Company identified material weaknesses as of December 31, 2025.

These material weaknesses included ineffective entity-level controls, ineffective information technology general controls (ITGCs), and ineffective controls over certain non-routine transactions, significant management estimates, and financial reporting.

The completeness and accuracy of the consolidated financial statements, including the financial condition, results of operations and cash flows, is dependent on, in part, the Company’s ability to (i) design and maintain an effective control environment, including maintaining a sufficient number of qualified resources to support and provide proper oversight and accountability over the performance of controls, (ii) design and maintain effective ITGCs for certain information systems relevant to the preparation of the financial statements, and (iii) design and maintain effective controls over financial reporting.

We identified a critical audit matter over the completeness and accuracy of the consolidated financial statements.

The ineffective control environment, including the ineffective ITGCs resulted in several material weaknesses.

Designing the appropriate procedures and evaluating audit evidence to ensure the completeness and accuracy of the consolidated financial

statements, including higher risk areas, with an ineffective control environment, required especially challenging and subjective auditor judgment due to the increased extent of audit effort including the need to modify the nature and extent of audit evidence obtained.

The primary procedures we performed to address this critical audit matter included:

• Performing incremental procedures over material financial statement accounts such as revenue and receivables by i) increasing the sample sizes to perform certain audit procedures and ii) lowering the testing thresholds and by expanding the types of journal entries to be tested.

• Evaluating the impact of improper segregation of duties and designing incremental procedures over disbursements.

• Manually testing the completeness and accuracy of information provided by the Company and increasing the extent of our testing for items to be selected and agreed to source documents.

Goodwill Impairment – Valuation of Reporting Unit

As disclosed in Notes 2 and 8 to the consolidated financial statements, the Company’s consolidated goodwill balance was $38.8 million as of December 31, 2024.

Goodwill is tested for impairment at the reporting unit level at least annually, or whenever events or changes in circumstances indicate that goodwill might be impaired.

In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from the Company’s business.

A change in underlying assumptions could cause a change in the results of the impairment test and, as such, could cause fair value to be less than the carrying amount and result in an impairment of goodwill in the future.

In connection with the impairment tests completed as of September 30, 2024 and December 31, 2024 using the quantitative goodwill impairment assessment, the Company determined the fair value of its one reporting unit, using an average of the income approach, specifically, the discounted cash flow method, and market approaches, specifically, the comparable public company analysis and comparable acquisition analysis methods.

The income approach uses a discounted cash flow model that reflects management significant assumptions that mainly related to revenue growth rates, gross profit margins, distribution, selling & administrative (DS&A) expenses and a discount rate.

The comparable public company and comparable acquisition analysis methods apply a market multiple assumption to the Company’s EBITDA to calculate fair value.

The fair value of the Company’s reporting unit exceeded the carrying value as of September 30, 2024.

The results of the impairment testing as of December 31, 2024 concluded that the fair value of the Company’s reporting unit did not exceed the carrying value, and therefore the Company recorded a goodwill impairment charge of $46.3 million during the year ended December 31, 2024.

We identified certain assumptions used in the valuation of goodwill for the reporting unit for both the September 30, 2024 and December 31, 2024 impairment tests as a critical audit matter.

Management’s determination of the fair value of the reporting unit required the use of significant judgment due to the subjectivity and uncertainty of the gross profit margins, DS&A expenses and discount rate assumptions used in the income approach, and the EBITDA multiple assumption used in the comparable public company analysis and comparable acquisition analysis approaches.

Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

These material weaknesses included ineffective entity-level controls over control activities and monitoring, and ineffective controls over financial reporting including controls over the recording of revenue and accounts receivable, the review of journal entries, the accounting for new leases, and the impairment analysis of long-lived assets, including the review of underlying data and assumptions for completeness and accuracy.

The completeness and accuracy of the consolidated financial statements, including the financial condition, results of operations and cash flows, is dependent on, in part, the Company’s ability to (i) design and maintain effective entity-level controls and (ii) design and maintain effective controls over financial reporting.

We identified a critical audit matter over the existence and accuracy of (i) revenues and accounts receivable, and (ii) journal entries.

Designing the appropriate procedures and evaluating audit evidence to ensure the existence and accuracy of (i) revenue and accounts receivable, and (ii) journal entries, required especially challenging and subjective auditor judgment due to the increased extent of audit effort due to the large volume of transactions.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the reasonableness of the gross profit margins and DS&A expenses by:

i) evaluating the consistency of the gross profit margins and DS&A expenses with historical results, ii) evaluating the consistency of the gross profit margins, and DS&A expenses with the Company’s objectives and strategies, and iii) comparing the forecasted gross profit margins and DS&A expenses with external market data and evidence obtained in other areas of the audit.

• Utilizing personnel with specialized knowledge and skill with valuation to assist in assessing the reasonableness of the concluded fair value of the Company’s reporting unit, as well as the discount rate incorporated in the income approach and the EBITDA multiples incorporated in the comparable public company analysis and comparable acquisition analysis approaches.

• Performing incremental procedures over the existence and accuracy of revenue and accounts receivable by increasing the sample sizes to perform audit procedures.

• Expanding the scope of our journal entry testing, to select additional types of journal entries.

/s/ BDO USA, P.C.

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Prepaid expenses and other current assets 9,725 11,507

Assets held for sale 2,768 —

TOTAL CURRENT ASSETS 194,000 178,103

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and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

Year Ended December 31,

2024 2023 2022

Net revenue - third parties $ 1,223,793 $ 1,197,926

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Goodwill impairment charges 38,815 46,303

(LOSS) INCOME FROM OPERATIONS ( 39,135 ) 8,969 10,559

LOSS FROM OPERATIONS ( 33,001 ) ( 39,135 )

Interest expense 11,467 11,425

Other expense (income), net 2,818 ( 1,091 ) ( 1,829 )

Other (income) expense, net ( 1,057 ) 2,818

Change in fair value of interest rate swap contracts 1,870 ( 1,693 )

Lease guarantee (income) expense ( 5,548 ) ( 377 ) 5,744

(LOSS) INCOME BEFORE INCOME TAXES ( 46,137 ) ( 2,621 ) 4

Income tax expense (benefit) 1,965 41 ( 231 )

NET (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME ( 48,102 ) ( 2,662 ) 235

net income (loss) attributable to noncontrolling interests 409 ( 488 ) ( 225 )

NET (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO HF FOODS GROUP INC.

Lease guarantee income — ( 5,548 )

LOSS BEFORE INCOME TAXES ( 45,281 ) ( 46,137 )

Income tax (benefit) expense ( 5,970 ) 1,965

NET LOSS AND COMPREHENSIVE LOSS ( 39,311 ) ( 48,102 )

net (loss) income attributable to noncontrolling interests ( 468 ) 409

NET LOSS AND COMPREHENSIVE LOSS ATTRIBUTABLE TO HF FOODS GROUP INC.

$ ( 38,843 ) $ ( 48,511 )

(LOSS) EARNINGS PER COMMON SHARE - BASIC $ ( 0.92 ) $ ( 0.04 ) $ 0.01

(LOSS) EARNINGS PER COMMON SHARE - DILUTED $ ( 0.92 ) $ ( 0.04 ) $ 0.01

LOSS PER COMMON SHARE - BASIC $ ( 0.73 ) $ ( 0.92 )

LOSS PER COMMON SHARE - DILUTED $ ( 0.73 ) $ ( 0.92 )

WEIGHTED AVERAGE SHARES - BASIC 52,946,655 52,552,490

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Year Ended December 31,

2024 2023 2022

Cash flows from operating activities:

Net (loss) income $ ( 48,102 ) $ ( 2,662 ) $ 235

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization expense 28,382 26,677

Treasury stock received via legal settlement — ( 7,750 ) —

Goodwill impairment charges 38,815 46,303

Other asset impairment charges — 1,200 422

Gain from disposal of property and equipment ( 115 ) ( 12 )

(Credit) provision for expected credit losses ( 103 ) 701 82

Deferred tax expense (benefit) 364 ( 5,415 ) ( 5,012 )

Credit for expected credit losses ( 357 ) ( 103 )

Deferred tax (benefit) expense ( 5,584 ) 364

Change in fair value of interest rate swap contracts 1,870 ( 1,693 )

1 unchanged sentence

Non-cash lease expense 5,124 3,992

Lease guarantee (income) expense ( 5,548 ) ( 377 ) 5,744

Other non-cash expense (income) 1,169 493 ( 266 )

Lease guarantee income — ( 5,548 )

Other non-cash (income) expense ( 280 ) 1,169

Changes in operating assets and liabilities:

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Purchase of property and equipment ( 18,918 ) ( 12,547 )

Purchase of intangible assets ( 1,661 ) —

Proceeds from sale of property and equipment 206 48

Contribution to equity method investee — ( 49 )

Payment made for acquisition of Sealand — — ( 34,848 )

Payment made for acquisition of Great Wall Group — — ( 17,445 )

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

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Repayment of line of credit ( 1,448,100 ) ( 1,477,240 )

Proceeds from long-term debt — — 45,956

Proceeds from issuance of debt

Repayment of long-term debt ( 6,856 ) ( 5,470 )

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Repayment of obligations under finance leases ( 6,291 ) ( 3,574 )

Repayment of promissory note payable - related party — — ( 4,500 )

Proceeds from noncontrolling interests — — 240

Cash distributions to noncontrolling interests — ( 500 )

Net cash (used in) provided by financing activities ( 10,853 ) ( 5,895 ) 24,887

Net (decrease) increase in cash ( 765 ) ( 9,057 ) 9,497

Net cash used in financing activities ( 10,933 ) ( 10,853 )

Net decrease in cash

( 5,826 ) ( 765 )

Cash at beginning of the period 14,467 15,232

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Year Ended December 31,

2024 2023 2022

Supplemental disclosure of cash flow data:

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Property acquired in exchange for finance leases 14,269 14,322

Treasury stock received via legal settlement — 7,750 —

Acquisition of noncontrolling interests — 772

Note receivable related to property and equipment sales — 300 —

Intangible asset acquired in exchange for noncontrolling interests — — 566

The accompanying notes are an integral part of these consolidated financial statements.

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HF Foods Group Inc.

Noncontrolling

Non-controlling

Interests Total

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Shares Amount

Balance at January 1, 2022 53,706,392 $ 5 — — $ 597,227 $ ( 306,974 ) $ 290,258 $ 4,041 $ 294,299

Net income (loss) — — — — — 460 460 ( 225 ) 235

Capital contribution by shareholders — — — — — — — 806 806

Issuance of common stock pursuant to equity compensation plan 139,239 — — — — — — — —

Shares withheld for tax withholdings on vested awards ( 31,854 ) — — — ( 162 ) — ( 162 ) — ( 162 )

Distribution to shareholders — — — — — — — ( 186 ) ( 186 )

Stock-based compensation — — — — 1,257 — 1,257 — 1,257

Balance at December 31, 2023 54,153,391 $ 5 1,997,423 $ ( 7,750 ) $ 603,094 $ ( 308,688 ) $ 286,661 $ 1,322 $ 287,983

Net loss — — — — — ( 2,174 ) ( 2,174 ) ( 488 ) ( 2,662 )

Net income (loss) — — — — — ( 48,511 ) ( 48,511 ) 409 ( 48,102 )

Issuance of common stock pursuant to equity compensation plan 638,721 — — — — — — — —

Shares withheld for tax withholdings on vested awards ( 57,039 ) — — — ( 175 ) — ( 175 ) — ( 175 )

Treasury stock received via legal settlement — — 1,997,423 ( 7,750 ) — — ( 7,750 ) — ( 7,750 )

Distribution to shareholders — — — — — — — ( 500 ) ( 500 )

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Balance at December 31, 2024 54,735,073 $ 5 1,997,423 $ ( 7,750 ) $ 604,235 $ ( 357,199 ) $ 239,291 $ 2,003 $ 241,294

Net (loss) income — — — — — ( 48,511 ) ( 48,511 ) 409 ( 48,102 )

Net loss — — — — — ( 38,843 ) ( 38,843 ) ( 468 ) ( 39,311 )

Issuance of common stock pursuant to equity compensation plan 345,378 — — — — — — — —

Shares withheld for tax withholdings on vested awards ( 39,196 ) — — — ( 156 ) — ( 156 ) — ( 156 )

Distribution to shareholders — — — — — — — ( 500 ) ( 500 )

Dissolution of noncontrolling interests — — — — ( 772 ) — ( 772 ) 772 —

Stock-based compensation — — — — 1,759 — 1,759 — 1,759

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The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”) regarding annual financial reporting.

All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The accompanying consolidated financial statements for 2024 and 2023 include the accounts of HF Foods, and for 2022, the accounts of HF Foods and certain variable interest entities for which the Company was the primary beneficiary.

Securities and Exchange Commission (“SEC”).

All significant intercompany balances and transactions have been eliminated in consolidation.

For consolidated entities where we own or are exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interest in its consolidated statements of operations and comprehensive income (loss) equal to the percentage of the economic or ownership interest retained in such entity by the respective noncontrolling party.

Reclassifications

During 2024, the Company reclassified the presentation of checks issued not presented for payment from cash flows from financing activities to cash flows from operating activities in the consolidated statement of cash flows.

Prior periods amounts were reclassified to conform to the current period presentation.

The reclassification did not impact consolidated balance sheets or consolidated statements of operations and comprehensive income (loss).

For consolidated entities where we own or are exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interests in its consolidated statements of operations and comprehensive loss equal to the percentage of the economic or ownership interest retained in such entity by the respective noncontrolling party.

Variable Interest Entities

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If deemed the primary beneficiary, the Company consolidates the VIE.

As of and for the years ended December 31, 2023 and 2022, the Company had one VIE, AnHeart, Inc.

(“AnHeart”), for which the Company was not the primary beneficiary and therefore did not consolidate.

Effective April 30, 2024, the Company assumed the lease for which AnHeart was a lessee and the Company was a guarantor, and as such, it no longer recognizes AnHeart as a VIE as of December 31, 2024.

Effective April 30, 2024, the Company assumed the lease for which AnHeart, Inc.

(“AnHeart”) was a lessee and the Company was a guarantor, and as such, it discontinued recognizing AnHeart as a VIE for the year ended December 31, 2024.

The Company was not the primary beneficiary and therefore did not consolidate AnHeart.

See Note 17 - Commitments and Contingencies for additional information on AnHeart.

During the year ended December 31, 2022, the Company consolidated FUSO Trucking, LLC (“FUSO”) which was established to provide exclusive trucking services to the Company and was dissolved in 2022.

The results of operations and cash flows of FUSO prior to being dissolved were immaterial during 2022.

For the year ended December 31, 2025, the Company had no VIEs.

Noncontrolling Interests

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December 31, 2025 December 31, 2024

HF Foods Industrial, LLC (“HFFI”) (a)

N/A $ — $ ( 759 )

Min Food, Inc.

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Total $ 1,535 $ 2,003

_______________

(a) During the year ended December 31, 2024, upon dissolution of HFFI, the Company assumed HFFI’s remaining assets and liabilities.

In accordance with ASC Topic 810 (“ASC 810”), Consolidation, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary shall be accounted for as equity transactions.

No gain or loss was recognized.

As a result of this transaction, noncontrolling interest of $( 0.8 ) million was reclassified to additional paid-in capital on the consolidated balance sheets.

Uses of Estimates

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Actual results could differ from those estimates.

Significant accounting estimates reflected in the Company’s consolidated financial statements include, but are not limited to, inventory reserves, impairment of long-lived assets, impairment of goodwill, and the purchase price allocation and fair value of assets and liabilities acquired with respect to business combinations.

Recent Issued Accounting Pronouncements not yet Adopted

In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires public entities to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature.

This guidance also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions.

This guidance is effective for fiscal years beginning after December 15, 2024.

Upon adoption, ASU 2023-09 should be applied on a prospective basis while retrospective application is permitted.

The Company does not expect this adoption to have a material impact on its consolidated financial statements.

Recently Issued Accounting Pronouncements not yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

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The Company is in the process of assessing the impact the adoption of this guidance will have on the Company’s financial statement disclosures.

In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets.

This standard amends ASC 326-20 to provide a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606.

The guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2025 and interim periods in those annual periods.

The Company is in the process of assessing the impact the adoption of this guidance will have on the Company’s financial statement disclosures.

In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software.

This standard is intended to improve the operability and application of guidance related to capitalized software development costs.

The guidance becomes effective on a prospective basis, with the option for modified prospective or retrospective application, for all entities for annual reporting periods beginning after December 15, 2027 and interim periods in those annual periods.

The Company is in the process of assessing the impact the adoption of this guidance will have on the Company’s financial statement disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270).

This new standard clarifies interim reporting guidance, develops a list of disclosures required by other Topics and intends to enhance consistency in interim reporting across entities.

The standard allows for early adoption and becomes effective for fiscal years beginning after December 15, 2027, and interim periods within those annual periods.

The Company is in the process of assessing the impact the adoption of this guidance will have on the Company’s interim financial statement disclosures.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements.

This update addresses a broad range of topics including technical corrections, unintended applications of the codifications, clarifications of certain items, and other minor improvements.

The ASU is effective for annual and interim reporting periods beginning after December 15, 2026.

The Company is in the process of assessing the impact the adoption of this guidance will have on the Company’s financial statement disclosures.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about segment expenses on an annual and interim basis.

This standard is effective for the Company’s consolidated financial statements for the year ending December 31, 2024 and for interim periods beginning in 2025.

See Note 16 - Segment Information in the accompanying notes to the consolidated financial statements for further detail.

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

This guidance also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions.

This standard is effective for the Company’s consolidated financial statements for the year ended December 31, 2025.

See Note 12 - Income Taxes in the accompanying notes to the consolidated financial statements for further detail.

Cash and Cash Equivalents

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The Company maintains an allowance for expected credit losses based on historic collection trends, write-offs and the aging of receivables.

The Company uses specific criteria to determine uncollectible receivables to be written off, including, bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due.

The Company uses specific criteria to

determine uncollectible receivables to be written off, including, bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due.

The Company’s inventories, consisting mainly of food and other foodservice-related products, are considered finished goods.

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Machinery and equipment 3 to 10 years

Leasehold improvements are amortized over the shorter of the useful life of those leasehold improvements and the remaining lease term.

Leasehold improvements are amortized over the shorter of the useful life of those leasehold improvements or the remaining lease term.

Repair and maintenance costs are charged to expense as incurred, whereas the cost of renewals and betterment that extends the useful lives of property and equipment are capitalized as additions to the related assets.

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Capitalized software purchases and related development costs, net of accumulated amortization, were $ 3.0 million as of December 31, 2025 and $ 4.1 million as of December 31, 2024, and are included in other long-term assets on the consolidated balance sheets.

Business Combinations

The Company accounts for its business combinations using the purchase method of accounting in accordance with ASC Topic 805, Business Combinations .

The purchase method of accounting requires that the consideration transferred be allocated to the assets, including separately identifiable assets and liabilities the Company 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.

The Company estimates the fair value of assets acquired and liabilities assumed in a business combination.

While the Company uses its 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 the Company believes the assumptions and estimates it has 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, the Company 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 the Company’s consolidated statements of operations and comprehensive income (loss).

Transaction costs associated with business combinations are expensed as incurred, and are included in distribution, selling and administrative expenses in the Company’s consolidated statements of operations and comprehensive income (loss).

The results of operations of the businesses that the Company acquired are included in the Company’s consolidated financial statements from the date of acquisition.

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

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Potential impairment indicators include (but are not limited to) macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit, or sustained decrease in share price.

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.

The Company has 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.

If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value, or at management’s discretion, the Company performs a quantitative analysis.

If the quantitative analysis indicates the carrying value of a reporting unit exceeds its fair value, the Company measures 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 of December 31, 2024 and December 31, 2023,

the Company has one reporting unit for purposes of testing goodwill for impairment.

See Note 8 - Goodwill and Acquired Intangible Assets for additional information.

Determining the fair value of a reporting unit requires the application of judgment and involves the use of significant estimates and assumptions including, projections of future cash flows, which include forecasted revenue, discount rate, and other factors which can be affected by changes in business climate, economic conditions, the competitive environment and other factors.

As of December 31, 2025 and December 31, 2024, the Company has one reporting unit for purposes of testing goodwill for impairment.

See Note 7 - Goodwill and Intangible Assets for additional information.

which can be affected by changes in business climate, economic conditions, the competitive environment and other factors.

The Company also considers the use of market approaches, such as the comparable public company analysis and comparable acquisitions analysis, to estimate the fair value of the reporting unit.

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In the event of a goodwill impairment, the Company would be required to record an impairment, which would impact earnings and reduce the carrying amounts of goodwill on the consolidated balance sheet.

The Company recorded goodwill impairment charges of $ 38.8 million and $ 46.3 million during the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, the Company’s goodwill is fully impaired.

Intangible Assets, net

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Customer relationships 10 to 20 years

Inventory management system 7 years

Long-term Investments

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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 asset or asset group exceeds its fair value.

The Company impaired machinery related to HFFI 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.

The Company fully impaired its acquired developed technology associated with the Syncglobal joint venture 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 .

Fair value was determined using Level 3 inputs at the time of impairment.

The Company did no t record any impairment loss on its long-lived assets during the year ended December 31, 2024.

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.

The Company did no t record any impairment loss on its long-lived assets during the years ended December 31, 2025 and 2024.

Insurance and Claim Costs

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Cost of Revenue

Cost of revenue primarily includes inventory costs (net of vendor consideration, primarily in the form of rebates), inbound freight, customs clearance fees and other miscellaneous expenses.

Cost of revenue primarily includes inventory costs (net of vendor consideration, primarily in the form of rebates), inbound freight, customs clearance fees, tariffs and other miscellaneous expenses.

Distribution, Selling and Administrative Expenses

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Shipping and handling costs, which include costs related to the selection of products and their delivery to customers, are included in distribution, selling and administrative expenses.

Shipping and handling costs were $ 69.2 million, $ 76.0 million and $ 83.7 million for the years ended December 31, 2024, 2023 and 2022, respectively, and includes estimates for labor associated with shipping and handling activities for the years ended December 31, 2023 and 2022.

Shipping and handling costs were $ 67.6 million and $ 69.2 million for the years ended December 31, 2025 and 2024, respectively, and includes estimates for labor associated with shipping and handling activities for the years ended December 31, 2025 and 2024.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

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A valuation allowance is provided when it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

Based on our assessment, it is more likely than not that the deferred tax assets will be realized through future taxable income.

In 2023, management established a valuation allowance of $ 0.7 million against certain deferred taxes attributable to the Company’s subsidiary, HFFI.

In 2024, the Company dissolved its subsidiary, HFFI, and as such, the deferred tax balances and corresponding valuation allowance associated with this entity were written off during the year ended December 31, 2024.

There is no remaining valuation allowance as of December 31, 2024.

The Company will continue to assess the need for a valuation allowance in the future by evaluating both positive and negative evidence that may exist.

The Company records uncertain tax positions in accordance with ASC Topic 740, Income Taxes (“ASC 740”), on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

See Note 12 - Income Taxes for additional information.

In 2021, the Organization for Economic Co-operation and Development (“OECD”) published the Tax Challenges Arising from the Global Anti-Base Erosion Model Rules (“Pillar Two”), also referred to as the GloBE Rules or Pillar Two.

The rules are designed to ensure large multinational enterprises (“MNEs”) pay a minimum level of tax (15%) on income of each jurisdiction.

The legislation applies to MNEs with annual consolidated group revenues of at least €750 million if at least one jurisdiction in which the MNE operates has enacted tax laws in accordance with the Pillar Two framework.

Many aspects of Pillar Two are effective for tax years beginning after January 1, 2024 with certain remaining aspects to be effective for tax years beginning January 1, 2025 or later.

The Company currently does not have any foreign operations that would trigger the application of Pillar Two and therefore it is not anticipated to have a significant impact.

The Company will continue to monitor the effects of Pillar Two and any potential future developments.

The One Big Beautiful Bill Act (“OBBBA”) was signed into law on July 4, 2025.

The OBBBA includes a broad range of tax reform provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

The Company adopted the tax provisions in the current period when the provisions were signed into law.

The Company accounts for leases following ASC Topic 842, Leases (“ASC 842”).

The Company determines if an arrangement is a lease at inception and also considers classification of leases as operating or finance.

Operating leases are included in

operating lease ROU assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s consolidated balance sheets.

Operating leases are included in operating lease ROU assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s consolidated balance sheets.

Finance leases are included in property and equipment, net, current portion of obligations under finance leases, and obligations under finance leases, non-current on the consolidated balance sheets.

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The Company has not designated its interest rate swap (“IRS”) contracts as hedges for accounting treatment.

Pursuant to GAAP, income or loss from fair value changes for derivatives that are not designated as hedges by management are reflected as income or loss on the consolidated statements of operations and comprehensive income (loss).

Net amounts received or paid under the interest rate swap contracts are recognized as an increase or decrease to interest expense when such amounts are incurred.

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Seafood $ 436,630 36 % $ 394,032 33 %

Asian Specialty 305,584 25 % 305,466 27 % 299,215 26 %

Meat and Poultry 270,584 22 % 253,008 21 %

Asian Specialty 226,268 18 % 305,584 25 %

Commodity 123,831 10 % 57,529 5 %

Produce 113,263 9 % 128,837 11 %

Packaging and Other 57,706 5 % 62,677 5 %

Commodity 57,529 5 % 71,572 6 % 67,707 6 %

Total $ 1,228,282 100 % $ 1,201,667 100 %

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Accounts receivable, net $ 65,691 $ 54,107

The beginning balance of accounts receivable as of January 1, 2024 was $ 49.6 million.

Movement of allowance for expected credit losses was as follows:

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Beginning balance $ 1,557 $ 2,119

(Credit) provision for expected credit losses ( 103 ) 701 82

Credit for expected credit losses ( 357 ) ( 103 )

Bad debt write-offs ( 1 ) ( 459 )

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Prepaid expenses and other current assets $ 9,725 $ 11,507

Assets held for sale consisted of the following:

(In thousands) December 31, 2025 December 31, 2024

Buildings $ 2,034 $ —

Assets held for sale $ 2,768 $ —

In 2025, the Company approved a plan to sell land and a building it owned in Utah.

The Company engaged a firm to market the location for sale and solicited multiple offers on the property.

On October 17, 2025, the Company executed a sale agreement for

the assets and subsequently determined that the assets met the accounting requirements to be classified as held for sale as of December 31, 2025.

The Company closed on the sale of the land and building on February 12, 2026.

For additional information regarding the sale see Note 18 - Subsequent Events .

Property and equipment, net consisted of the following:

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Building improvements (1)

41,182 22,709

Furniture and fixtures 489 398

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Machinery and equipment (1)

14,500 13,216

Construction in progress (2)

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_________________

(1) The cost and accumulated depreciation of property and equipment related to finance leases was $ 36.1 million and $ 14.3 million, respectively, at December 31, 2024 and $ 22.2 million and $ 10.3 million, respectively, at December 31, 2023, which primarily relates to Automobiles.

During the year ended December 31, 2024, the Company entered into finance leases for automobiles which mature in 4 to 7 years and have a weighted average discount rate of 6.3 %.

The total future minimum lease payments under finance leases as of December 31, 2024 is $ 35.7 million.

As of December 31, 2024, the Company had additional automobile leases that had not yet commenced which total $ 15.4 million in future minimum lease payments.

Depreciation expense was $ 10.4 million, $ 9.6 million and $ 9.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

During the year ended December 31, 2023, the Company impaired machinery and recognized impairment expense of $ 1.2 million in distribution, selling and administrative expense in the consolidated statements of operations and comprehensive income (loss).

(1) The cost and accumulated depreciation of property and equipment related to finance leases was $ 50.0 million and $ 21.1 million, respectively, at December 31, 2025 and $ 36.1 million and $ 14.3 million, respectively, at December 31, 2024.

The total future minimum lease payments under all finance leases as of December 31, 2025 is $ 43.7 million.

(2) Included in construction in progress at December 31, 2024 was $ 4.0 million related to the Inventory Management System prior to it being placed in service in 2025.

When the Company placed the Inventory Management System in service in 2025, it reclassified the amount out of construction in progress to Intangible Assets.

Depreciation expense was $ 12.7 million and $ 10.4 million for the years ended December 31, 2025 and 2024, respectively.

Long-term investments consisted of the following:

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See Note 8 - Derivative Financial Instruments for additional information regarding the Company’s interest rate swaps.

Carrying Value and Estimated Fair Value of Outstanding Debt - The following table presents the carrying value and estimated fair value of the Company’s outstanding debt as described in Note 10 - Debt , including the current portion, as of the dates indicated:

Carrying Value and Estimated Fair Value of Outstanding Debt - The following table presents the carrying value and estimated fair value of the Company’s outstanding debt as described in Note 9 - Long-Term Debt , including the current portion, as of the dates indicated:

Fair Value Measurements

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Bank of America $ — $ — $ 48 $ 51

Other financial institutions

— 2,474 — 2,784

Variable rate debt:

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Bank of America $ — $ — $ 104 $ 113

Other finance institutions $ — $ — $ 43 $ 45

Variable rate debt:

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For the Company’s fixed rate debt, the fair values were estimated using discounted cash flow analyses, based on the current incremental borrowing rates for similar types of borrowing arrangements.

See Note 10 - Debt for additional information regarding the Company’s debt.

See Note 9 - Long-Term Debt for additional information regarding the Company’s debt.

Nonrecurring Fair Values

The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.

As further disclosed in Note 8 - Goodwill and Acquired Intangible Assets, we performed a quantitative goodwill impairment analysis as of December 31, 2024.

The results of testing as of December 31, 2024 concluded that the estimated fair value of our one reporting unit fell short of carrying value, and therefore impairment existed as of that date.

Goodwill impairment charges of $ 46.3 million were recorded in the consolidated statements of operations during the year ended December 31, 2024.

The calculation of the fair value of our reporting unit was determined using Level 3 fair value measurements.

No other adjustments to fair value from the write-down of asset values due to impairment were made during the year ended December 31, 2024.

During the year ended December 31, 2023, the Company partially impaired machinery related to the operations of HFFI and recognized impairment expense of $ 1.2 million in distribution, selling and administrative expense in the consolidated statements of operations and comprehensive income (loss).

The machinery was sold during the year ended December 31, 2023.

The impairment was based on sales prices of similar equipment listed by third-party sellers and considered a Level 3 fair value measurement.

During the year ended December 31, 2022, the Company fully impaired its acquired developed technology associated with the Syncglobal, Inc.

joint venture and recognized impairment expense of $ 0.4 million in distribution, selling and administrative expenses in the consolidated statements of operations and comprehensive income (loss) during the year ended December 31, 2022.

There were no assets other than goodwill that were carried at nonrecurring fair value at December 31, 2024.

There were no assets carried at nonrecurring fair value at December 31, 2023.

As further disclosed in Note 7 - Goodwill and Intangible Assets, we performed a quantitative goodwill impairment analysis as of December 31, 2025 and 2024.

The results of testing as of December 31, 2025 and 2024 concluded that the estimated fair value of our one reporting unit fell short of carrying value, and therefore impairment existed as of those dates.

Goodwill impairment charges of $ 38.8 million and $ 46.3 million were recorded for the years ended December 31, 2025 and 2024, respectively.

The calculation of the fair value of our reporting unit was determined using Level 3 fair value measurements due to its use of internal projections and unobservable measurement inputs.

There were no assets carried at nonrecurring fair value other than goodwill at December 31, 2025 or 2024.

Note 6 - Leases

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Weighted average discount rate 6.7 % 5.4 %

Supplemental cash flow information related to operating leases was as follows:

Year Ended December 31,

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Finance Leases

The components of lease expense were as follows:

The components of finance lease expense were as follows:

Year Ended December 31,

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Maturities of lease liabilities are as follows:

Operating Leases

(In thousands) Related

Third Party Total Finance

(In thousands) Operating Leases Finance Leases

Year Ended December 31,

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Total $ 27,324 $ 31,704

_______________

(1) See Note 13 - Related Party Transactions

As of December 31, 2025, the Company had additional leases for vehicles that had not yet commenced which total $ 0.8 million in future minimum lease payments and were excluded from the table above.

These vehicle leases are expected to commence during the year ended December 31, 2026 with lease terms of 7 to 8 years.

Also excluded from the table above, the Company entered into a lease on September 30, 2024 for a new Atlanta, Georgia based distribution center which commenced February 1, 2025 and total $ 15.8 million in future minimum lease payments over 10 years.

Note 7 - Acquisitions

Acquisition of Sealand

On April 29, 2022, the Company completed the acquisition of substantially all of the operating assets of Sealand, including equipment, machinery and vehicles.

The acquisition was completed to expand the Company’s territory along the East Coast, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

The price for the purchased assets was $ 20.0 million paid in cash at closing.

In addition to the closing cash payment, the Company separately acquired all of the sellers’ saleable product inventory, for approximately $ 14.4 million and additional fixed assets for approximately $ 0.5 million.

The Company accounted for this transaction under ASC 805 Business Combinations, by applying the acquisition method of accounting and established a new basis of accounting on the date of acquisition.

The assets acquired by the Company were measured at their estimated fair values as of the date of acquisition.

Goodwill is calculated as the excess of the purchase price over the net assets recognized and represent synergies and benefits expected as a result from combining operations with an emerging national presence.

The transaction costs for the acquisition for the year ended December 31, 2022 totaled approximately $ 0.7 million and were reflected in distribution, selling and administrative expenses in the consolidated statement of operations and comprehensive income.

The information included herein was prepared based on the allocation of the purchase price using estimates of the fair value of assets acquired and liabilities assumed which were determined using a combination of quoted market prices, discounted cash flows, and other estimates made by management.

Purchase Price Allocation

The total consideration paid to acquire the assets and liabilities of Sealand, as set forth below:

(In thousands) Amount

Inventory $ 13,846

Property plant, and equipment 1,424

Right-of-use assets 127

Intangible assets 14,717

Total assets acquired 30,114

Obligations under operating leases 127

Total liabilities assumed 127

Net assets 29,987

Goodwill 4,861

Total consideration $ 34,848

The Company recorded acquired intangible assets of $ 14.7 million, which were measured at fair value using Level 3 inputs.

These intangible assets include tradenames and trademarks of $ 4.4 million, customer relationships of $ 8.9 million and non-competition agreements of $ 1.4 million.

The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology and Level 3 inputs including a discount rate.

The fair value of tradenames and trademarks was determined by applying the income approach utilizing the relief from royalty methodology and Level 3 inputs including a royalty rate of 1 % and a discount rate.

The fair value of non-competition agreements was determined by applying the income approach and Level 3 inputs including a discount rate.

Discount rates used in determining fair values for customer relationships, tradenames and trademarks, and non-competition agreements ranged from 17.5 % to 18.0 %.

The useful lives of the tradenames and trademarks are ten years , customer relationships are ten years and non-competition agreements are three years , with a weighted average amortization period of approximately nine years .

The associated goodwill is deductible for tax purposes.

Unaudited Supplemental Pro Forma Financial Information

The following table presents the Company’s unaudited pro forma results for the year ended December 31, 2022, as if the Sealand Acquisition had been consummated on January 1, 2021.

The unaudited pro forma financial information presented includes the effects of adjustments related to the amortization of acquired intangible assets and excludes other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees.

Statutory rates were used to calculate income taxes.

(In thousands, except share and per share data) Year Ended December 31,

Pro forma net revenue $ 1,202,296

Pro forma net income attributable to HF Foods $ 35

Pro forma earnings per common share — basic

Pro forma earnings per common share — diluted

Pro forma weighted average shares — basic

Pro forma weighted average shares — diluted

Note 8 - Goodwill and Acquired Intangible Assets

AnHeart Lease Arrangements

The Company was previously the guarantor of leases for properties located at 273 Fifth Avenue and 275 Fifth Avenue in Manhattan, New York.

In connection with these arrangements, the Company previously determined that AnHeart, Inc.

(“AnHeart”) was a variable interest entity (“VIE”);

however, because the Company was not the primary beneficiary, AnHeart was not consolidated.

Effective January 21, 2021, the Company assumed the lease for 273 Fifth Avenue and became responsible for the related tenant obligations thereunder, including rent and required property improvements.

The lease term expires in January 2051.

In March 2024, the Company commenced the required construction of a multi-use facility at the property.

As of December 31, 2025, the Company had incurred approximately $ 7.3 million of construction costs, and the project was placed in service in September 2025 following receipt of the certificate of occupancy.

The lease agreement permits subletting of the premises, and as of December 31, 2025, the Company had entered into sub-lease arrangements for portions of the property.

Following AnHeart’s default under the 275 Fifth Avenue lease in 2022, the Company performed under its guaranty and recognized a lease guarantee liability.

Effective April 30, 2024, the Company assumed the lease for portions of the 275 Fifth Avenue property.

Upon assumption of the lease, the Company determined that AnHeart was no longer a VIE with respect to this arrangement.

The remaining lease guarantee liability of $ 5.4 million was reversed, and an operating lease right-of-use asset and lease liability of approximately $ 4.9 million were recognized on the consolidated balance sheet.

The Company recognized a $ 5.4 million gain in other expense (income), net during 2024 for the reversal of the lease guarantee liability.

The lease term expires on April 30, 2034, includes options to renew for up to two additional five-year terms, and provides for initial monthly rent of approximately $ 45,000 , subject to annual increases.

Certain legal matters relating to the 273 Fifth Avenue and 275 Fifth Avenue lease arrangements are described in Note 17 - Commitments and Contingencies .

Note 7 - Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are presented below:

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Balance at December 31, 2023 $ 85,118

No Goodwill activity —

Goodwill impairment charges ( 46,303 )

Balance at December 31, 2024 $ 38,815

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Balance at December 31, 2025 $ —

Accumulated impairment for goodwill is $ 384.5 million as of December 31, 2024 and $ 338.2 million as of December 31, 2023 and 2022.

Prior to the goodwill impairment charge in the current year, the accumulated impairment resulted from an impairment during the year ended December 31, 2020.

Accumulated impairment for goodwill is $ 423.3 million as of December 31, 2025 and $ 384.5 million as of December 31, 2024.

Prior to the goodwill impairment charge in the current year, the accumulated impairment resulted from impairment charges taken during the years ended December 31, 2024 and December 31, 2020.

There is only one reporting unit at December 31, 2025 and 2024.

The Company tests goodwill for impairment at least annually, as of December 31, or whenever events or changes in circumstances indicated goodwill might be impaired.

The Company performed a quantitative goodwill impairment assessment as of December 31, 2023, as a result of the Company’s results of operations during 2023 compared to previous forecasts, combined with the level of the Company’s stock price.

The annual goodwill impairment test in 2023 resulted in an estimated fair value that exceeded carrying value at December 31, 2023, and therefore, the Company concluded no impairment was required to be recorded during the year ended December 31, 2023.

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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The results of the testing as of December 31, 2024, concluded that the estimated fair value of the reporting unit fell short of carrying value, and therefore impairment existed as of that date.

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, the Company 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.

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

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 statements of operations and comprehensive loss during the year ended December 31, 2025 of $ 38.8 million.

For the impairment tests conducted in 2025 and 2024, the Company 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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In addition, the Company considered the reasonableness of the fair value of the reporting unit by assessing the implied enterprise value control premium based on the Company’s market capitalization.

The Company determined that the implied control premium was reasonable which corroborates the Company’s fair value estimates.

The Company determined that the implied control premiums used in each analysis were reasonable which corroborates the Company’s fair value estimates.

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

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

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

Acquired Intangible Assets

As of December 31, 2025, the Company’s goodwill was fully impaired.

Intangible Assets

In connection with the Sealand acquisition in 2022, the Company acquired $ 14.7 million of intangible assets, primarily representing trademarks and trade names of $ 4.4 million, customer relationships of $ 8.9 million and non-compete agreements of $ 1.4 million.

The useful lives of trademarks and trade names are ten years , customer relationships are ten years and non-compete agreements are three years , with a weighted average amortization period of approximately nine years .

The associated goodwill is deductible for tax purposes.

In connection with the Great Wall Group acquisition in 2021, HF Foods acquired $ 30.1 million of intangible assets, primarily representing a non-competition agreement, trademarks and trade names and customer relationships, which have an estimated amortization period of approximately 3 years, 10 years, and 10 years, respectively.

In connection with the acquisition of B&R Global in 2019, HF Foods acquired $ 188.5 million of intangible assets, primarily representing trademarks and trade names and customer relationships which have an estimated amortization period of 10 and 20 years, respectively .

The useful lives of trademarks and trade names are ten years , customer relationships are ten years and non-compete agreements are three years .

December 31, 2025 December 31, 2024

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Customer relationships 185,266 ( 59,218 ) 126,048 185,266 ( 48,651 ) 136,615

Inventory Management System 5,667 ( 540 ) 5,127 — — —

Total $ 239,032 $ ( 87,544 ) $ 151,488 $ 233,365 $ ( 71,839 ) $ 161,526

The Company evaluated possible triggering events that would indicate long-lived asset impairment assessment.

The Company impaired its acquired developed technology associated with the former Syncglobal, Inc.

joint venture 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 .

There were no triggering events identified for the remaining acquired intangible assets at December 31, 2022.

No impairment was recorded against acquired intangible assets for the years ended December 31, 2024 and 2023.

Amortization expense for acquired intangible assets was $ 16.3 million, $ 16.3 million and $ 15.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company evaluated possible triggering events that would indicate its long-lived assets are impaired.

No impairment was recorded against intangible assets for the years ended December 31, 2025 and 2024.

Amortization expense for intangible assets was $ 15.7 million and $ 16.3 million for the years ended December 31, 2025 and 2024, respectively.

The estimated future amortization expense for intangible assets is presented below:

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Derivative Instruments

The Company utilizes interest rate swaps (“IRS”) for the sole purpose of mitigating interest rate fluctuation risk associated with floating rate debt instruments (as defined in Note 10 - Debt ).

The Company utilizes interest rate swaps (“IRS”) for the sole purpose of mitigating interest rate fluctuation risk associated with floating rate debt instruments (as defined in Note 9 - Long-Term Debt ).

The Company does not use any other derivative financial instruments for trading or speculative purposes.

On August 20, 2019, HF Foods entered into two IRS contracts with East West Bank (the “EWB IRS”) for initial notional amounts of $ 1.1 million and $ 2.6 million, respectively.

On April 20, 2023, the Company amended the corresponding mortgage term loans, which pegged the two mortgage term loans to 1-month Term SOFR (Secured Overnight Financing Rate) + 2.29 % per annum for the remaining duration of the term loans.

On April 20, 2023, the Company amended the corresponding mortgage term loans, which pegged the two mortgage term loans to 1-month Term SOFR (Secured Overnight Financing Rate) + 2.29 % per annum for

the remaining duration of the term loans.

The amended EWB IRS contracts fixed the two term loans at 4.23 % per annum until maturity in September 2029.

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The Company evaluated the aforementioned IRS contracts currently in place and did not designate those as cash flow hedges.

Hence, the fair value changes of these IRS contracts are accounted for and recognized as a change in fair value of interest rate swap contracts in the consolidated statements of operations and comprehensive income (loss).

As of December 31, 2024, the Company determined that the fair values of the IRS contracts were $ 0.5 million in an asset position and none in a liability position.

As of December 31, 2023, the fair values of the IRS contracts were $ 0.4 million in an asset position and $ 1.6 million in a liability position.

As of December 31, 2025, the Company determined that the fair values of the IRS contracts were $ 0.2 million in an asset position and $ 1.6 million in a liability position.

As of December 31, 2024, the fair values of the IRS contracts were $ 0.5 million in an asset position and none in a liability position.

The Company includes these in other long-term assets and other long-term liabilities , respectively, on the consolidated balance sheets.

Note 10 - Debt

Note 9 - Long-Term Debt

Long-term debt at December 31, 2025 and December 31, 2024 is summarized as follows:

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96,196 101,255

Other finance institutions (d)

July 2024 N/A

Other financial institutions

April 2026 - July 2030 6.60 % - 7.70 %

Total debt, principal amount 106,292 108,949

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(c) Real estate term loan with a principal balance of $ 96.2 million as of December 31, 2025 and $ 101.3 million as of December 31, 2024 is secured by assets held by the Company and has a maturity date of January 2030.

(d) Secured by vehicles.

The terms of the various loan agreements related to long-term bank borrowings require the Company to comply with certain financial covenants, including, but not limited to, a fixed charge coverage ratio and effective tangible net worth.

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Year ending December 31,

Thereafter 75,931

Total $ 106,119

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The existing revolving credit facility balance under the Second Amended Credit Agreement, was rolled over to the Revolving Facility on December 30, 2021.

On the same day, the Company utilized an additional $ 33.3 million drawdown from the Revolving Facility to fund the Great Wall Acquisition.

On the same day, the Company utilized an additional $ 33.3 million drawdown from the Revolving Facility to fund the Great Wall Group acquisition.

The Second Amended Credit Agreement, as amended, contains certain financial covenants, including, but not limited to, a fixed charge coverage ratio.

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to the 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.

Note 10 - Shareholders' Equity

The Company had 100,000,000 shares of common stock authorized, with a par value of $ 0.0001 per share as of December 31, 2025 and 2024.

On September 25, 2025, the Company entered into an At-the-Market (ATM) Sales Agreement with D.A.

Davidson & Co.

and Roth Capital Partners, LLC, pursuant to which the Company may sell, from time to time, at its discretion, shares (the “Shares”) of the Company’s common stock, par value $ 0.0001 per share, having an aggregate offering price of up to $ 100.0 million, subject to

the terms of the sales agreement.

During the year ended December 31, 2025, the Company did not sell any Shares under the offering.

Preferred Stock

The Company had authorized 100,000 shares of Series A Participating Preferred Stock, with a par value of $ 0.001 per share and 1,000,000 shares of Preferred Stock, with a par value of $ 0.001 per share as of December 31, 2025 and 2024.

The Company had no preferred stock outstanding as of December 31, 2025 or 2024.

Note 11 - Earnings (Loss) Per Share

The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260 (“ASC 260”), Earnings per Share .

The Company computes earnings (loss) per share (“EPS”) in accordance with ASC Topic 260 (“ASC 260”), Earnings per Share .

ASC 260 requires companies with complex capital structures to present basic and diluted EPS.

Basic EPS is measured as net (loss) income divided by the weighted average common shares outstanding for the period.

Basic EPS is measured as net income (loss) divided by the weighted average common shares outstanding for the period.

Diluted EPS is similar to basic EPS, but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, warrants and restricted stock) as if they had been converted at the beginning of the periods presented, or issuance date, if later.

Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

There were 918,880 and 1,325,443 potential common shares related to performance-based restricted stock units and restricted stock units that were excluded from the calculation of diluted EPS for the three months ended December 31, 2025 and 2024, respectively, because their effect could have been anti-dilutive.

There were 1,279,680 and 1,482,062 potential common shares related to performance-based restricted stock units and restricted stock units that were excluded from the calculation of diluted EPS for the years ended December 31, 2025 and 2024, respectively, because their effect could have been anti-dilutive.

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($ in thousands, except share and per share data) 2025 2024

Net (loss) income attributable to HF Foods Group Inc.

Net loss attributable to HF Foods Group Inc.

$ ( 38,843 ) $ ( 48,511 )

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Weighted-average dilutive shares outstanding 52,946,655 52,552,490

(Loss) earnings per common share:

Loss per common share:

Basic $ ( 0.73 ) $ ( 0.92 )

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State 392 255

Current income taxes 1,601 5,456 4,781

Deferred income benefit:

Current income taxes (benefit) ( 386 ) 1,601

Deferred income taxes (benefit):

Federal ( 3,768 ) ( 756 )

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Total income tax expense (benefit) $ ( 5,970 ) $ 1,965

Cash paid for income taxes (net of refunds received) by jurisdiction after the prospective adoption of ASU 2023-09 for the year ended December 31, 2025 is as follows:

(In thousands) 2025

Federal $ ( 252 )

California 314

North Carolina 26

All other states (individually less than 5% of total) 35

Total income taxes paid, net of refunds $ 358

The Company’s effective income tax rates for the years ended December 31, 2025 and 2024 were 13.2 % and ( 4.3 )%, respectively.

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Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and the Company’s effective income tax rate in the future.

The Company has no operations outside the U.S., as such, no foreign income tax was recorded.

Reconciliations of the statutory income tax rate to the effective income tax rate are as follows:

The Company has immaterial operations outside the U.S., as such, no foreign income tax was recorded.

The provision for income taxes differed from the amount obtained by applying the statutory U.S.

federal income tax rate to income before income taxes.

The r econciliations of the statutory income tax rate to the effective income tax rate reflecting the prospective adoption of ASU 2023-09 are as follows:

Year Ended December 31,

(In thousands) Amount Percent

Federal statutory tax rate (21%) $ ( 9,509 ) 21.0 %

State and local income tax, net of federal income tax effect (1)

( 1,089 ) 2.4

Tax credits ( 140 ) 0.3

Changes in valuation allowance — —

Nontaxable or Nondeductible items

Executive compensation limit 113 ( 0.2 )

Meals and Entertainment 42 ( 0.1 )

Goodwill impairment 4,664 ( 10.3 )

Other nontaxable or nondeductible items 32 ( 0.1 )

Changes in unrecognized tax benefits — —

Other adjustments ( 83 ) 0.2

Total income tax benefit $ ( 5,970 ) 13.2 %

_______________

(1) State taxes in CA made up the majority (greater than 50 percent) of the tax effect in this category

The reconciliation from the statutory U.S.

federal tax rate to our effective income tax rate prior to the adoption of ASU 2023-09 is as follows (in thousands, except percentages):

Federal statutory tax rate (21%) 21.0 %

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Rate change ( 1.2 ) %

Return to provision — % 21.6 % — %

Change in valuation allowance 1.6 %

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Stock compensation ( 0.2 ) %

Payable adjustments — % 6.0 % — %

Dissolution of HFFI ( 1.6 ) %

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Goodwill impairment charges ( 21.1 ) %

Other — % 0.3 % 634.7 %

Effective tax rate ( 4.3 ) %

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Compensation related accruals 888 948

Guarantee liability — 1,326

Fair value change in interest rate swap contracts 282 —

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Equity investments 161 163

Net operating loss carryovers — 706

Net operating loss carryforwards 1,236 —

Other 398 283

Total deferred tax assets 17,119 11,214

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Net deferred tax liabilities $ ( 23,808 ) $ ( 29,392 )

As of December 31, 2024 and 2023, the Company had no federal net operating loss (“NOL”) carryovers and $ 3.0 million, respectively.

As of December 31, 2024 and 2023, the Company had no state NOL carryovers and $ 2.2 million, respectively.

The Company previously recorded a full valuation allowance against the NOL carryovers related to the Company’s subsidiary, HFFI.

In 2024, the Company dissolved its subsidiary, HFFI, and as such, the NOL balances and valuation allowance associated with this entity were written off during the year.

As of December 31, 2025, the Company had federal and various state net operating loss (“NOL”) carryforwards of $ 5.5 million and $ 1.9 million, respectively.

The federal net operating loss carryforwards do not expire, while the state net operating loss carryforwards have various expiration dates.

In addition, the Company had federal tax credit carryforwards of approximately $ 0.1 million.

As of December 31, 2024, the Company had no federal or state net operating loss carryforwards.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

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During the year ended December 31, 2025, management concluded that it was more likely than not that the Company would be able to realize the benefit of the deferred tax assets in the future.

We based this conclusion on historical and projected operating performance, as well as our expectation that our operations will generate sufficient taxable income in future periods to realize the tax benefits associated with the deferred tax assets.

As of December 31, 2023, management established a valuation allowance of $ 0.7 million against certain deferred taxes attributable to the assets of the Company’s subsidiary, HFFI.

In 2024, the Company dissolved its subsidiary, HFFI.

As such, the deferred tax balances and corresponding valuation allowance associated with this entity were written off during the year.

We based this conclusion on historical and projected operating performance, as well as our expectation that our operations will generate sufficient taxable income and gains in future periods to realize the tax benefits associated with the deferred tax assets.

As such, no valuation allowances have been recorded in the aforementioned tax years.

The Company will continue to assess the need for a valuation allowance in the future by evaluating both positive and negative evidence that may exist.

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Total unrecognized tax benefits on December 31, $ — $ —

The Company has no unrecognized tax benefits as of December 31, 2024.

Due to the statute of limitations expiring, the unrecognized tax liability for the tax year ended December 31, 2020, was reversed, which was recorded as an income tax benefit on the consolidated statements of operations and comprehensive income (loss), in the amount of $ 0.1 million as of December 31, 2024.

As of December 31, 2024 and 2023, the Company had no accrued penalties and $ 17,000 , respectively, and no accrued interest and $ 10,000 , respectively.

During the year ended December 31, 2024, the Company reversed accrued penalties and accrued interest of $ 17,000 and $ 10,000 , respectively.

The Company recognized the reversal of accrued interest and penalties related to unrecognized tax benefits as income tax benefit.

The Company is subject to taxation in the United States and various states.

As of December 31, 2024, tax years for 2021 through 2023 are subject to examination by the tax authorities.

The Company has no unrecognized tax benefits as of December 31, 2025 and 2024.

This is due to the statute of limitations expiring as of December 31, 2024 on previously unrecognized tax benefits.

The Company recognizes interest and penalties related to unrecognized tax positions in income tax expense.

As of December 31, 2025 and 2024, the Company had no accrued penalties or interest.

During the year ended December 31, 2024, the Company reversed all remaining accrued penalties and accrued interest related to unrecognized tax benefits as an income tax benefit.

As of December 31, 2025, the Company’s U.S.

federal and state income tax returns for tax years 2022 through 2024 remain subject to examination by tax authorities.

Note 13 - Related Party Transactions

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Related party affiliations were attributed to transactions conducted between the Company and those business entities partially or wholly owned by the Company, the Company’s officers and/or shareholders who owned no less than 10 % shareholdings of the Company.

The Company believes that Mr.

Xiao Mou Zhang (“Mr.

Zhang”), the former Chief Executive Officer through October 24, 2024 and current Director on the board of directors of the Company, and certain of his immediate family members have ownership interests in various related parties involved in (i) the distribution of food and related products to restaurants and other retailers and (ii) the supply of fresh food, frozen food, and packaging supplies to distributors.

Zhang”), the former Chief Executive Officer through October 24, 2024, together with certain of his immediate family members are collectively beneficial owners of more than 10 % of the Company’s outstanding common stock, and they have ownership interests in various related parties involved in (i) the distribution of food and related products to restaurants and other retailers and (ii) the supply of fresh food, frozen food, and packaging supplies to distributors.

Zhang does not have any involvement in negotiations with any of the above-mentioned related parties.

Effective October 24, 2024, Mr.

Zhang departed from his role as Chief Executive Officer of the Company.

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, which consists of payment of base salary multiplied by two , totaling $ 1.35 million, and payment of COBRA premiums, for up to 12 months.

The severance expenses were recorded in distribution, selling, and administrative expense in the consolidated statement of operations and both accrued expenses and other liabilities and other long-term liabilities in the consolidated balance sheet.

The Company believes that Mr.

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(b) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) Trade 4,124 5,055

(formerly “GA-GW Seafood, Inc.”) Trade N/A 37 52

(d) First Choice Seafood, Inc.

Trade — — 134

(d) Fujian RongFeng Plastic Co., Ltd Trade — — 372

(e) North Carolina Good Taste Noodle, Inc.

Trade N/A N/A 7,227

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Others Trade — — 13

Total $ 4,615 $ 5,595

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Zhou Min Ni owns an equity interest in this entity.

Enson Seafood GA, Inc.

is no longer considered a related party as of January 1, 2024 since Mr.

Zhou Min Ni disposed his equity interest in this entity.

Zhou Min Ni owns an equity interest in this entity indirectly through its parent company.

(e) No longer considered a related party as of January 1, 2023 since it has been three years since Mr.

Jian Ming Ni, a former executive, resigned from the Company.

As a result, amounts have not been disclosed for the years ended December 31, 2024 and 2023, respectively..

Below is a summary of sales to related parties recorded for the years ended December 31, 2025 and 2024, respectively:

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(a) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) 1,497 1,016

(d) First Choice Seafood, Inc.

(d) Fortune One Foods, Inc.

(e) N&F Logistics, Inc.

(f) Union Food LLC — 27 —

(d) Ocean Pacific Seafood Group, Inc.

Total $ 4,489 $ 3,741

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(b) The Company, through its subsidiary Mountain Food, LLC, owns an equity interest in this entity.

Zhou Min Ni’s family members, owns an equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns an equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns an equity interest in this entity.

(f) Tina Ni, one of Mr.

Zhou Min Ni’s family members, owns an equity interest in this entity.

Lease Agreements

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under an operating lease agreement which expired on December 31, 2020.

In February 2021, the Company executed a new five-year operating lease agreement with Yoan Chang Trading Inc., effective January 1, 2021 and expiring on December 31, 2025.

Rent expense was $ 0.3 million, $ 0.3 million and $ 0.3 million for the years ended December 31, 2024, 2023 and 2022, respectively, which is included in distribution, selling and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

In February 2021, the Company executed a new five-year operating lease agreement with Yoan Chang Trading Inc., effective January 1, 2021 which expired on December 31, 2025.

Rent expense, which is included in distribution, selling and administrative expenses in the consolidated statements of operations and comprehensive loss, was $ 0.3 million for both the years ended December 31, 2025 and 2024.

Beginning 2014, the Company leased a warehouse to Asahi Food, Inc.

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The lease term was extended by an addendum dated September 1, 2023, which extended the lease through September 1, 2025.

Rental income was $ 0.1 million, $ 0.1 million and $ 0.1 million for the years ended December 31, 2024, 2023 and 2022, respectively, which is included in other expense (income), net in the consolidated statements of operations and comprehensive income (loss).

A second addendum, executed effective September 1, 2025, was enacted during the third quarter which extends the expiration of the lease by one year to September 1, 2026.

Rental income was $ 0.1 million for both the years ended December 31, 2025 and 2024, which is included in other expense (income), net in the consolidated statements of operations and comprehensive loss.

Related Party Balances

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(a) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) 254 —

(formerly known as GA-GW Seafood, Inc.) N/A 59

(d) Union Food LLC — 2

Total $ 546 $ 239

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(b) The Company, through its subsidiary Mountain Food, LLC, owns an equity interest in this entity.

Zhou Min Ni disposed his equity interest in this entity.

(d) Tina Ni, one of Mr.

Zhou Min Ni’s family members, owns an equity interest in this entity.

The Company has reserved for 100 % of the accounts receivable due from Enson Seafood GA, Inc.

as of December 31, 2023.

During the year ended December 31, 2024 it was determined that Enson Seafood GA, Inc.

is no longer a related party due to Mr.

Ni having sold all of his equity interest to a third party.

All other accounts receivable from these related parties are current and considered fully collectible.

No additional allowance is deemed necessary as of December 31, 2024 and December 31, 2023.

All accounts receivable from these related parties are current and considered fully collectible.

No allowance is deemed necessary as of December 31, 2025 and December 31, 2024.

Line of Credit Note - Related Parties

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on November 1, 2024, which is outstanding at December 31, 2025 and included in other current assets in the consolidated balance sheet.

Interest shall accrue at a rate of 7.25 % per annum with monthly payments of interest only due beginning December 1, 2024 and continuing through the first day of each calendar month until the maturity date of October 31, 2025.

Interest income was $ 308 for the year ended December 31, 2024, which is included in interest expense in the consolidated statements of operations and comprehensive income (loss).

The note was extended for an additional twelve months during the fourth quarter and will become due on October 31, 2026.

Interest income was $ 4,005 and $ 308 for the years ended December 31, 2025 and 2024, respectively, which is included in other income (expense), net in the consolidated statements of operations and comprehensive loss.

Accounts Payable - Related Parties

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The weighted-average grant date fair value per share of PSUs granted during the years ended December 31, 2025 and 2024 was $ 1.72 and $ 3.55 , respectively.

The total fair value of equity based awards that vested during the years ended December 31, 2024, 2023 and 2022 was $ 2.0 million, $ 1.5 million and $ 0.8 million, respectively.

The total fair value of equity based awards that vested during the years ended December 31, 2025, and 2024 was $ 1.3 million and $ 2.0 million, respectively.

The Company accounts for stock-based compensation in accordance with ASC Topic 718 Compensation - Stock Compensation (“ASC 718”).

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The Company recognizes forfeitures as they occur.

Stock-based compensation expense is included in distribution, selling and administrative expenses in the Company’s consolidated statements of operations and comprehensive income (loss).

The components of stock-based compensation expense for the years ended December 31, 2024 and 2023 and 2022 were as follows:

Stock-based compensation expense is included in distribution, selling and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss.

The components of stock-based compensation expense for the years ended December 31, 2025 and 2024 were as follows:

Year Ended December 31,

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401(k) Plan participants are immediately 100% vested in the Company’s non-discretionary contributions to the plan.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized expense of $ 1.2 million, $ 0.8 million and $ 0.4 million, respectively, in distribution, selling and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

For the years ended December 31, 2025 and 2024, the Company recognized expense of $ 1.3 million and $ 1.2 million, respectively, in distribution, selling and administrative expenses in the consolidated statements of operations and comprehensive loss.

Note 16 - Segment Information

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The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on a consolidated basis.

The CODM uses consolidated net income to assess financial performance and allocate resources.

The CODM uses consolidated net (loss) income to assess financial performance and allocate resources.

The Company’s measure of segment assets is total assets, as reported on the consolidated balance sheets.

Accounting policies for the company’s single operating segment are the same as those described in Note 2 - Summary of Significant Accounting Policies .

The following table presents selected financial information with respect to the Company’s single operating segment for the years ended December 31, 2025 and 2024:

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Cost of revenue 1,020,706 996,473

Operating expenses:

Payroll and related labor costs 97,956 98,991

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Goodwill impairment charges 38,815 46,303

Other (income) expenses:

Interest expense 11,467 11,425

Other expense (income), net 2,818 ( 1,091 ) ( 1,829 )

Other (income) expense, net ( 1,057 ) 2,818

Change in fair value of interest rate swap contracts 1,870 ( 1,693 )

Lease guarantee (income) expense ( 5,548 ) ( 377 ) 5,744

Lease guarantee income — ( 5,548 )

Income tax expense (benefit) ( 5,970 ) 1,965

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Under the settlement, without admitting or denying the SEC’s findings in this matter, the Company consented to the entry of an administrative civil cease-and-desist order by the SEC (the “Order”) with respect to violations of Sections 17(a) of the Securities Act, and of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934, as amended, and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13a-15(a), and 14a-9 thereunder, resulting from the materially false and misleading disclosures and other fraudulent conduct implemented by its former Chairman and CEO Zhou Min Ni and former CFO Jian Ming “Jonathan” Ni.

During the quarter ended June 30, 2024 the

Company agreed to and paid a civil monetary penalty of $ 3.9 million, which was recorded in other expense (income), net in the Company’s consolidated statements of operations and comprehensive income (loss).

During the quarter ended June 30, 2024 the Company agreed to and paid a civil monetary penalty of $ 3.9 million, which was recorded in other expense (income), net in the Company’s consolidated statements of operations and comprehensive loss.

The Order states that, in determining to accept the Company’s Offer of Settlement, the SEC considered the numerous remedial actions promptly undertaken by the Company and its cooperation during the investigation.

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The Special Litigation Committee of the Board of Directors previously obtained a monetary settlement from the former executives that was ratified by the Delaware Chancery Court.

The Company also created a Special Litigation Committee which determined to pursue claims against certain former officers and directors.

As a result, pursuant to the previously disclosed settlement agreement (as amended on November 1, 2023, the “Settlement Agreement”) between the Company and certain parties to the verified stockholder derivative complaint filed by James Bishop in the Court of Chancery of the State of Delaware, on October 16, 2023, the Company received $ 1.5 million on behalf of Zhou Min Ni and Chan Sin Wong, a former President and Chief Operating Officer of the Company (together, the “Ni Defendants”).

Subsequently, on December 1, 2023, the Company received 1,997,423 shares (valued at $ 7.75 million) of the Company’s common stock, based on the closing price of $ 3.88 on October 13, 2023, plus a cash payment of approximately $ 0.1 million of accrued interest through the date of payment, in satisfaction of the Ni Defendants’ payment obligations totaling $ 9.25 million under the Settlement Agreement.

Additionally, the Company received a related D&O insurance payout settlement in the amount of $ 1.7 million, of which we paid $ 0.9 million, resulting in total net settlements in 2023 of approximately $ 10.0 million.

The receipt of the settlement proceeds were recorded in 2023 in distribution, selling, and administrative expense in the consolidated statement of operations (as a recovery of previously recorded expenses related to the litigation) and cash and treasury stock in the consolidated balance sheet.

Pursuant to the terms of the Settlement Agreement, Mr.

Wong and Jonathan Ni, the former Chief Financial Officer of the Company, agreed to give up any rights to indemnification or the advancement of fees in connection with the SEC investigation and any actions the SEC might take against them relating to the SEC investigation.

AnHeart Lease Guarantee

The Company provided a guarantee for two separate leases for two properties located in Manhattan, New York, at 273 Fifth Avenue and 275 Fifth Avenue, for 30 years and 15 years, respectively.

The Company previously determined that AnHeart was a VIE as a result of the guarantees.

However, the Company concluded it was not the primary beneficiary of AnHeart and therefore did not consolidate, because it did not have the power to direct the activities of AnHeart that most significantly impact AnHeart’s economic performance.

On February 10, 2021, the Company entered into an Assignment and Assumption of Lease Agreement (“Assignment”), dated effective as of January 21, 2021, with AnHeart and Premier 273 Fifth, LLC, pursuant to which it assumed the lease of the premises at 273 Fifth Avenue (the “273 Lease Agreement”).

At the same time, the closing documents were delivered to effectuate the amendment of the 273 Lease Agreement pursuant to an Amendment to Lease (the “Lease Amendment”).

The Assignment and the Lease Amendment were negotiated in light of the Company’s guarantee obligations as guarantor under the 273 Lease Agreement.

The Company agreed to observe all the covenants and conditions of the 273 Lease Agreement, as amended, including the payment of all rents due.

Under the terms of the 273 Lease Agreement and the Assignment, the Company has undertaken to construct, at its own expense, a building on the premises at a minimum cost of $ 2.5 million.

The Lease Amendment permits subletting of the premises, and the Company intends to sublease the newly constructed premises to defray the rental expense undertaken pursuant to its guaranty obligations.

In March 2024, the Company began construction of a multi-use facility on 273 Fifth Avenue and committed $ 7.0 million for the completion of the construction project.

The Company has incurred $ 5.4 million in construction costs which was recorded in construction in progress within property and equipment, net in the Company’s consolidated balance sheet as of December 31, 2024.

The Company expects to complete construction in June 2025.

On January 17, 2022, the Company received notice that AnHeart had defaulted on its obligations as tenant under the lease for 275 Fifth Avenue.

On February 7, 2022, the Company undertook its guaranty obligations by assuming responsibility for payment of monthly rent and other tenant obligations, including past due rent as well as property tax obligations beginning with the January 2022 rent due.

As a result, during the year ended December 31, 2022, the Company recorded a lease guarantee liability of $ 5.9 million.

On February 25, 2022, the Company instituted a legal action to pursue legal remedies against AnHeart and Minsheng.

In March 2022, the Company agreed to stay that litigation against AnHeart in exchange for AnHeart’s payment of certain back rent from January to April 2022 and its continued partial payment of monthly rent.

AnHeart subsequently

defaulted on these obligations.

On October 25, 2023, the Company commenced a new legal action by filing a complaint in New York County Supreme Court to pursue legal remedies against AnHeart and Minsheng (the “2023 Action”).

As of the filing of the new summons and complaint, AnHeart and Minsheng are indebted to the Company in the amount of $ 474,000 .

AnHeart and the Company have since reached a settlement agreement (the “Settlement Agreement”) for AnHeart to pay the Company $ 40,000 a month in rent through December 2024, $ 46,750 a month in rent from January 2025 through December 2025, and commence regular monthly rental payments in accordance with the lease for 275 Fifth Avenue.

The Settlement Agreement also provides that AnHeart will pay twenty-four monthly installments of $ 11,250 from January 2025 through December 2026 as payment for all back rent due.

Effective April 30, 2024, the Company through its subsidiary assumed the lease of a building located on the premises of 275 Fifth Avenue.

The assumption of the lease had no impact on the Company’s obligations as guarantor.

The lease covers certain portions of the ground floor, lower level, and second floor of the building.

The lease term ends on April 30, 2034 and is renewable at the option of the Company for up to two additional five-year terms.

The Company shall pay rent of approximately $ 45,000 per month with provisions for yearly increases.

With the assumption of the lease for 275 Fifth Avenue, the Company no longer recognized AnHeart as a VIE.

In addition, the remaining lease guarantee liability of $ 5.4 million was reversed and an operating lease right-of-use asset and liability of $ 4.9 million was recorded to the consolidated balance sheet.

As a result of the reversal, a gain of $ 5.4 million was recorded to other expense (income), net on the consolidated statements of operations and comprehensive income (loss) in 2024.

AnHeart Lease Matter

In connection with lease arrangements relating to properties located at 273 Fifth Avenue and 275 Fifth Avenue in Manhattan, New York, (see Note 6 - Leases for details) the Company previously guaranteed certain obligations of AnHeart, Inc.

under those leases.

Following AnHeart’s default under the 275 Fifth Avenue lease in 2022, the Company performed under its guaranty and pursued remedies to recover amounts it believes are owed under contractual and related arrangements.

On February 25, 2022, the Company initiated legal proceedings against AnHeart, Inc.

and Minsheng Pharmaceutical Group Company, Ltd.

(“Minsheng”), who in 2019 executed on behalf of AnHeart, an unconditional guaranty of all liabilities arising from the leases, in favor of the Company.

In March 2022, that proceeding was stayed in connection with certain payment commitments being made by AnHeart.

After such payment commitments were not satisfied, the Company commenced a new action in New York County Supreme Court on October 25, 2023 against AnHeart and Minsheng seeking recovery of amounts alleged to be due under the relevant arrangements.

The parties subsequently entered into a settlement arrangement providing for specified monthly payments through December 2025, after which regular monthly rental payments were to resume in accordance with the applicable lease terms.

The Company continues to evaluate and pursue its rights and remedies with respect to these matters.

The ultimate outcome cannot be predicted with certainty.

Based on information currently available, management does not believe that the resolution of this matter will have a material adverse effect on the Company’s consolidated financial statements.

Other Commitments

On September 30, 2024, the Company entered into the lease of a new distribution center located in Georgia.

The lease term commenced February 1, 2025 for a period of 10 years and five months and is renewable at the option of the Company for up to three additional five-year terms.

The company shall pay rent of approximately $ 120,000 per month with provisions for yearly increases.

As of December 31, 2025, the Company had additional automobile leases that had not yet commenced which total $ 0.8 million in future minimum lease payments.

Note 18 - Subsequent Events

Appointment of Xi (Felix) Lin as Chief Executive Officer

Effective January 1, 2025, Xi (Felix) Lin was appointed to serve as Chief Executive Officer by the Board of Directors.

Lin continues to also serve as the Company’s President.

On January 3, 2025, according to the employment agreement entered into on December 16, 2024, Mr.

Lin received a market-based performance stock unit award of 310,559 shares of Class A Common Stock contingent upon satisfaction of the applicable vesting conditions.

The PSUs are scheduled to vest on the third anniversary of the grant date, if for at least a period of thirty consecutive trading days at any time prior to the vesting date, the closing per share price of the Issuer’s Class A Common Stock averages at least $ 7.00 over such thirty -day period.

Credit Facility Amended

On February 12, 2025, the Company amended certain terms and conditions of the JPM Credit Agreement.

See Note 10 - Debt for additional information regarding the terms of the amendment.

Purchase of Chicago Warehouse and Toledo Cross-dock

On January 30, 2026, the Company closed on the purchase of two facilities it currently operates and had previously leased located in Elk Grove Village, Illinois and Toledo, Ohio.

The Elk Grove facility serves as one of our distribution centers and was purchased for a price of $ 9.0 million.

The Toledo facility serves as one of our cross docks and was purchased for a price of $ 3.5 million.

Utah Building Sale

On February 12, 2026, the Company closed on the sale of land and a building it owned in West Jordan, Utah.

The final sale was for a total of $ 4.4 million.

The assets which were subject to sale were classified as held for sale on the Company’s consolidated balance sheets as of December 31, 2025.

The gain realized on the sale of these assets will be recorded in other income during the first quarter of 2026.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data