What changed in this filing

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Item 1. Financial Statements

2026-05-11 compared with 2025-11-10 · 176 added, 244 removed, 440 unchanged (49% of the section changed)

4 unchanged sentences

(In thousands, except share data)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

CURRENT ASSETS:

5 unchanged sentences

Prepaid expenses and other current assets 6,096 9,725

Assets held for sale — 2,768

TOTAL CURRENT ASSETS 191,956 194,000

4 unchanged sentences

Trademarks, trade names and other intangibles, net 24,139 25,440

Goodwill 38,815 38,815

Other long-term assets 3,916 4,451

26 unchanged sentences

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 September 30, 2025 and December 31, 2024, respectively

55,196,255 and 55,041,255 shares issued and 53,198,832 and 53,043,832 shares outstanding as of March 31, 2026 and December 31, 2025, respectively

Treasury stock, at cost;

1,997,423 shares as of September 30, 2025 and December 31, 2024

1,997,423 shares as of March 31, 2026 and December 31, 2025

( 7,750 ) ( 7,750 )

9 unchanged sentences

and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except share and per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Net revenue - third parties $ 310,959 $ 297,473

8 unchanged sentences

Interest expense 2,812 2,609

Other (income) expense, net ( 234 ) ( 332 ) ( 825 ) 3,040

Other income, net ( 1,891 ) ( 177 )

Change in fair value of interest rate swap contracts ( 843 ) 1,184

Lease guarantee income — — — ( 5,548 )

LOSS BEFORE INCOME TAXES ( 1,634 ) ( 5,091 ) ( 3,065 ) ( 3,997 )

Income tax expense (benefit) ( 760 ) ( 1,254 ) ( 1,171 ) 164

NET LOSS AND COMPREHENSIVE LOSS ( 874 ) ( 3,837 ) ( 1,894 ) ( 4,161 )

net income (loss) attributable to noncontrolling interests 242 103 ( 349 ) 456

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

INCOME (LOSS) BEFORE INCOME TAXES 959 ( 2,462 )

Income tax benefit

( 397 ) ( 932 )

LOSS PER COMMON SHARE - BASIC $ ( 0.02 ) $ ( 0.07 ) $ ( 0.03 ) $ ( 0.09 )

LOSS PER COMMON SHARE - DILUTED $ ( 0.02 ) $ ( 0.07 ) $ ( 0.03 ) $ ( 0.09 )

NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) 1,356 ( 1,530 )

net income attributable to noncontrolling interests 131 115

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

$ 1,225 $ ( 1,645 )

EARNINGS (LOSS) PER COMMON SHARE - BASIC $ 0.02 $ ( 0.03 )

EARNINGS (LOSS) PER COMMON SHARE - DILUTED $ 0.02 $ ( 0.03 )

WEIGHTED AVERAGE SHARES - BASIC 53,053,610 52,737,650

5 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net loss $ ( 1,894 ) $ ( 4,161 )

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

Net Income (loss) $ 1,356 $ ( 1,530 )

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

Depreciation and amortization expense 7,521 6,758

Provision (credit) for expected credit losses ( 357 ) ( 40 )

Gain from disposal of property and equipment ( 1,471 ) ( 10 )

Credit for expected credit losses 25 619

Deferred tax benefit ( 133 ) ( 1,084 )

2 unchanged sentences

Non-cash lease expense 2,185 1,220

Lease guarantee income — ( 5,548 )

Other non-cash (income) expense ( 548 ) 522

Other non-cash expense (income) 96 ( 119 )

Changes in operating assets and liabilities:

15 unchanged sentences

Cash flows from financing activities:

Payments for tax withholding related to vested stock awards ( 156 ) ( 173 )

Proceeds from line of credit 393,818 315,008

4 unchanged sentences

Repayment of obligations under finance leases ( 1,773 ) ( 1,467 )

Net cash provided by financing activities

Net decrease in cash

( 2,139 ) ( 3,787 )

Proceeds from ATM sale 275 —

Acquisition of noncontrolling interests

Net cash used in financing activities ( 1,749 ) ( 1,752 )

Net increase in cash 2,420 1,632

Cash at beginning of the period 8,641 14,467

Cash at end of the period $ 11,061 $ 16,099

Supplemental disclosure of cash flow data:

Cash paid for interest $ 2,743 $ 11,623

Cash paid (received) for income taxes 225 ( 91 )

Supplemental disclosure of non-cash investing and financing activities:

1 unchanged sentence

Property acquired in exchange for finance leases 1,178 10,154

Dissolution of noncontrolling interests — 772

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

16 unchanged sentences

Balance at March 31, 2025 54,735,073 $ 5 1,997,423 $ ( 7,750 ) $ 604,609 $ ( 358,844 ) $ 238,020 $ 2,118 $ 240,138

— — — — — 17 17 218 235

Issuance of common stock pursuant to equity compensation plan 555,181 — — — — — — — —

Shares withheld for tax withholdings on vested awards ( 40,403 ) — — — ( 128 ) — ( 128 ) — ( 128 )

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

Stock-based compensation — — — — 522 — 522 — 522

Balance at June 30, 2024 54,668,169 $ 5 1,997,423 $ ( 7,750 ) $ 603,454 $ ( 309,365 ) $ 286,344 $ 2,447 $ 288,791

Net income (loss) — — — — — ( 3,940 ) ( 3,940 ) 103 ( 3,837 )

Issuance of common stock pursuant to equity compensation plan 82,713 — — — — — — — —

Shares withheld for tax withholdings on vested awards ( 16,297 ) — — — ( 45 ) — ( 45 ) — ( 45 )

Stock-based compensation — — — — 701 — 701 — 701

Balance at September 30, 2024 54,734,585 $ 5 1,997,423 $ ( 7,750 ) $ 604,110 $ ( 313,305 ) $ 283,060 $ 2,550 $ 285,610

Balance at January 1, 2026 55,041,255 $ 5 1,997,423 $ ( 7,750 ) $ 605,838 $ ( 396,042 ) $ 202,051 $ 1,535 $ 203,586

Net income (loss) — — — — — 1,225 1,225 131 1,356

Stock-based compensation — — — — 374 — 374 — 374

Balance at March 31, 2025 54,735,073 $ 5 1,997,423 $ ( 7,750 ) $ 604,609 $ ( 358,844 ) $ 238,020 $ 2,118 $ 240,138

Net income (loss)

Issuance of common stock under at-the-market equity offering 155,000 — — — 275 — 275 — 275

Acquisition of Non-Controlling Interest

— — — — ( 175 ) — ( 175 ) ( 660 ) ( 835 )

Issuance of common stock pursuant to equity compensation plan 316,251 — — — — — — — —

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

Stock-based compensation — — — — 305 — 305 — 305

Balance at June 30, 2025 55,012,128 $ 5 1,997,423 $ ( 7,750 ) $ 605,078 $ ( 357,628 ) $ 239,705 $ 1,412 $ 241,117

Net income (loss) — — — — — ( 1,116 ) ( 1,116 ) 242 ( 874 )

Issuance of common stock pursuant to equity compensation plan 29,127 — — — — — — — —

Stock-based compensation — — — — 619 — 619 — 619

Balance at September 30, 2025 55,041,255 $ 5 1,997,423 $ ( 7,750 ) $ 605,697 $ ( 358,744 ) $ 239,208 $ 1,654 $ 240,862

Balance at March 31, 2026 55,196,255 $ 5 1,997,423 $ ( 7,750 ) $ 606,243 $ ( 394,817 ) $ 203,681 $ 1,006 $ 204,687

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

17 unchanged sentences

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 condensed consolidated statements of operations and comprehensive income (loss) equal to the percentage of the economic or ownership interest retained in such entity by the respective noncontrolling party.

Reclassifications

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

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

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

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.

For the quarter ended September 30, 2025, the Company had no VIEs.

Noncontrolling Interests

1 unchanged sentence

In addition, the amounts attributable to the net income (loss) of those noncontrolling interests are reported separately in the condensed consolidated statements of operations and comprehensive income (loss).

As of September 30, 2025 and December 31, 2024, noncontrolling interest equity consisted of the following:

On March 1, 2026, the Company acquired a 18.99 % ownership interest in its consolidated subsidiary, Min Food, Inc.

(“Min Food”), from two investors for total consideration of approximately $ 0.8 million.

Following the completion of this transaction, the Company’s ownership interest in Min Food increased from 60.25 % to 79.24 %, and the noncontrolling interest decreased from 39.75 % to 20.76 %.

Because the Company maintained a controlling financial interest in Min Food both before and after the transaction, this acquisition was accounted for as an equity transaction in accordance with ASC 810, Consolidation .

No gain or loss was recognized in the condensed consolidated statements of operations and comprehensive income (loss).

As of March 31, 2026 and December 31, 2025, noncontrolling interest equity consisted of the following:

($ in thousands) Ownership of

noncontrolling interest at September 30, 2025

September 30, 2025 December 31, 2024

noncontrolling interest at March 31, 2026

March 31, 2026 December 31, 2025

Min Food, Inc.

5 unchanged sentences

Actual results could differ from those estimates.

Significant accounting estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, inventory reserves, impairment of long-lived assets, and impairment of goodwill.

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

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

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

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

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

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

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

3 unchanged sentences

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.

2 unchanged sentences

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

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

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

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

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

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

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

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

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

Recently Adopted Accounting Pronouncements

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

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

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

See Note 14 - Segment Information in the accompanying notes to the condensed consolidated financial statements for further detail.

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

The Company adopted this guidance prospectively effective January 1, 2026 and elected the practical expedient provided thereunder.

The adoption did not have a material impact on the Company’s consolidated financial statements.

Note 3 - Revenue

The following table presents the Company’s net revenue disaggregated by principal product categories:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2026 2025

2 unchanged sentences

Asian Specialty 54,436 17 % 60,980 21 %

Commodity 36,103 12 % 23,816 8 %

Produce 29,517 9 % 27,911 9 %

Packaging and Other 14,281 5 % 14,121 5 %

Commodity 33,587 11 % 13,289 5 % 88,698 10 % 41,843 5 %

Total $ 312,002 100 % $ 298,428 100 %

1 unchanged sentence

Accounts receivable, net consisted of the following:

(In thousands) September 30, 2025 December 31, 2024

(In thousands) March 31, 2026 December 31, 2025

Accounts receivable $ 68,093 $ 66,890

1 unchanged sentence

Accounts receivable, net $ 67,000 $ 65,691

The beginning balance of accounts receivable as of January 1, 2025 was $ 55.7 million.

Movement of allowance for expected credit losses was as follows:

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2026 2025

Beginning balance $ 1,199 $ 1,557

Provision (credit) for expected credit losses ( 357 ) ( 40 )

Credit for expected credit losses 25 619

Bad debt write-offs ( 131 ) ( 2 )

1 unchanged sentence

Prepaid expenses and other current assets consisted of the following:

(In thousands) September 30, 2025 December 31, 2024

(In thousands) March 31, 2026 December 31, 2025

Prepaid expenses $ 2,454 $ 5,641

2 unchanged sentences

Prepaid expenses and other current assets $ 6,096 $ 9,725

Assets held for sale consisted of the following:

(In thousands) March 31, 2026 December 31, 2025

Buildings $ — $ 2,034

Assets held for sale $ — $ 2,768

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

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

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

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

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

The gain of $ 1.4 million realized on the sale was recognized in other income, net on our condensed consolidated statements of operations and comprehensive income (loss) during the quarter ended March 31, 2026.

Property and equipment, net consisted of the following:

(In thousands) September 30, 2025 December 31, 2024

(In thousands) March 31, 2026 December 31, 2025

Automobiles (1)

12 unchanged sentences

_________________

(1) The cost and accumulated depreciation of property and equipment related to finance leases was $ 50.1 million and $ 19.4 million, respectively, at September 30, 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 September 30, 2025 is $ 45.8 million.

Depreciation expense was $ 3.2 million and $ 2.6 million for the three months ended September 30, 2025 and 2024, respectively.

Depreciation expense was $ 9.4 million and $ 7.7 million for the nine months ended September 30, 2025 and 2024, respectively.

(1) The cost and accumulated depreciation of property and equipment related to finance leases was $ 50.5 million and $ 22.4 million, respectively, at March 31, 2026 and $ 50.0 million and $ 21.1 million, respectively, at December 31, 2025.

The total future minimum lease payments under all finance leases as of March 31, 2026 is $ 42.9 million.

Depreciation expense was $ 3.6 million and $ 2.9 million for the three months ended March 31, 2026 and 2025, respectively.

Long-term investments consisted of the following:

(In thousands) Ownership as of September 30,

2025 September 30, 2025 December 31, 2024

(In thousands) Ownership as of March 31,

2026 March 31, 2026 December 31, 2025

Asahi Food, Inc.

4 unchanged sentences

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 three months ended September 30, 2025 and 2024 for these investments.

The Company determined there was no impairment for the three months ended March 31, 2026 and 2025 for these investments.

Accrued expenses and other liabilities consisted of the following:

(In thousands) September 30, 2025 December 31, 2024

(In thousands) March 31, 2026 December 31, 2025

Accrued compensation $ 6,285 $ 6,690

7 unchanged sentences

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:

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

9 unchanged sentences

There were no transfers between fair value levels in any of the periods presented herein.

The carrying amounts reported in the condensed 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.

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

2 unchanged sentences

(In thousands) Level 1 Level 2 Level 3 Carrying Value

September 30, 2025

March 31, 2026

Fixed rate debt:

9 unchanged sentences

Bank of America $ — $ — $ 48 $ 51

Other finance institutions $ — $ 2,474 $ — $ 2,784

Variable rate debt:

7 unchanged sentences

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.

No adjustments to fair value from the write-down of asset values due to impairment were made during the nine months ended September 30, 2025 and 2024.

As further disclosed in Note 6 - Goodwill and Acquired Intangible Assets, we performed a quantitative goodwill impairment analysis as of December 31, 2024.

We performed a quantitative goodwill impairment analysis as of December 31, 2025.

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

Goodwill impairment charges of $ 46.3 million were recorded in the fourth quarter of the year ended December 31, 2024.

A goodwill impairment charge of $ 38.8 million was recorded for the year ended December 31, 2025, which resulted in the full impairment of our remaining goodwill balance.

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 that were carried at nonrecurring fair value at September 30, 2025.

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

Note 6 - Goodwill and Acquired Intangible Assets

There is only one reporting unit at September 30, 2025 and December 31, 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 a result of the declines in the level of stock price prior to year end, 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 fourth quarter during the year ended December 31, 2024.

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.

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

The Company determined that there were no events or circumstances during the nine months ended September 30, 2025 that would more likely than not reduce the fair value of the reporting unit below its carrying value.

Goodwill was $ 38.8 million as of September 30, 2025 and December 31, 2024.

Acquired Intangible Assets

There were no assets carried at nonrecurring fair value at March 31, 2026.

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

Note 6 - Intangible Assets

Intangible Assets

The components of the intangible assets are as follows:

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

(In thousands) Gross

3 unchanged sentences

Amortization Net

Non-competition agreement $ 3,892 $ ( 3,892 ) $ — $ 3,892 $ ( 3,723 ) $ 169

Trademarks and trade names 44,207 ( 24,992 ) 19,215 44,207 ( 23,894 ) 20,313

2 unchanged sentences

Total $ 235,140 $ ( 87,594 ) $ 147,546 $ 235,140 $ ( 83,652 ) $ 151,488

Amortization expense for acquired intangible assets was $ 4.0 million and $ 4.1 million for the three months ended September 30, 2025 and 2024.

Amortization expense for acquired intangible assets was $ 11.8 million and $ 12.2 million for the nine months ended September 30, 2025 and 2024.

Amortization expense for intangible assets was $ 3.9 million each for the three months ended March 31, 2026 and 2025, respectively.

Note 7 - Derivative Financial Instruments

6 unchanged sentences

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 + 2.5 %.

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 %.

3 unchanged sentences

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 condensed consolidated statements of operations and comprehensive loss.

As of September 30, 2025, the Company determined that the fair values of the IRS contracts were $ 0.3 million in an asset position and $ 1.7 million in a liability position.

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

As of March 31, 2026, the Company determined that the fair values of the IRS contracts were $ 0.3 million in an asset position and $ 0.8 million in a liability position.

As of December 31, 2025, 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 condensed consolidated balance sheets.

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

Note 8 - Long-Term Debt

Long-term debt at September 30, 2025 and December 31, 2024 is summarized as follows:

Long-term debt at March 31, 2026 and December 31, 2025 is summarized as follows:

($ in thousands)

Bank Name Maturity Interest Rate at September 30, 2025

September 30, 2025 December 31, 2024

Bank Name Maturity Interest Rate at March 31, 2026

March 31, 2026 December 31, 2025

Bank of America (a)

18 unchanged sentences

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 $ 97.5 million as of September 30, 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.

(c) Real estate term loan with a principal balance of $ 91.7 million as of March 31, 2026 and $ 96.2 million as of December 31, 2025 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 September 30, 2025, the Company was in compliance with its covenants.

As of March 31, 2026, the Company was in compliance with its covenants.

Credit Facility

6 unchanged sentences

(ii) modify the due date for a borrowing base certificate based on availability under the revolving credit facility.

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.

On February 12, 2025, the Company entered into a Joinder and Amendment no.

4 to the Third Amended Credit Agreement, which revised certain terms 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.

As of September 30, 2025, the Company was in compliance with its covenants.

The outstanding principal balance on the line of credit as of September 30, 2025 was $ 67.2 million and outstanding letters of credit amounted to $ 8.0 million leaving access to approximately $ 49.8 million in additional funds through our $ 125.0 million line of credit, subject to a borrowing base calculation.

Note 9 - Stockholder's Equity

The Company has 100,000,000 shares of common stock authorized, with a par value of $ 0.0001 per share.

On March 30, 2026, the Company entered into a Joinder and Amendment no.

5 (the “Fifth Amendment”) to the Third Amended Credit Agreement, with JPMorgan Chase Bank, and certain other lender parties thereto, to revise the Third Amended Credit Agreement.

The Fifth Amendment revises the credit agreement to (i) extend the maturity date of the credit facility to the earlier of March 31, 2031 or certain other dates subject to conditions specified in the agreement;

(ii) amend the interest rate to be based upon the one month SOFR plus a fixed spread based upon the daily availability of the aggregate revolving commitment;

and (iii) add HF Atlanta, LLC as an additional loan party as a “Borrower” thereunder.

As of March 31, 2026, the Company was in compliance with its covenants.

The outstanding principal balance on the line of credit as of March 31, 2026 was $ 61.8 million and outstanding letters of credit amounted to $ 8.0 million leaving access to approximately $ 55.2 million in additional funds through our $ 125.0 million line of credit, subject to a borrowing base calculation.

Note 9 - Shareholders' Equity

The Company had 100,000,000 shares of common stock authorized, with a par value of $ 0.0001 per share as of March 31, 2026 and December 31, 2025.

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 $ 100,000,000 , subject to the terms of the sales agreement.

During the period, the Company did not sell any Shares under the offering.

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

During the quarter ended March 31, 2026, the Company sold 155,000 Shares for cash proceeds of $ 0.3 million under the offering.

The Company sold no Shares under the offering during the year ended December 31, 2025.

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 March 31, 2026 and December 31, 2025.

The Company had no preferred stock outstanding as of March 31, 2026 or December 31, 2025.

Note 10 - Earnings (Loss) Per Share

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

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

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

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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 1,046,087 and 601,719 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 September 30, 2025 and 2024, respectively, because their effect could have been anti-dilutive.

There were 1,216,821 and 1,542,412 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 nine months ended September 30, 2025 and 2024, respectively, because their effect could have been anti-dilutive.

There were 1,446,582 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 March 31, 2025, because their effect could have been anti-dilutive.

The following table sets forth the computation of basic and diluted EPS:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

($ in thousands, except share and per share data) 2026 2025

Net loss attributable to HF Foods Group Inc.

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

$ 1,225 $ ( 1,645 )

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Weighted-average dilutive shares outstanding 53,933,051 52,737,650

Loss per common share:

Earnings (loss) per common share:

Basic $ 0.02 $ ( 0.03 )

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

As of September 30, 2025, the Company had one subsidiary outside the U.S.

that generated an insignificant amount of activity.

As such, no foreign income tax was recorded.

For the three and nine months ended September 30, 2025, the Company’s effective income tax rate of 46.5 % and 38.2 %, respectively, differed from the federal statutory tax rate primarily as a result of permanent differences and state income taxes, partially offset by tax credits.

The Company’s tax provision for the three and nine months ended September 30, 2025 includes a discrete tax expense of $ 1,900 and $ 2,500 related to stock-based compensation shortfalls.

For the three and nine months ended September 30, 2024, the Company’s effective income tax rate of 24.6 % and ( 4.1 )%, respectively, differed from the federal statutory tax rate primarily as a result of permanent differences and state income taxes.

The Company’s tax provision for the nine months ended September 30, 2024 included a discrete tax expense of $ 1.0 million related to the Company’s SEC settlement.

Additionally, the Company’s tax provision for the three and nine months ended September 30, 2024 included a discrete tax expense of $ 0.1 million and $ 0.2 million, respectively, related to stock-based compensation shortfalls.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S.

The OBBBA includes significant 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 evaluated the impact of the OBBBA in the third quarter of 2025, the period of enactment, and determined the impact was not material to the Company’s tax provision as of September 30, 2025.

The Company will continue to evaluate the impact of the new legislation on its year-end consolidated financial statements but does not expect the OBBBA to have a material impact.

As of March 31, 2026, the Company had immaterial operations outside the U.S.

and as such, no foreign income tax was recorded.

For the three months ended March 31, 2026 and 2025, the Company’s effective income tax rates were ( 41.4 )% and 37.9 %, respectively.

For the three months ended March 31, 2026, the effective income tax rate differed from the federal statutory rate primarily due to significant investment tax credits recognized in the period, partially offset by permanent differences and state income taxes.

For the three months ended March 31, 2025, the Company’s effective income tax rate differed from the federal statutory tax rate primarily due to permanent differences and state income taxes.

Note 12 - Related Party Transactions

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Ni’s four children, are collectively beneficial owners of more than 5 % 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 September 30, 2025 and December 31, 2024 and for the three and nine months ended September 30, 2025, and 2024 , are identified as follows:

The related party transactions as of March 31, 2026 and December 31, 2025 and for the three months ended March 31, 2026 and 2025, are identified as follows:

Related Party Sales, Purchases, and Lease Agreements

Below is a summary of purchases of goods and services from related parties recorded for the three and nine months ended September 30, 2025 and 2024, respectively:

Three Months Ended September 30, Nine Months Ended September 30,

Below is a summary of purchases of goods and services from related parties recorded for the three months ended March 31, 2026 and 2025, respectively:

Three Months Ended March 31,

(In thousands) Nature 2026 2025

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Trade 133 49 247 189

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Zhou Min Ni owns an equity interest in this entity.

Below is a summary of sales to related parties recorded for the three and nine months ended September 30, 2025 and 2024, respectively:

Three Months Ended September 30, Nine Months Ended September 30,

Below is a summary of sales to related parties recorded for the three months ended March 31, 2026 and 2025, respectively:

Three Months Ended March 31,

(In thousands) 2026 2025

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(b) Asahi Food, Inc.

166 152 553 439

(a) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) 460 342

1 unchanged sentence

28 44 118 151

(d) Ocean Pacific Seafood Group, Inc.

Total $ 1,043 $ 955

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

Zhou Min Ni owns an equity interest in this entity.

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 and expiring on December 31, 2025.

Rent expense, which is included in distribution, selling and administrative expenses in the condensed consolidated statements of operations and comprehensive loss, was $ 0.1 million for both the three months ended September 30, 2025 and 2024, and $ 0.2 million for both the nine months ended September 30, 2025 and 2024.

Lease Agreement

The Company has a lease agreement with a related party, Asahi Food, Inc.

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 .

A new commercial lease agreement was entered into, expiring September 1, 2023, with optional renewal periods.

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 2025 which extends the expiration of the lease by one year to September 1, 2026.

Rental income was $ 36,000 for both the three months ended September 30, 2025 and 2024, and $ 0.1 million for both the nine months ended September 30, 2025 and 2024, which is included in other expense (income), net in the condensed consolidated statements of operations and comprehensive loss.

Rental income was $ 36 thousand for both the three months ended March 31, 2026 and 2025, which is included in other income, net in the condensed consolidated statements of operations and comprehensive income (loss).

Related Party Balances

Accounts Receivable - Related Parties, Net

Below is a summary of accounts receivable with related parties recorded as of September 30, 2025 and December 31, 2024, respectively:

(In thousands) September 30, 2025 December 31, 2024

Below is a summary of accounts receivable with related parties recorded as of March 31, 2026 and December 31, 2025, respectively:

(In thousands) March 31, 2026 December 31, 2025

(a) ABC Food Trading, LLC $ 309 $ 115

1 unchanged sentence

(a) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) 126 254

Total $ 616 $ 546

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

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

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

No allowance is deemed necessary as of September 30, 2025 and December 31, 2024.

No allowance is deemed necessary as of March 31, 2026 and December 31, 2025.

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 September 30, 2025 and included in other current assets in the consolidated balance sheet.

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

Interest income was $ 924 and $ 3,081 for the three and nine months ended September 30, 2025, which is included in other income, net in the condensed consolidated statements of operations and comprehensive loss.

on November 1, 2024, which is outstanding at March 31, 2026 and included in other current assets in the consolidated balance sheet.

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

Interest income was $ 616 and $ 1,233 for the three months ended March 31, 2026 and 2025,

respectively, which is included in other income expense, net in the condensed consolidated statements of operations and comprehensive income (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 September 30, 2025 and December 31, 2024, respectively:

(In thousands) September 30, 2025 December 31, 2024

Below is a summary of accounts payable with related parties recorded as of March 31, 2026 and December 31, 2025, respectively:

(In thousands) March 31, 2026 December 31, 2025

(a) Conexus Food Solutions LLC (formerly known as Best Food Services, LLC) $ 243 $ 360

7 unchanged sentences

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.

As of September 30, 2025, the Company had 616,061 time-based vesting restricted stock units unvested, 1,056,233 performance-based restricted stock units unvested, 1,515,321 shares of common stock vested and 3,812,385 shares remaining available for future awards under the 2018 Incentive Plan.

Stock-based compensation expense was $ 0.6 million and $ 0.7 million for the three months ended September 30, 2025 and 2024, respectively.

Stock-based compensation expense was $ 1.6 million and $ 2.0 million for the nine months ended September 30, 2025 and 2024, respectively.

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

As of September 30, 2025, there was $ 4.1 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 2.04 years.

As of March 31, 2026, the Company had 535,810 time-based vesting restricted stock units unvested, 912,071 performance-based restricted stock units unvested, 1,515,321 shares of common stock vested and 4,036,798 shares remaining available for future awards under the 2018 Incentive Plan.

Stock-based compensation expense was $ 0.3 million and $ 0.4 million for the three months ended March 31, 2026 and 2025, respectively.

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

As of March 31, 2026, there was $ 2.0 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 1.67 years.

Note 14 - Segment Information

3 unchanged sentences

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 condensed consolidated balance sheets.

The following table presents selected financial information with respect to the Company’s single operating segment for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30, Nine Months Ended September 30,

The CODM uses consolidated net income (loss) 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 three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

(In thousands) 2026 2025

9 unchanged sentences

Distribution, selling and administrative expenses 49,489 49,805

Other (income) expenses:

Interest expense 2,812 2,609

Other (income) expense, net ( 234 ) ( 332 ) ( 825 ) 3,040

Other income, net ( 1,891 ) ( 177 )

Change in fair value of interest rate swap contracts ( 843 ) 1,184

Lease guarantee income — — — ( 5,548 )

Income tax expense (benefit) ( 760 ) ( 1,254 ) ( 1,171 ) 164

net income (loss) attributable to noncontrolling interests 242 103 ( 349 ) 456

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

Income tax benefit ( 397 ) ( 932 )

net income attributable to noncontrolling interests 131 115

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

$ 1,225 $ ( 1,645 )

_______________

(a) Other segment expenses include distribution, selling and administrative expenses which are not provided to the chief operating decision maker on a regular basis.

(a) Other segment expenses include distribution, selling and administrative expenses which are not provided to the CODM on a regular basis.

These expenses include primarily auto & truck expense, insurance, occupancy expense and utilities.

9 unchanged sentences

Legal costs associated with loss contingencies are expensed as incurred.

AnHeart Lease Guarantee

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

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

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

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

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

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

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

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

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

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

The Company has incurred $ 7.3 million in construction costs which was placed in service in September 2025 after receiving the certificate of occupancy.

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

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

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

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

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

AnHeart subsequently defaulted on these obligations.

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

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

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

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

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

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

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

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

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

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

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

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

AnHeart Lease Matter

In connection with lease arrangements relating to properties located at 273 Fifth Avenue and 275 Fifth Avenue in Manhattan, New York, the Company previously guaranteed certain obligations of AnHeart, Inc.

under those leases.

Following AnHeart’s

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

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

and Minsheng Pharmaceutical Group Company, Ltd.

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

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

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

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

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

The ultimate outcome cannot be predicted with certainty.

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

Other Commitments

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

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

The Company is reasonably likely to exercise the first of the three five-year renewal options due to the investment the Company is making to the leased property infrastructure.

The Company shall pay rent of approximately $ 120,000 per month with provisions for yearly increases totaling $ 29.0 million in future minimum lease payments over 15 years.

As of September 30, 2025, the current portion and non-current portion of obligations under all operating leases was $ 4.2 million and $ 23.8 million, respectively.

Note 16 - Subsequent Events

Departure of Chief Financial Officer

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

In connection with Ms.

Yao’s separation, the Company entered into a separation agreement with Ms.

Yao on October 30, 2025 (the “Separation Agreement”).

Under the Separation Agreement, Ms.

Yao will be entitled, subject to her non-revocation of a general release of claims in favor of the Company, to one-half of her annual base salary of $ 375,000 , paid out over a period of six months following the Separation Date (the “Severance Period”), subject to deduction for applicable withholding taxes.

Yao will also be eligible to elect group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) following the Separation Date, including coverage for eligible dependents, until the earliest of (i) the expiration of the Severance Period, (ii) the expiration of eligibility for continuation coverage under COBRA, or (iii) the date on which Ms.

Yao becomes eligible for substantially equivalent health insurance coverage in connection with new employment.

Utah Building Sale

On October 17, 2025, the Company entered into an agreement to sell a warehouse owned by the Company located in West Jordan, Utah.

The agreement provides for a sale price of $ 4.6 million and is expected to close during the fourth quarter, subject to customary closing conditions.

The Company does not expect the transaction to have any significant impact on current customers as operations will be consolidated into another nearby facility owned by the Company.

As the building remains in use, the asset was not classified as held for sale as of September 30, 2025 on the Company’s Consolidated Balance Sheet.

As of March 31, 2026, the Company had additional automobile leases that had not yet commenced which total $ 0.8 million in future minimum lease payments.

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

What changed 10-Q

Item 1. Financial Statements