HF Foods Group Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA HF Foods Group Inc. and Subsidiaries Consolidated Financial Statements Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm - Year Ended December 31, 2025 (BDO USA, P.C.; Troy, Michigan; PCAOB ID # 243 ) 33 Consolidated Financial Statements 35 Consolidated Balance Sheets 35 Consolidated Statements of Operations and Comprehensive Loss 36 Consolidated Statements of Cash Flows 37 Consolidated Statements of Changes in Shareholders’ Equity 39 Notes to Consolidated Financial Statements 40 Note 1 - Organization and Description of Business 40 Note 2 - Summary of Significant Accounting Policies 40 Note 3 - Revenue 47 Note 4 - Balance Sheet Components 47 Note 5 - Fair Value Measurements 49 Note 6 - Leases 50 Note 7 - Goodwill and Intangible Assets 53 Note 8 - Derivative Financial Instruments 54 Note 9 - Long-Term Debt 55 Note 10 - S hareholder s ’ Equity 56 Note 11 - Earnings (Loss) Per Share 57 Note 12 - Income Taxes 58 Note 13 - Related Party Transactions 61 Note 14 - Stock-Based Compensation 63 Note 15 - Employee Benefit Plan 64 Note 16 - Segment Information 65 Note 17 - Commitments and Contingencies 66 Note 18 - Subsequent Events 67 32 Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors HF Foods Group Inc. Las Vegas, Nevada Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of HF Foods Group Inc. (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. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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 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 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: 33 • 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. We have served as the Company’s auditor since 2021. Troy, Michigan March 16, 2026 34 HF Foods Group Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share data) December 31, 2025 December 31, 2024 ASSETS CURRENT ASSETS: Cash $ 8,641 $ 14,467 Accounts receivable, net of allowances of $ 1,199 and $ 1,557 65,691 54,107 Accounts receivable - related parties 546 239 Inventories 106,629 97,783 Prepaid expenses and other current assets 9,725 11,507 Assets held for sale 2,768 — TOTAL CURRENT ASSETS 194,000 178,103 Property and equipment, net 163,397 149,572 Operating lease right-of-use assets 26,049 13,944 Long-term investments 2,144 2,350 Customer relationships, net 126,048 136,615 Trademarks, trade names and other intangibles, net 25,440 24,911 Goodwill — 38,815 Other long-term assets 4,451 5,681 TOTAL ASSETS $ 541,529 $ 549,991 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Checks issued not presented for payment $ 1,674 $ 5,687 Line of credit 55,799 57,483 Accounts payable 74,475 50,592 Accounts payable - related parties 384 52 Current portion of long-term debt, net 6,683 5,410 Current portion of obligations under finance leases 6,425 3,797 Current portion of obligations under operating leases 4,334 4,177 Accrued expenses and other liabilities 14,994 18,001 TOTAL CURRENT LIABILITIES 164,768 145,199 Long-term debt, net of current portion 99,436 103,324 Obligations under finance leases, non-current 25,279 19,929 Obligations under operating leases, non-current 22,990 10,125 Deferred tax liabilities 23,808 29,392 Other long-term liabilities 1,662 728 TOTAL LIABILITIES 337,943 308,697 COMMITMENTS AND CONTINGENCIES (Note 17) SHAREHOLDERS’ EQUITY: Series A Participating Preferred Stock, par value $ 0.001 ; 100,000 shares authorized, no shares issued and outstanding — — Preferred Stock, $ 0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding — — Common Stock, $ 0.0001 par value; 100,000,000 shares authorized; 55,041,255 and 54,735,073 shares issued and 53,043,832 and 52,737,650 shares outstanding as of December 31, 2025 and December 31, 2024, respectively 5 5 Treasury stock, at cost; 1,997,423 shares as of December 31, 2025 and December 31, 2024 ( 7,750 ) ( 7,750 ) Additional paid-in capital 605,838 604,235 Accumulated deficit ( 396,042 ) ( 357,199 ) TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC. 202,051 239,291 Noncontrolling interests 1,535 2,003 TOTAL SHAREHOLDERS’ EQUITY 203,586 241,294 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 541,529 $ 549,991 The accompanying notes are an integral part of these consolidated financial statements. 35 HF Foods Group Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share data) Year Ended December 31, 2025 2024 Net revenue - third parties $ 1,223,793 $ 1,197,926 Net revenue - related parties 4,489 3,741 TOTAL NET REVENUE 1,228,282 1,201,667 Cost of revenue - third parties 1,016,716 993,026 Cost of revenue - related parties 3,990 3,447 TOTAL COST OF REVENUE 1,020,706 996,473 GROSS PROFIT 207,576 205,194 Distribution, selling and administrative expenses 201,762 198,026 Goodwill impairment charges 38,815 46,303 LOSS FROM OPERATIONS ( 33,001 ) ( 39,135 ) Interest expense 11,467 11,425 Other (income) expense, net ( 1,057 ) 2,818 Change in fair value of interest rate swap contracts 1,870 ( 1,693 ) 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 ) Less: 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 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 WEIGHTED AVERAGE SHARES - DILUTED 52,946,655 52,552,490 The accompanying notes are an integral part of these consolidated financial statements. 36 HF Foods Group Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2025 2024 Cash flows from 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 Goodwill impairment charges 38,815 46,303 Gain from disposal of property and equipment ( 115 ) ( 12 ) 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 ) Stock-based compensation 1,759 2,088 Non-cash lease expense 5,124 3,992 Lease guarantee income — ( 5,548 ) Other non-cash (income) expense ( 280 ) 1,169 Changes in operating assets and liabilities: Accounts receivable ( 11,227 ) ( 6,421 ) Accounts receivable - related parties ( 307 ) 10 Inventories ( 8,846 ) 7,835 Prepaid expenses and other current assets 1,782 ( 1,362 ) Other long-term assets 967 942 Checks issued not presented for payment ( 4,013 ) 1,193 Accounts payable 23,703 ( 1,025 ) Accounts payable - related parties 332 ( 345 ) Operating lease liabilities ( 4,207 ) ( 4,040 ) Accrued expenses and other liabilities ( 3,007 ) 714 Net cash provided by operating activities 25,480 22,636 Cash flows from investing activities: 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 ) Net cash used in investing activities ( 20,373 ) ( 12,548 ) Cash flows from financing activities: Payments for tax withholding related to vested stock awards ( 156 ) ( 175 ) Proceeds from line of credit 1,446,483 1,476,106 Repayment of line of credit ( 1,448,100 ) ( 1,477,240 ) Proceeds from issuance of debt 4,200 — Repayment of long-term debt ( 6,856 ) ( 5,470 ) Payment of debt financing costs ( 213 ) — Repayment of obligations under finance leases ( 6,291 ) ( 3,574 ) Cash distributions to noncontrolling interests — ( 500 ) 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 Cash at end of the period $ 8,641 $ 14,467 The accompanying notes are an integral part of these consolidated financial statements. 37 HF Foods Group Inc. and Subsidiaries Consolidated Statements of Cash Flows (Continued) (In thousands) Year Ended December 31, 2025 2024 Supplemental disclosure of cash flow data: Cash paid for interest $ 11,372 $ 11,623 Cash paid for income taxes 358 2,506 Supplemental disclosure of non-cash investing and financing activities: Right-of-use assets obtained in exchange for operating lease liabilities $ 17,229 $ 5,222 Property acquired in exchange for finance leases 14,269 14,322 Acquisition of noncontrolling interests — 772 The accompanying notes are an integral part of these consolidated financial statements. 38 HF Foods Group Inc. and Subsidiaries Consolidated Statements of Changes in Shareholders' Equity (In thousands, except share data) Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’ Equity Attributable to HF Foods Group Inc. Non-controlling Interests Total Shareholders’ Equity Shares Amount Shares Amount 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 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 ) Distribution to shareholders — — — — — — — ( 500 ) ( 500 ) Dissolution of noncontrolling interests — — — — ( 772 ) — ( 772 ) 772 — Stock-based compensation — — — — 2,088 — 2,088 — 2,088 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 — — — — — ( 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 ) Stock-based compensation — — — — 1,759 — 1,759 — 1,759 Balance at December 31, 2025 55,041,255 $ 5 1,997,423 $ ( 7,750 ) $ 605,838 $ ( 396,042 ) $ 202,051 $ 1,535 $ 203,586 The accompanying notes are an integral part of these consolidated financial statements. 39 HF Foods Group Inc. and Subsidiaries Notes to Consolidated Financial Statements Note 1 - Organization and Description of Business Organization and General HF Foods Group Inc., headquartered in Las Vegas, Nevada, operating through our subsidiaries (collectively “HF Foods” or the “Company”) is a marketer and distributor of fresh produce, frozen and dry food, and non-food products to Asian restaurants, as well as other foodservice customers, throughout the United States. With multiple distribution centers located throughout the nation, HF Foods supplies Asian cuisine through its relationships with growers and suppliers of food products in North America, South America and Asia. The Company’s business consists of one operating segment, which is also its one reportable segment: HF Foods, which operates solely in the United States, offers specialty restaurant foods and supplies to its customers. Note 2 - Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation 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”). 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 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 GAAP provides guidance on the identification of a variable interest entity (“VIE”) and financial reporting for an entity over which control is achieved through means other than voting interests. The Company evaluates each of its interests in an entity to determine whether or not the investee is a VIE and, if so, whether the Company is the primary beneficiary of such VIE. In determining whether the Company is the primary beneficiary, the Company considers if the Company (1) has power to direct the activities that most significantly affect the economic performance of the VIE, and (2) has the obligation to absorb losses or the right to receive the economic benefits of the VIE that could be potentially significant to the VIE. If deemed the primary beneficiary, the Company consolidates the VIE. 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. For the year ended December 31, 2025, the Company had no VIEs. Noncontrolling Interests GAAP requires that noncontrolling interests in subsidiaries and affiliates be reported in the equity section of the Company’s consolidated balance sheets. In addition, the amounts attributable to the net income (loss) of those noncontrolling interests are reported separately in the consolidated statements of operations and comprehensive loss. As of December 31, 2025 and December 31, 2024, noncontrolling interest equity consisted of the following: ($ in thousands) Ownership of noncontrolling interest at December 31, 2025 December 31, 2025 December 31, 2024 Min Food, Inc. 39.75 % $ 1,173 $ 1,561 Monterey Food Service, LLC 35.00 % 362 442 Total $ 1,535 $ 2,003 Uses of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during each reporting period. 40 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, and impairment of goodwill. 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): Disaggregation of Income Statement Expenses. The guidance requires additional disclosure of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. This guidance is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. 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 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 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 The Company considers all highly liquid investments purchased with an original maturity of three months or shorter as cash equivalents. As of December 31, 2025 and December 31, 2024, the Company had no cash equivalents. Checks issued not presented for payment represent accounts at banks with an aggregate excess of the amount of outstanding checks over the cash balances and are presented in current liabilities in the consolidated balance sheets. The net changes to checks issued not presented for payment are presented in the operating section of the statement of cash flows. Accounts Receivable, net Accounts receivable represent amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest. Receivables are presented net of the allowance for expected credit losses in the accompanying consolidated balance sheets. The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for expected credit losses based on a combination of factors. 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 41 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. Inventories The Company’s inventories, consisting mainly of food and other foodservice-related products, are considered finished goods. Inventory costs, including the purchase price of the product and freight charges to deliver it to the Company’s warehouses, are net of certain cash consideration received from vendors, primarily in the form of rebates. The Company adjusts its inventory balance for slow-moving, excess and obsolete inventories to the net recoverable value of such goods based upon inventory category, inventory age, specifically identified items, and overall economic conditions. Inventories are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Property and Equipment, net Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Following are the estimated useful lives of the Company’s property and equipment: Estimated Useful Lives Automobiles 3 to 7 years Buildings and improvements 7 to 39 years Furniture and fixtures 4 to 10 years Machinery and equipment 3 to 10 years 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. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with any resulting gain or loss reflected in the consolidated statements of operations and comprehensive income loss in distribution, selling and administrative expenses. Software Costs In accordance with ASC 350-40, Internal-Use Software, the Company capitalizes certain computer software licenses and software implementation costs related to developing or obtaining computer software for internal use. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task that it previously did not perform. Internal use software is amortized on a straight-line basis over a three to five year period. Capitalized costs include direct acquisitions as well as software and software development acquired under capitalized leases and internal labor where appropriate. 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. Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. The Company tests goodwill for impairment at least annually, as of December 31, or whenever events or changes in circumstances indicate that goodwill might be impaired. The Company’s policy is to test goodwill for impairment annually on the last day of the fourth quarter, or more frequently if certain triggering events or circumstances indicate it could be impaired. 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. 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, 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. 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 42 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. The Company bases these fair value estimates on assumptions management believes to be reasonable but which are unpredictable and inherently uncertain. A change in underlying assumptions would cause a change in the results of the tests and, as such, could cause fair value to be less than the carrying amount and result in an impairment of goodwill in the future. Additionally, if actual results are not consistent with the estimates and assumptions or if there are significant changes to the Company’s planned strategy, it may cause the fair value of the reporting unit to be less than its carrying amount and result in an impairment of goodwill in the future. The Company corroborates the reasonableness of the total fair value of the reporting unit by assessing the implied control premium based on the Company’s market capitalization. The Company’s market capitalization is calculated using the relevant shares outstanding and stock price of the Company’s publicly traded shares. 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 Intangible assets are amortized on a straight-line basis over their estimated useful lives. The Company determines the appropriate useful life of its intangible assets by measuring the expected cash flows of acquired assets. The estimated useful lives of intangible assets are as follows: Estimated Useful Lives Non-competition agreements 3 years Trademarks and trade names 10 years Customer relationships 10 to 20 years Inventory management system 7 years Long-term Investments The Company’s investments in unconsolidated entities consist of an equity investment and an investment without readily determinable fair value. The Company follows ASC Topic 321 (“ASC 321”), Investments – Equity Securities , using the measurement alternative to measure investments in investees that do not have readily determinable fair value and over which the Company does not have significant influence at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. The Company makes a qualitative assessment of whether the investment is impaired at each reporting date. If a qualitative assessment indicates that the investment is impaired, the Company has to estimate the investment’s fair value in accordance with the principles of ASC Topic 820 (“ASC 820”), Fair Value Measurements and Disclosures. If the fair value is less than the investment’s carrying value, the entity has to recognize an impairment loss in earnings equal to the difference between the carrying value and fair value. Investments in entities in which the Company can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting in accordance with ASC Topic 323 (“ASC 323”), Investments-Equity Method and Joint Ventures . Under the equity method, the Company initially records its investment at cost, which is included in the equity method investment on the consolidated balance sheets. The Company subsequently adjusts the carrying amount of the investment to recognize the Company’s proportionate share of each equity investee’s net income or loss into earnings after the date of investment. The Company evaluates the equity method investments for impairment under ASC 323. An impairment loss on the equity method investments is recognized in earnings when the decline in value is determined to be other-than-temporary. The Company did no t record any impairment loss on its long-term investments during the years ended December 31, 2025 and 2024. 43 Impairment of Long-lived Assets The Company assesses its long-lived assets such as property and equipment and intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. Factors which may indicate potential impairment include a significant underperformance related to the historical or projected future operating results or a significant negative industry or economic trend. Recoverability of an asset or asset group is measured by comparison of its carrying amount to future undiscounted cash flows the asset or asset group is expected to generate. 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 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 The Company maintains workers compensation and general liability insurance with licensed insurance carriers. Beginning in April 2020, the Company is self-insured for auto claims less than $ 100,000 per claim. Insurance and claims expense represent premiums the Company paid and the accruals made for claims within the Company’s self-insured retention amounts. A liability is recognized for the estimated cost of all self-insured claims including an estimate of incurred but not reported claims based on historical experience and for claims expected to exceed the Company’s policy limits. The Company establishes reserves for anticipated losses and expenses related to auto liability claims. The reserves consist of specific reserves for all known claims and an estimate for claims incurred but not reported, and losses arising from known claims ultimately settling in excess of insurance coverage using loss development factors based upon industry data and past experience. In determining the liability, the Company specifically reviews all known claims and records a liability based upon the Company’s best estimate of the amount to be paid. In making the estimate, the Company considers the amount and validity of the claim, as well as the Company’s past experience with similar claims. In establishing the reserve for claims incurred but not reported, the Company considers its past claims history, including the length of time it takes for claims to be reported to the Company. These reserves are periodically reviewed and adjusted to reflect the Company’s experience and updated information relating to specific claims. As of December 31, 2025 and December 31, 2024, the Company has recorded a self-insurance liability of $ 2.0 million and $ 1.7 million respectively, which is included in accrued expenses and other liabilities on the consolidated balance sheets. Revenue Recognition The Company recognizes revenue from the sale of products when control of each product passes to the customer and the customer accepts the goods, which occurs at delivery. The majority of customer orders are fulfilled within a day and customer payment terms are typically thirty days or less from invoice date. Our 100% satisfaction guarantee permits our customers to reject part of the order or the entire order within twenty-four hours of receipt without any penalty. Sales taxes invoiced to customers and remitted to government authorities are excluded from net sales. The Company follows ASC Topic 606 , Revenue from Contracts with Customers . The Company recognizes revenue that represents the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfer to a customer. The Company’s contracts contain performance obligations which are satisfied when customers have physical possession of each product. The Company’s revenue streams are recognized at a specific point in time. 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, tariffs and other miscellaneous expenses. Distribution, Selling and Administrative Expenses Distribution, selling and administrative expenses consist primarily of salaries and benefits for employees and contract laborers, trucking and fuel expenses for deliveries, utilities, maintenance and repair expenses, insurance expenses, depreciation and amortization expenses, selling and marketing expenses, professional fees and other operating expenses. Shipping and Handling Costs 44 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 $ 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. Income Taxes 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. Under this method, the Company determines deferred tax assets and liabilities based on the differences between the financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. 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. 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. 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. Leases 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. 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. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable rent payments related to both operating and finance leases are expensed as incurred. The Company's variable lease payments primarily consist of real estate, maintenance and usage charges. The Company has elected to exclude short-term leases from the recognition requirements of ASC 842. A lease is short-term if, at the commencement date, it has a term of less than or equal to one year. Lease expense related to short-term leases is recognized on a straight-line basis over the lease term. The Company has also elected to combine lease and non-lease components when measuring lease liabilities for vehicle and equipment leases. Derivative Financial Instruments In accordance with the guidance in ASC Topic 815, Derivatives and Hedging (“ASC 815”) , d erivative financial instruments are recognized as assets or liabilities on the consolidated balance sheets at fair value. 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 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. The Company is exposed to credit loss in the event of nonperformance by the counterparty. 45 Concentrations and Credit Risk The Company had no customers that comprised more than 10% of consolidated net sales for the years ended December 31, 2025 or 2024, respectively. At December 31, 2025 and 2024, the Company had no customers that comprised more than 10% of consolidated accounts receivable. Accounts receivable are typically unsecured and derived from revenue earned from customers, and thereby exposed to credit risk. The risk is mitigated by the Company’s large customer base and ongoing assessments of its customers’ creditworthiness and outstanding balances. The Company maintains cash balances with banks which at times exceed federally insured limits. The Company has not experienced any losses in such accounts. Segment Reporting ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s operating decision makers for making operational decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews operating results and makes resource allocations on a consolidated basis and thus the Company has concluded it has one operating and reportable segment. See Note 16 - Segment Information in the accompanying notes to the consolidated financial statements for further detail. Stock-Based Compensation The Company grants restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) annually. Stock-based compensation expense is based on the fair value of the stock awards at the grant date and is recognized, net of forfeitures, over the requisite service period. See Note 14 - Stock-Based Compensation to the consolidated financial statements for further information regarding stock-based compensation. 46 Note 3 - Revenue The following table presents the Company’s net revenue disaggregated by principal product categories: Year Ended December 31, (In thousands) 2025 2024 Seafood $ 436,630 36 % $ 394,032 33 % 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 % Total $ 1,228,282 100 % $ 1,201,667 100 % Note 4 - Balance Sheet Components Accounts receivable, net consisted of the following: (In thousands) December 31, 2025 December 31, 2024 Accounts receivable $ 66,890 $ 55,664 Less: allowance for expected credit losses ( 1,199 ) ( 1,557 ) 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: Year Ended December 31, (In thousands) 2025 2024 Beginning balance $ 1,557 $ 2,119 Credit for expected credit losses ( 357 ) ( 103 ) Bad debt write-offs ( 1 ) ( 459 ) Ending balance $ 1,199 $ 1,557 Prepaid expenses and other current assets consisted of the following: (In thousands) December 31, 2025 December 31, 2024 Prepaid expenses $ 5,641 $ 4,443 Advances to suppliers 1,514 5,606 Other current assets 2,570 1,458 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 $ — Land 734 — 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 47 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: (In thousands) December 31, 2025 December 31, 2024 Automobiles (1) $ 65,202 $ 50,565 Buildings 60,648 63,045 Building improvements (1) 41,182 22,709 Furniture and fixtures 489 398 Land 49,180 49,929 Machinery and equipment (1) 14,500 13,216 Construction in progress (2) 2,493 10,370 Subtotal 233,694 210,232 Less: accumulated depreciation ( 70,297 ) ( 60,660 ) Property and equipment, net $ 163,397 $ 149,572 _________________ (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: (In thousands) Ownership as of December 31, 2025 December 31, 2025 December 31, 2024 Asahi Food, Inc. (“Asahi”) 49.0 % $ 344 $ 550 Pt. Tamron Akuatik Produk Industri (“Tamron”) 12.0 % 1,800 1,800 Total long-term investments $ 2,144 $ 2,350 The investment in Tamron is accounted for using the measurement alternative under Accounting Standards Codification (“ASC”) Topic 321 Investments—Equity Securities , which is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments, if any. The investment in Asahi is accounted for under the equity method due to the fact that the Company has significant influence but does not exercise control over this investee. The Company determined there was no impairment for the years ended December 31, 2025 and 2024 for these investments. Accrued expenses and other liabilities consisted of the following: (In thousands) December 31, 2025 December 31, 2024 Accrued compensation $ 6,690 $ 7,497 Accrued professional fees 300 553 Accrued interest and fees 862 938 Self-insurance liability 1,969 1,671 Advance from customers 549 3,081 Other 4,624 4,261 Total accrued expenses and other liabilities $ 14,994 $ 18,001 48 Note 5 - Fair Value Measurements The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the dates indicated: December 31, 2025 December 31, 2024 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (In thousands) Assets: Interest rate swaps $ — $ 241 $ — $ 241 $ — $ 504 $ — $ 504 Liabilities: Interest rate swaps $ — $ 1,607 $ — $ 1,607 $ — $ — $ — $ — The Company follows the provisions of ASC Topic 820 Fair Value Measurement which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows: • Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. • Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. • Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions about what assumptions market participants would use in pricing the asset or liability based on the best available information. Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized at the end of the reporting period in which the transfer occurs. There were no transfers between fair value levels in any of the periods presented herein. The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, other current assets, accounts payable, checks issued not presented for payment and accrued expenses and other liabilities approximate their fair value based on the short-term maturity of these instruments. See Note 8 - Derivative Financial Instruments for additional information regarding the Company’s interest rate swaps. 49 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 (In thousands) Level 1 Level 2 Level 3 Carrying Value December 31, 2025 Fixed rate debt: Bank of America $ — $ — $ 48 $ 51 Other financial institutions — 2,474 — 2,784 Variable rate debt: JPMorgan Chase $ — $ 96,023 $ — $ 96,023 Bank of America $ — $ 1,930 $ — $ 1,930 East West Bank $ — $ 5,331 $ — $ 5,331 December 31, 2024 Fixed rate debt: Bank of America $ — $ — $ 104 $ 113 Variable rate debt: JPMorgan Chase $ — $ 101,040 $ — $ 101,040 Bank of America $ — $ 2,063 $ — $ 2,063 East West Bank $ — $ 5,518 $ — $ 5,518 The carrying value of the variable rate debt approximates its fair value because of the variability of interest rates associated with these instruments. 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 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 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 The Company leases office space, warehouses and vacant land that is currently being developed under non-cancelable operating leases, with terms typically ranging from one to thirty years , as well as operating and finance leases for vehicles and delivery trucks, forklifts and computer equipment with various expiration dates through 2051. The Company determines whether an arrangement is or includes an embedded lease at contract inception. Operating and finance lease assets and lease liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term. Operating lease expense is recognized on a straight-line basis over the lease term. The Company also recognizes finance lease assets and finance lease liabilities at inception, with lease expense recognized as interest expense and amortization of the lease payment. Variable lease costs were insignificant in the years ended December 31, 2025 and 2024. 50 Operating Leases The components of operating lease expense were as follows: Year Ended December 31, ($ in thousands) 2025 2024 Operating lease cost $ 6,903 $ 4,709 Short-term lease cost $ 4,088 $ 868 Weighted average remaining lease term (months) 122 58 Weighted average discount rate 6.7 % 5.4 % Supplemental cash flow information related to operating leases was as follows: Year Ended December 31, (In thousands) 2025 2024 Operating cash flows from operating leases $ 5,986 $ 4,623 Finance Leases The components of finance lease expense were as follows: Year Ended December 31, (In thousands) 2025 2024 Finance leases cost: Amortization of ROU assets $ 7,000 $ 4,249 Interest on lease liabilities 1,874 1,284 Total finance leases cost $ 8,874 $ 5,533 Supplemental cash flow information related to finance leases was as follows: Year Ended December 31, (In thousands) 2025 2024 Operating cash flows from finance leases $ 1,817 $ 1,205 Supplemental balance sheet information related to finance leases was as follows: ($ in thousands) December 31, 2025 December 31, 2024 Property and equipment, at cost $ 50,002 $ 36,072 Accumulated depreciation ( 21,132 ) ( 14,262 ) Property and equipment, net $ 28,870 $ 21,810 Weighted average remaining lease term (months) 113 143 Weighted average discount rate 5.9 % 5.9 % 51 Maturities of lease liabilities are as follows: (In thousands) Operating Leases Finance Leases Year Ended December 31, 2026 $ 6,792 $ 8,057 2027 4,406 7,598 2028 3,729 6,662 2029 2,822 3,719 2030 2,746 2,015 Thereafter 23,760 15,683 Total lease payments 44,255 43,734 Less: Imputed interest ( 16,931 ) ( 12,030 ) Total $ 27,324 $ 31,704 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. 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 . 52 Note 7 - Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill are presented below: (In thousands) Amount Balance at December 31, 2023 $ 85,118 Goodwill impairment charges ( 46,303 ) Balance at December 31, 2024 $ 38,815 Goodwill impairment charges ( 38,815 ) Balance at December 31, 2025 $ — 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. 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. Accordingly, the Company performed a quantitative assessment as of September 30, 2024. The fair value of the reporting unit exceeded the carrying value, and therefore the Company concluded no impairment was required to be recorded during the period ended September 30, 2024. As a result of continued declines in the level of stock price, the Company performed a quantitative impairment assessment as of December 31, 2024. 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 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. The income approach requires detailed forecasts of cash flows, including assumptions such as revenue growth rates, gross profit margins, distribution, selling and administrative expenses, among other assumptions, and an estimate of weighted-average cost of capital which the Company believes approximate the assumptions from a market participant’s perspective. The market approaches are primarily impacted by an enterprise value multiple of EBITDA. These estimates incorporate many uncertain factors which could be impacted by changes in market conditions, interest rates, growth rate, tax rates, costs, customer behavior, regulatory environment and other macroeconomic changes. 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 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. Assumptions used in impairment testing are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each impairment test date. Additionally, these assumptions are generally interdependent and do not change in isolation. As of December 31, 2025, the Company’s goodwill was fully impaired. 53 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 . 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 three years , ten years , and ten 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 ten and twenty years , respectively . December 31, 2025 December 31, 2024 (In thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Non-competition agreements $ 3,892 $ ( 3,892 ) $ — $ 3,892 $ ( 3,723 ) $ 169 Trademarks and trade names 44,207 ( 23,894 ) 20,313 44,207 ( 19,465 ) 24,742 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 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: (In thousands) Amount Year ending December 31, 2026 $ 15,797 2027 15,797 2028 15,797 2029 15,309 2030 12,867 Thereafter 75,921 Total $ 151,488 Note 8 - Derivative Financial Instruments 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 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 54 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. On December 19, 2019, HF Foods entered into an IRS contract with Bank of America (the “BOA IRS”) for an initial notional amount of $ 2.7 million in conjunction with a newly contracted mortgage term loan of corresponding amount. On December 19, 2021, the Company entered into the Second Amendment to Loan Agreement, which pegged the mortgage term loan to Term SOFR + 2.50 %. The BOA IRS was modified accordingly to fix the SOFR based loan to approximately 4.50 %. The term loan and corresponding BOA IRS contract mature in December 2029. On March 15, 2023, the Company entered into an amortizing IRS contract with JPMorgan Chase for an initial notional amount of $ 120.0 million, effective from March 1, 2023 and expiring in March 2028, as a means to partially hedge its existing floating rate loans exposure. Pursuant to the agreement, the Company will pay the swap counterparty a fixed rate of 4.11 % in exchange for floating payments based on Term SOFR. 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 loss. 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 9 - Long-Term Debt Long-term debt at December 31, 2025 and December 31, 2024 is summarized as follows: ($ in thousands) Bank Name Maturity Interest Rate at December 31, 2025 December 31, 2025 December 31, 2024 Bank of America (a) October 2026 - December 2029 4.34 % - 6.57 % $ 1,981 $ 2,176 East West Bank (b) August 2027 - September 2029 6.13 % - 7.25 % 5,331 5,518 JPMorgan Chase (c) January 2030 5.85 % 96,196 101,255 Other financial institutions April 2026 - July 2030 6.60 % - 7.70 % 2,784 — Total debt, principal amount 106,292 108,949 Less: debt issuance costs ( 173 ) ( 215 ) Total debt, carrying value 106,119 108,734 Less: current portion ( 6,683 ) ( 5,410 ) Long-term debt $ 99,436 $ 103,324 _______________ (a) Loan balance consists of real estate term loan and equipment term loan, collateralized by one real property and specific equipment. The real estate term loan is pegged to TERM SOFR + 2.50 %. (b) Real estate term loans with East West Bank are collateralized by three real properties. Balloon payments of $ 1.9 million and $ 2.9 million are due at maturity in 2027 and 2029, respectively. (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. 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. As of December 31, 2025, the Company was in compliance with its covenants. On March 31, 2022, the Company amended the JPM Credit Agreement, defined below, extending the Real Estate Term Loan for five years . The amendment provided for an increase in the Real Estate Term Loan from $ 69.0 million to $ 115.0 million with a 1-month SOFR plus a credit adjustment of 0.10 % plus 1.875 % per annum. 55 The future maturities of long-term debt as of December 31, 2025 are as follows: (In thousands) Amount Year ending December 31, 2026 $ 6,683 2027 7,566 2028 5,635 2029 9,956 2030 76,279 Thereafter — Total $ 106,119 Credit Facility On November 4, 2019, the Company entered into a credit agreement with JPMorgan Chase (the “JPM Credit Agreement”). The JPM Credit Agreement provided for a $ 100.0 million asset-secured revolving credit facility maturing on November 4, 2022, with an option to renew at the bank’s discretion. On January 17, 2020, the Company and certain of the wholly-owned subsidiaries and affiliates of the Company as borrowers, and certain material subsidiaries of the Company as guarantors, entered into the Second Amended Credit Agreement. On December 30, 2021, the Company entered into the Consent, Waiver, Joinder and Amendment No. 3 to the Second Amended Credit Agreement with JPMorgan Chase, as Administrative Agent, and certain lender parties thereto, including Comerica Bank. The Second Amended Credit Agreement, as amended, provided for (i) a $ 125.0 million asset-secured revolving credit facility maturing on November 4, 2022 (the “Revolving Facility”), (ii) mortgage-secured term loan of $ 75.6 million, (the “Term Loan”), and (iii) amendment in the referenced interest rate from 1-month LIBOR to 1-month Secured Overnight Financing Rate (“SOFR”) plus a credit adjustment of 0.10 % (difference between LIBOR and SOFR plus 1.375 % per annum). 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 Group acquisition. The Second Amended Credit Agreement, as amended, contains certain financial covenants, including, but not limited to, a fixed charge coverage ratio. On March 31, 2022, the Company entered into the Third Amended Credit Agreement extending the Revolving Facility for five years , with a maturity date of March 31, 2027. The Third Amended Credit Agreement provides for a $ 100.0 million asset-secured revolving credit facility with a one-month SOFR plus a credit adjustment of 0.10 % plus 1.375 % per annum. On February 6, 2024, the Company amended the Third Amended Credit Agreement to (i) remove a cap on permitted indebtedness in respect of capital lease obligations, subject to certain enumerated conditions; (ii) create a reserve on the borrowing base, which will be reduced on a dollar-for-dollar basis once the Company has made expenditures in excess of such amount relating to the development and construction of certain real property, and which amounts shall be excluded from certain financial covenants under the Third Amended Credit Agreement and; (iii) remove certain sublease income from various financial covenants. On July 15, 2024, the Company again amended the Third Amended Credit Agreement to (i) increase the issuing bank sublimit to $ 10.0 million and; (ii) modify the due date for a borrowing base certificate based on availability under the revolving credit facility. As of December 31, 2025, the Company was in compliance with its covenants. The outstanding principal balance on the line of credit as of December 31, 2025 was $ 55.8 million and outstanding letters of credit amounted to $ 8.0 million leaving access to approximately $ 61.2 million in additional funds through our $ 125.0 million line of credit, subject to a borrowing base calculation. On February 12, 2025, the Company amended certain terms and conditions of the Third Amended Credit Agreement, by, among other things, (i) increasing the Revolving Commitment (as defined in the Credit Agreement) from $ 100.0 million to $ 125.0 million, (ii) joining three new subsidiaries of the Company to the Credit Agreement, each as a “Borrower” thereunder, (iii) joining Wells Fargo Bank, N.A. to the 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 Common Stock 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 56 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 (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 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. The following table sets forth the computation of basic and diluted EPS: Year Ended December 31, ($ in thousands, except share and per share data) 2025 2024 Numerator: Net loss attributable to HF Foods Group Inc. $ ( 38,843 ) $ ( 48,511 ) Denominator: Weighted-average common shares outstanding 52,946,655 52,552,490 Effect of dilutive securities — — Weighted-average dilutive shares outstanding 52,946,655 52,552,490 Loss per common share: Basic $ ( 0.73 ) $ ( 0.92 ) Diluted $ ( 0.73 ) $ ( 0.92 ) 57 Note 12 - Income Taxes The provision (benefit) for income taxes of the Company for the years ended December 31, 2025 and 2024 consists of the following: Year Ended December 31, (In thousands) 2025 2024 Current: Federal $ ( 778 ) $ 1,346 State 392 255 Current income taxes (benefit) ( 386 ) 1,601 Deferred income taxes (benefit): Federal ( 3,768 ) ( 756 ) State ( 1,816 ) 1,120 Deferred income taxes (benefit): ( 5,584 ) 364 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: Year ended December 31, (In thousands) 2025 Federal $ ( 252 ) State Arizona 43 California 314 Colorado 31 Illinois 30 North Carolina 26 Texas 40 Utah 18 Virginia 73 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. The determination of the Company’s overall effective income tax rate requires the use of estimates. The effective income tax rate reflects the income earned and taxed in U.S. federal and various state jurisdictions based on enacted tax law, permanent differences between book and tax items, tax credits and the Company’s change in relative income in each jurisdiction. 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 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: 58 Year Ended December 31, 2025 (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): Year Ended December 31, 2024 Federal statutory tax rate (21%) 21.0 % State statutory tax rate ( 1.1 ) % U.S permanent differences ( 0.3 ) % Noncontrolling interests 0.2 % Officers’ compensation ( 0.4 ) % Rate change ( 1.2 ) % Change in valuation allowance 1.6 % Tax credits 0.3 % Uncertain tax positions 0.3 % Stock compensation ( 0.2 ) % Dissolution of HFFI ( 1.6 ) % SEC Settlement ( 1.8 ) % Goodwill impairment charges ( 21.1 ) % Effective tax rate ( 4.3 ) % 59 Temporary differences and carryforwards of the Company that created significant deferred tax assets and liabilities are as follows: (In thousands) December 31, 2025 December 31, 2024 Deferred tax assets: Allowance for expected credit losses $ 303 $ 343 Inventories 1,060 967 Equity compensation 563 465 Compensation related accruals 888 948 Fair value change in interest rate swap contracts 282 — Leases 11,657 4,956 Accrued expenses 571 792 Interest expense limitation — 2,297 Equity investments 161 163 Net operating loss carryforwards 1,236 — Other 398 283 Total deferred tax assets 17,119 11,214 Deferred tax liabilities: Property and equipment ( 9,895 ) ( 6,751 ) Intangible assets ( 24,417 ) ( 30,609 ) Right of use assets ( 6,080 ) ( 2,646 ) Fair value change in interest rate swap contracts — ( 170 ) Other ( 535 ) ( 430 ) Total deferred tax liabilities ( 40,927 ) ( 40,606 ) Less: Valuation allowance — — Net deferred tax liabilities $ ( 23,808 ) $ ( 29,392 ) 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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. 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 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. Unrecognized Tax Benefits Year Ended December 31, (In thousands) 2025 2024 Total unrecognized tax benefits on January 1, $ — $ 106 Decrease related to positions taken on items from prior years — ( 106 ) Increase related to positions taken in the current year — — Total unrecognized tax benefits on December 31, $ — $ — 60 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 The Company makes regular purchases from and sales to various related parties. 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, 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. Mr. Zhang does not have any involvement in negotiations with any of the above-mentioned related parties. The Company believes that Mr. Zhou Min Ni (“Mr. Ni”), the Company’s former Co-Chief Executive Officer, together with various trusts for the benefit of Mr. Ni’s four children, are collectively beneficial owners of more than 10 % of the outstanding shares of the Company’s common stock, and he and certain of his immediate family members have ownership interests in 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. The related party transactions as of December 31, 2025 and December 31, 2024 and for the years ended December 31, 2025 and 2024, are identified as follows: Related Party Sales, Purchases, and Lease Agreements Purchases Below is a summary of purchases of goods and services from related parties recorded for the years ended December 31, 2025 and 2024, respectively: Year Ended December 31, (In thousands) Nature 2025 2024 (a) Asahi Food, Inc. Trade $ 107 $ 97 (b) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) Trade 4,124 5,055 (c) Ocean Pacific Seafood Group, Inc. Trade 284 257 (c) Rainfield Ranches, LP Trade 100 186 Total $ 4,615 $ 5,595 _______________ (a) The Company, through its subsidiary Mountain Food, LLC, owns an equity interest in this entity. (b) An equity interest is held by three Irrevocable Trusts for the benefit of Mr. Zhang’s children. (c) Mr. Zhou Min Ni owns an equity interest in this entity. 61 Sales Below is a summary of sales to related parties recorded for the years ended December 31, 2025 and 2024, respectively: Year Ended December 31, (In thousands) 2025 2024 (a) ABC Food Trading, LLC $ 2,090 $ 1,916 (b) Asahi Food, Inc. 755 565 (a) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) 1,497 1,016 (c) First Choice Seafood, Inc. 6 29 (c) Fortune One Foods, Inc. 130 215 (d) Ocean Pacific Seafood Group, Inc. 11 — Total $ 4,489 $ 3,741 _______________ (a) An equity interest is held by three Irrevocable Trusts for the benefit of Mr. Zhang’s children. (b) The Company, through its subsidiary Mountain Food, LLC, owns an equity interest in this entity. (c) Mr. Zhou Min Ni owns an equity interest in this entity indirectly through its parent company. (d) Mr. Zhou Min Ni owns an equity interest in this entity. Lease Agreements The Company leases various facilities to related parties. In 2020, the Company renewed a warehouse lease from Yoan Chang Trading Inc. 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 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. under a commercial lease agreement which was rescinded March 1, 2020. A new commercial lease agreement for a period of one year was entered into, expiring February 28, 2021, with a total of four renewal periods with each term being one year . The lease term was extended by an addendum dated September 1, 2023, which extended the lease through September 1, 2025. 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 Accounts Receivable - Related Parties, Net Below is a summary of accounts receivable with related parties recorded as of December 31, 2025 and December 31, 2024, respectively: (In thousands) December 31, 2025 December 31, 2024 (a) ABC Food Trading, LLC $ 115 $ 155 (b) Asahi Food, Inc. 177 84 (a) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) 254 — Total $ 546 $ 239 _______________ (a) An equity interest is held by three Irrevocable Trusts for the benefit of Mr. Zhang’s children. (b) The Company, through its subsidiary Mountain Food, LLC, owns an equity interest in this entity. 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. 62 Line of Credit Note - Related Parties The Company issued a $ 51,000 line of credit note to Asahi Food, Inc. 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. 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 All the accounts payable to related parties are payable upon demand without interest. Below is a summary of accounts payable with related parties recorded as of December 31, 2025 and December 31, 2024, respectively: (In thousands) December 31, 2025 December 31, 2024 (a) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) $ 360 $ 35 Others 24 17 Total $ 384 $ 52 _______________ (a) An equity interest is held by three Irrevocable Trusts for the benefit of Mr. Zhang’s children. Note 14 - Stock-Based Compensation In 2021, the Company began issuing awards under the HF Foods Group Inc. 2018 Omnibus Equity Incentive Plan (the “2018 Incentive Plan”), which reserved up to 3,000,000 shares of the Company’s common stock for issuance of awards to employees and non-employee directors. On June 3, 2024, the Company’s shareholders approved an amendment to the 2018 Incentive Plan which increased the number of shares of the Company’s common stock available for issuance under the 2018 Incentive Plan to 7,000,000 , an increase of 4,000,000 shares. The 2018 Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, other stock awards, and performance awards that may be settled in stock, or other property. As of December 31, 2025, the Company had 578,891 time-based vesting restricted stock units (“RSUs”) unvested, 950,465 performance-based restricted stock units (“PSUs”) unvested, and 1,515,321 shares of common stock vested leaving 3,955,323 shares remaining available for future awards under the 2018 Incentive Plan. RSUs granted to employees vest over time based on continued service (vesting over a period between one to three years in equal installments). PSUs granted to employees vest based on (i) the attainment of certain financial metrics, as defined by the Company’s compensation committee (“Financial PSUs”) and (ii) for the 2021 grants, total shareholder return of the Company’s common stock (“TSR PSUs”). Both types of PSUs vest over three years in equal installments based on the performance metrics established for each year and also require continued service for vesting. A summary of RSU and PSU activity for the year ended December 31, 2025 is as follows: Shares Weighted Average Grant Date Fair Value Unvested RSUs at January 1, 2025 619,932 $ 3.70 Granted 382,803 3.89 Forfeited ( 162,115 ) 3.72 Vested ( 261,729 ) 3.82 Unvested RSUs at December 31, 2025 578,891 3.76 63 Shares Weighted Average Grant Date Fair Value Unvested PSUs at January 1, 2025 579,075 $ 3.71 Granted 643,826 1.72 Forfeited ( 188,787 ) 3.40 Vested ( 83,649 ) 4.22 Unvested PSUs at December 31, 2025 950,465 2.38 The weighted-average grant date fair value per share of RSUs granted during the years ended December 31, 2025 and 2024 was $ 3.89 and $ 3.52 , respectively. 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, 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”). ASC 718 addresses all forms of share-based payment awards including shares issued under employee stock purchase plans and stock incentive shares. The fair value of the RSUs and Financial PSUs are measured using the closing price of the Company’s common stock on NASDAQ Global Capital Market on the grant date. The fair value of TSR PSUs are determined using a Monte Carlo simulation model. No TSR PSUs were granted during the years ended December 31, 2025 and 2024. The fair value of RSUs are amortized on a straight-line basis over the requisite service period for each award. For the PSUs, the Company recognizes stock-based compensation expense on a straight-line basis for each vesting tranche over the longer of the derived, explicit, or implicit service period for the vesting tranche. As of interim and annual reporting periods, the Financial PSUs stock-based compensation expense is adjusted based on expected achievement of performance targets, while TSR PSUs stock-based compensation expense is not adjusted. 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 loss. The components of stock-based compensation expense for the years ended December 31, 2025 and 2024 were as follows: Year Ended December 31, (In thousands) 2025 2024 Stock-based compensation (RSUs) expense $ 1,051 $ 1,382 Stock-based compensation (PSUs) expense 708 706 Total stock-based compensation expense $ 1,759 $ 2,088 Tax benefit of stock-based compensation expense $ 569 $ 742 As of December 31, 2025, there was $ 2.6 million of total unrecognized compensation cost related to all non-vested outstanding RSUs and PSUs outstanding under the 2018 Incentive Plan, with a weighted average remaining service period of 1.75 years. Of the total unrecognized compensation cost, $ 1.4 million is related to RSUs with time-based vesting provisions and $ 1.2 million is related to PSUs with performance-based vesting provisions. Note 15 - Employee Benefit Plan The Company sponsors a defined contribution plan, the HF Foods Group, Inc. Employees 401(k) Savings Plan (the “401(k) Plan”). Under the 401(k) Plan, after one month of service, eligible employees may elect to defer up to 100 % of their compensation before taxes, up to the dollar limit imposed by the Internal Revenue Service for tax purposes. The Company matches 100 % of an eligible employee’s contributions, dollar for dollar, up to 3 % of eligible pay, plus 50 % of each additional dollar greater than 3 % and no more than 5 % of eligible pay. 401(k) Plan participants are immediately 100% vested in the Company’s non-discretionary contributions to the plan. 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. 64 Note 16 - Segment Information The Company’s business consists of one operating segment, which is also its one reportable segment. The Company operates solely in the United States and derives revenues by providing sales of food and non-food to customers. The segment’s customer base consists primarily of Asian restaurants located throughout the United States. 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 (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. 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: Year Ended December 31, (In thousands) 2025 2024 Net revenue $ 1,228,282 $ 1,201,667 Less: Cost of revenue 1,020,706 996,473 Operating expenses: Payroll and related labor costs 97,956 98,991 Professional fees 8,230 11,066 Depreciation 12,677 10,397 Amortization 15,705 16,280 Other segment expenses (a) 67,194 61,292 Distribution, selling and administrative expenses 201,762 198,026 Goodwill impairment charges 38,815 46,303 Other (income) expenses: Interest expense 11,467 11,425 Other (income) expense, net ( 1,057 ) 2,818 Change in fair value of interest rate swap contracts 1,870 ( 1,693 ) Lease guarantee income — ( 5,548 ) Income tax expense (benefit) ( 5,970 ) 1,965 Less: net income (loss) attributable to noncontrolling interests ( 468 ) 409 NET LOSS AND COMPREHENSIVE LOSS ATTRIBUTABLE TO HF FOODS GROUP INC. $ ( 38,843 ) $ ( 48,511 ) _______________ (a) Other segment expenses include distribution, selling and administrative expenses which are not provided to the chief operating decision maker on a regular basis. These expenses include primarily auto & truck expense, insurance, occupancy expense and utilities. 65 Note 17 - Commitments and Contingencies From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. The Company continuously assesses the potential liability related to its pending litigation and revises its estimates when additional information becomes available. Adverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against the Company that could adversely affect its ability to conduct business. There also exists the possibility of a material adverse effect on the Company’s financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable. Legal costs associated with loss contingencies are expensed as incurred. On June 6, 2024, the SEC announced that it had accepted an Offer of Settlement submitted by the Company in order to resolve the previously disclosed formal, non-public SEC investigation of allegations that the Company and certain of its former directors and officers violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements. 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 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. The Company’s resolution follows charges brought by the SEC against the two former executives in a District Court action filed on June 3, 2024. As a result of the SEC’s district court complaint against them, the two former executives agreed to pay civil fines and disgorgement, and agreed to be subject to officer and director bars. Zhou Min Ni also agreed to a conduct-based injunction which enjoins him from directly or indirectly participating in the management of, or otherwise exercising any control of influence over the Company. 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. 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 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. 66 Note 18 - Subsequent Events 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. 67 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.