What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-13 compared with 2025-03-14 · 118 added, 107 removed, 183 unchanged (55% of the section changed)

11 unchanged sentences

We operate our business strategically and with broad flexibility to provide both our large and small customers with the wide spectrum of products they need to successfully run and grow their businesses.

We believe we have established ourselves as a differentiated provider of high-quality products relative to our competitors.

We believe we have established ourselves as a differentiated and reliable provider of high-quality products relative to our competitors.

Our operating model entails generating the majority of our revenue from the distribution of products sourced from a diversified global network, complemented by select manufacturing capabilities in the U.S., which allows us to provide customers with broad product choices and customized offerings with short lead times.

This model provides us with the flexibility to adjust the mix of our product offering from import and manufacturing in evolving economic environments to drive operating efficiency and sustained margin expansion and ensure quality of our customer service and product availability during global supply chain disruptions.

Starting in 2023 and continuing into 2025, in light of the rising domestic labor and other operating costs and dropping ocean freight rates, we executed a strategy to pivot into a more asset-light model by increasing imports and scaling back domestic manufacturing.

At the same time, we have expanded our vendor network by prioritizing strong partnerships with reliable and cost-efficient sources.

This has enabled us to diversify our supplier base, minimize reliance on individual suppliers, enhance the resilience of our supply chain, expand our margin and improve our operating cash flows.

Amidst the evolving tariff environment throughout 2025, we have placed our strategic emphasis on expanding and diversifying our global vendor network to enhance the resilience of our supply chain, minimize tariff impact on our operations and financial results, and maintain a strong margin profile and operating cash flows.

We are prioritizing strong partnerships with reliable and cost-efficient sources and more favorable trade terms, negotiating additional vendor support, exploring opportunities to collaborate with vendors in new countries and geographies, while reallocating our own domestic production capabilities to optimize overall product margin.

We operate an approximately 500,000 square foot distribution center located in Rockwall, Texas, an approximately 300,000 square foot distribution center in Chino, California, and an approximately 76,000 square foot distribution center located in Kapolei, Hawaii.

We have selected manufacturing capabilities in all of these facilities.

In addition, we operate seven other warehouse spaces and distribution centers located in Puyallup, Washington;

Summerville, South Carolina;

In addition, we operate seven othe r distribution centers lo cated in Puyallup, Washington;

Branchburg, New Jersey;

2 unchanged sentences

Mesa, Arizona;

and Sugar Land, Texas.

Sugar Land, Texas, and Chino, California.

Our distribution centers are strategically located in proximity to major population centers, including the Los Angeles, New York, Chicago, Dallas, Houston, Seattle, Phoenix, Atlanta, and Honolulu metro areas.

Further, as described in Note 22 — Subsequent Events in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, we entered into a lease agreement on March 3, 2025 for an additional distribution center of approximately 187,000 square foot in Chino, California and are currently in the process of setting up this location to be fully operational by the second quarter of 2025.

On October 17, 2025, we announced that Lollicup, our wholly-owned business operating subsidiary, relocated its headquarters to Rockwall, Texas, from Chino, California.

We manage and evaluate our operations in one reportable segment.

2025 Business Highlights and Trends

• We initiated a strategic emphasis on expanding into the supermarket segment, and have started to see early positive results.

• We continued our transition to a more asset-light model by further scaling back manufacturing in the U.S., increasing imports, and expanding our vendor network, leading to strong margin expansion.

• We recorded net sales of $422.6 million for the year ended December 31, 2024, an increase of 4.2% compared to the year ended December 31, 2023 in net sales amount and an increase of 7.4% in volume.

• We achieved a record gross margin of 38.9% for the year ended December 31, 2024, a 120-basis-point increase from the year ended December 31, 2023.

• We recorded net income of $30.8 million for the year ended December 31, 2024, a decrease of 7.1% compared to the year ended December 31, 2023.

• We achieved net income margin of 7.3% for the year ended December 31, 2024, compared to 8.2% for the year ended December 31, 2023.

• We generated net cash provided by operating activities of $48.0 million for the year ended December 31, 2024, a decrease of $5.4 million compared to the year ended December 31, 2023.

• We generated Adjusted EBITDA, a non-GAAP measure defined below, of $55.3 million for the year ended December 31, 2024, a 6.5% decrease from the year ended December 31, 2023.

• Our Adjusted EBITDA margin, a non-GAAP measure defined below, was 13.1% for the year ended December 31, 2024, a decrease of 150 basis points from the year ended December 31, 2023.

• We had financial liquidity of $67.8 million and additional short-term investments of $28.3 million as of December 31, 2024.

• During the year ended December 31, 2024, we returned a total of $31.0 million to our shareholders in the form of special and regular cash dividends.

• On February 13, 2025, our Board of Directors declared another quarterly cash dividend of $0.45 per share on our common stock, which was paid on or around February 28, 2025 to shareholders of record at the close of business on February 24, 2025.

• We have strategically and swiftly realigned our global supply chain in 2025 against a backdrop of higher tariffs.

We reduced purchases from China from approximately 22% of global sourcing in 2024 to approximately 15% in 2025, maintained purchases from Taiwan at approximately 50% of our global sourcing, and diversified sourcing to countries with more favorable trade conditions, including Malaysia and Vietnam, which in aggregate accounted for approximately 17% of our global sourcing in 2025 compared to 9% in 2024.

• We continued to expand our eco-friendly product offerings, contributing to meaningful sales growth.

Sales from eco-friendly products as a percentage of total sales increased from 33.6% for the year ended December 31, 2024 to 34.1% for the year ended December 31, 2025.

We started shipment on a newly-acquired paper bag contract with a chain account in the second half of 2025, growing paper bags sales from $7.9 million for the year ended December 31, 2024 to $13.7 million for the year ended December 31, 2025.

• We continued our transition to a more asset-light model by further scaling back manufacturing in the U.S.

and increasing imports from diversified sources to continue to improve our margin profile.

For the year ended December 31, 2025, manufacturing accounted for approximately 9% of our net sales, down from 11% in the prior year.

• We achieved record net sales of $467.7 million for the year ended December 31, 2025, an increase of 10.7% in net sales amount and 11.2% in volume compared to the year ended December 31, 2024.

• We recorded gross margin of 36.8% for the year ended December 31, 2025, reflecting an expected decrease of 210-basis-point compared to the year ended December 31, 2024, as cost of goods sold in 2025 reflected elevated inventory cost due to tariffs in place.

• We recorded net income of $32.7 million for the year ended December 31, 2025, an increase of 6.0% compared to the year ended December 31, 2024.

• We recorded net income margin of 7.0% for the year ended December 31, 2025, compared to 7.3% for the year ended December 31, 2024, reflecting the decrease in gross margin, as discussed above, and an improvement in operating cost leverage.

• Net cash provided by operating activities was $33.8 million for the year ended December 31, 2025, a decrease of $14.2 million compared to the year ended December 31, 2024.

• We generated Adjusted EBITDA, a non-GAAP measure defined below, of $55.2 million for the year ended December 31, 2025, a decrease of 0.2% compared to the year ended December 31, 2024.

• Our Adjusted EBITDA margin, a non-GAAP measure defined below, was 11.8% for the year ended December 31, 2025, a decrease of 130 basis points compared to the year ended December 31, 2024.

• We had financial liquidity of $45.6 million as of December 31, 2025.

• During the year ended December 31, 2025, we returned a total of $36.1 million to our shareholders in the form of regular quarterly cash dividends.

• On November 4, 2025, our Board of Directors approved a first-ever share repurchase program of up to $15.0 million in common stock.

We repurchased approximately $3.0 million of common stock during the period.

• On February 5, 2026, our Board of Directors declared another regular quarterly cash dividend of $0.45 per share on our common stock, which was paid on or about February 27, 2026 to the stockholders of record at the close of business on February 20, 2026.

Trends in Our Business

4 unchanged sentences

We believe this trend will have a positive long-lasting impact on our results of operations, as we expect there will be an increased demand for eco-friendly and compostable single-use disposable products.

Our eco-friendly products made up 33.6% of total sales during the year ended December 31, 2024 compared to 32.7% during the prior year.

Our eco-friendly products made up 34.1% of total sales during the year ended December 31, 2025, compared to 33.6% during the prior year, and we expect sales generated from eco-friendly products as percentage of total sales to continue to grow.

• Most of our products are sourced from vendors abroad and as a result we incur freight costs from these overseas import shipments, which could be a significant component of our cost of goods sold.

Elevated ocean freight rates could pressure our gross margin, and if we raise our price, dampen the demand for our products.

Elevated ocean freight rates

could pressure our gross margin, and if we raise our price, dampen the demand for our products.

Steady or dropping ocean freight could yield significant opportunities for us to expand our margin.

However, it could also reduce the barrier of entry, intensifying the competition.

foreign trade policy continues to evolve, such as the imposition of tariffs on imports from China and other countries.

We believe this trend will have either a positive or a negative impact on our results of operations, depending on whether we are able to source our raw materials or manufactured products from countries where tariffs have not been imposed, whether any previously imposed tariffs are removed an whether we can implement procedures to mitigate the impact from the tariffs.

• Beginning in the first quarter of 2025, the U.S.

government announced additional tariffs on goods imported into the U.S.

from numerous countries and multiple nations have responded with reciprocal tariffs and other actions.

We believe this trend will have either a positive or a negative impact on our results of operations, depending on whether we are able to source our raw materials or manufactured products from countries with minimum tariffs, whether any previously imposed tariffs are removed and whether we can implement procedures to mitigate the impact from the tariffs.

The Company continues to monitor the economic effects of such announcements.

The Company has implemented short- and long-term mitigation efforts.

Based on the current tariff policies, the Company expects to partially offset the operating profit impact of the enacted tariffs with supply chain adjustments and productivity and cost savings actions.

To the extent additional tariffs or other trade restrictions are enacted and the Company is unable to offset the tariffs or the tariffs negatively impact demand, the Company’s revenue and profitability could be adversely impacted.

• The cost of raw materials used to manufacture our products, including polyethylene terephthalate, or PET, plastic resin, aluminum, and paper boards, may continue to fluctuate.

1 unchanged sentence

There can also be lags between cost inflation and the implementation of price increases, which could negatively impact our gross margin.

Conversely, periods of deflation, where raw material costs decrease, may create pricing pressure and start price wars, potentially requiring us to lower prices,

which could also affect our gross margin.

Conversely, periods of deflation, where raw material costs decrease, may create pricing pressure and start price wars, potentially requiring us to lower prices, which could also affect our gross margin.

We believe price fluctuations will have either a positive or a negative impact on our results of operations in the future, depending on whether raw material costs increase or decrease and whether we can successfully implement price adjustments to maintain gross margin.

14 unchanged sentences

We recognize an allowance for doubtful accounts on accounts receivable in an amount equal to the estimated expected losses net of recoveries.

The allowance is based on an analysis of historical bad debt write-offs, current past due customers in the aging, risk profiles associated with different customer types, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible.

The allowance is based on an analysis of historical bad debt write-offs, current past due customers

in the aging, risk profiles associated with different customer types, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible.

While such losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates we have in the past.

19 unchanged sentences

Net income $ 32,664 $ 30,824

Net sales were $422.6 million for the year ended December 31, 2024 compared to $405.7 million for the year ended December 31, 2023, an increase of $17.0 million, or 4.2%.

The year-over-year increase is primarily driven by an increase of $36.7 million from volume growth and change in product mix, an increase of $4.6 million in online sales platform fees due to higher sales within the e-commerce channel, and an increase of $0.8 million in logistics and shipping revenue.

Such increases were partially offset by $25.2 million of unfavorable year-over-year pricing comparison, as the overall pricing environment remained competitive especially in the distributor channel, driven largely by customers' heightened focus on value and quality.

Net sales were $467.7 million for the year ended December 31, 2025 compared to $422.6 million for the year ended December 31, 2024, representing an increase of $45.1 million, or 10.7%.

Net sales for the year ended December 31, 2024 were understated by $0.7 million, which represented products shipped and recognized as revenue in 2023 but not delivered until 2024.

Including this impact, the year-over-year increase is primarily driven by an increase of $39.7 million from volume and an increase of $11.9 million from product mix.

Such increases were partially offset by a $6.5 million unfavorable year-over-year pricing comparison, as the overall pricing environment remained competitive due to customers' heightened focus on value.

Cost of goods sold

Cost of goods sold was $258.3 million for the year ended December 31, 2024 compared to $252.6 million for the year ended December 31, 2023, an increase of $5.7 million, or 2.3%.

Freight and duty costs for the year ended December 31, 2024 increased $4.4 million from the year ended December 31, 2023 as a result of a 14% increase in import volume coupled with 27% higher freight container rates, despite a $3.0 million year-over-year decrease in anti-dumping and countervailing duty charges.

Additionally, product costs for the year ended December 31, 2024 increased $1.1 million from the year ended December 31, 2023 primarily as a result of increased sales volume, as discussed above, partially offset by favorable impact from reduced vendor pricing, a stronger United States Dollar against New Taiwan Dollar, and an increase in imports as a percentage of total product mix, in keeping with our asset-light strategy.

Inventory reserve adjustment for the year ended December 31, 2024 increased $0.6 million from the year ended December 31, 2023.

These increases were partially offset by a decrease in inventory adjustments and write-offs of $2.4 million, as 2023 included a $1.7 million write-off of raw materials as we disposed of certain machinery and equipment in executing our strategy to scale back production.

Gross profit was $164.3 million for the year ended December 31, 2024 compared to $153.0 million for the year ended December 31, 2023, an increase of $11.3 million, or 7.4%.

Gross margin was 38.9% for the year ended December 31, 2024 compared to 37.7% for the year ended December 31, 2023, an increase of 120 basis points.

Product costs as a percentage of net sales decreased to 50.2% for the year ended December 31, 2024 from 52.1% during the year ended December 31, 2023, primarily due to more favorable vendor pricing, foreign currency impact and product mix, as discussed above.

Additionally, gross margin improved 60 basis points as the year ended December 31, 2023 included more inventory write-offs from expired products as well as a $1.7 million write-off of raw materials as we disposed of certain machinery and equipment in executing our strategy to scale back production in certain locations, as discussed above.

At the same time, freight and duty costs as a percentage of net sales increased to 8.2% during the year ended December 31, 2024 from 7.5% during the year ended December 31, 2023.

Cost of goods sold was $295.6 million for the year ended December 31, 2025 compared to $258.3 million for the year ended December 31, 2024, representing an increase of $37.3 million, or 14.4%.

Cost of goods sold for the year ended December 31, 2024 was understated by $0.4 million related to products shipped and recognized as cost of goods sold in 2023 but not delivered until 2024, as discussed above.

Including this impact, the year-over-year increase in cost of goods sold was primarily driven by an increase in ocean freight and duty costs of $20.6 million, resulting from higher duties and tariffs, which nearly doubled from $14.7 million for the year ended December 31, 2024 to $29.3 million for the year ended December 31, 2025.

This increase was further driven by a 22.0% increase in import volume, partially offset by a 5.4% decrease in average freight container rates.

In addition, product costs increased by $18.1 million due to higher sales volume and better product mix, partially offset by more favorable vendor pricing.

Gross profit was $172.1 million for the year ended December 31, 2025 compared to $164.3 million for the year ended December 31, 2024, representing an increase of $7.8 million, or 4.8%.

Gross profit for the year ended December 31, 2024 was understated by $0.3 million related to products shipped and recognized as revenue and cost of goods sold in 2023 but not delivered until 2024, as discussed above.

Gross margin was 36.8% for the year ended December 31, 2025 compared to 38.9% for the year ended December 31, 2024, a decrease of 210 basis points.

Gross margin was negatively impacted by rising freight and duty costs, as discussed above, which as a percentage of net sales increased to 11.8% during the year ended December 31, 2025 from 8.2% during the year ended December 31, 2024.

This erosion in margin was partially offset by a decrease in product costs as a percentage of net sales from 49.9% during the year ended December 31, 2024 to 48.9% during the year ended December 31, 2025, as a result of more favorable vendor pricing and increased imports as a percentage of total product mix, as discussed above.

Depreciation expense on production equipment as a percentage of net sales also decreased to 1.3% during the year ended December 31, 2025 from 1.5% during the year ended December 31, 2024.

Operating expenses

Operating expenses were $126.6 million for the year ended December 31, 2024 compared to $111.0 million for the year ended December 31, 2023, an increase of $15.6 million, or 14.1%.

Selling expenses increased $10.8 million from the year ended December 31, 2023, which included a $4.6 million increase in online sales platform fees due to higher sales within the e-commerce channel in the current year, a $1.9 million increase in marketing expense primarily due to a ramp up

in online marketing efforts to grow our e-commerce sales channel, a $1.4 million increase in shipping costs, and a $0.8 million increase in labor costs for our sales team.

General and administrative expenses increased $4.6 million from the year ended December 31, 2023, which included a $4.7 million increase in rent and warehouse expense due to the opening of new distribution centers in late 2023 and early 2024 and a higher rate on our Chino, California facility lease extension, a $1.0 million increase in stock-based compensation and a $0.8 million increase in labor costs, partially offset by a $1.1 million decrease in write-off charges as 2023 included a write-off of a vendor prepayment upon the resolution of a legal contingency and a $0.5 million reduction in fees associated with the secondary offering that occurred in 2023.

In addition, impairment expense and loss, net, on disposal of machinery of $2.8 million for the year ended December 31, 2024 included a $0.8 million loss, net, on disposal of machinery and a $2.0 million non-cash ROU asset impairment charge resulting from the sublease of our City of Industry warehouse in California, as we optimized our distribution footprint in the southwest region with the opening of a new warehouse in Mesa, Arizona.

In comparison, impairment expense and loss, net, on disposal of machinery of $2.5 million for the year ended December 31, 2023 included a $0.5 million impairment on deposits paid for property and equipment and a $2.0 million loss, net, on disposal of machinery in keeping with our asset-light strategy.

Operating expenses were $130.7 million for the year ended December 31, 2025 compared to $126.6 million for the year ended December 31, 2024, representing an increase of $4.2 million, or 3.3%.

Shipping and transportation costs increased $7.0 million during the year ended December 31, 2025 primarily due to increases in both offline sales shipping volume and shipping rates.

Rent expense increased $3.3 million primarily due to a higher rate on our Chino, California facility lease extension plus the opening of a new Chino distribution center in 2025.

Salaries and benefits also increased $1.4 million during the year ended December 31, 2025.

These increases were partially offset by a decrease in online platform fees of $3.8 million due to a shift away from third-party order fulfillments of online orders and a decrease in marketing expense of $1.1 million.

In addition, 2025 included total gain, net, on disposal of machinery of $0.5 million.

In comparison, 2024 included impairment expense and loss, net, on disposal of machinery of $2.8 million made up of a $0.8 million loss, net, on disposal of machinery and a $2.0 million non-cash ROU asset impairment charge resulting from the sublease of our City of Industry warehouse in California, as we optimized our distribution footprint in the southwest region with the opening of a new warehouse in Mesa, Arizona.

Operating income

Operating income was $37.8 million for the year ended December 31, 2024 compared to $42.1 million for the year ended December 31, 2023, a decrease of $4.3 million, or 10.3%.

The decrease was primarily due to an increase in operating expenses of $15.6 million, partially offset by an increase in gross profit of $11.3 million, as discussed above.

Operating income was $41.4 million for the year ended December 31, 2025 compared to $37.8 million for the year ended December 31, 2024, representing an increase of $3.7 million, or 9.7%.

The increase was primarily due to an increase in gross profit of $7.8 million, as discussed above, partially offset by an increase in operating expenses of $4.2 million.

Other income, net

Other income, net was $2.9 million for the year ended December 31, 2024 compared to $0.9 million for the year ended December 31, 2023, an increase of $2.0 million, or 223.1%.

The increase was primarily due to an increase of $1.0 million in rental income as we sublet our City of Industry warehouse in California in early 2024, an increase of $0.5 million in interest income from our investments in certificates of deposit, and an increase of $0.4 million in gain on foreign currency transactions.

Other income, net was $1.6 million for the year ended December 31, 2025 compared to $2.9 million for the year ended December 31, 2024, representing a decrease of $1.3 million, or 45.2%.

The decrease was primarily driven from a loss on foreign currency transactions of $1.5 million, due to the weakening of the U.S.

Dollar against the New Taiwan Dollar during the year ended December 31, 2025, compared to a gain on foreign currency transactions of $0.5 million during the year ended December 31, 2024.

This negative impact was partially offset by an increase of $0.8 million in rental income as we sublet our City of Industry warehouse in California in 2024.

Provision for income taxes

Provision for income taxes was $9.9 million for the year ended December 31, 2024 compared to $9.8 million for the year ended December 31, 2023, an increase of $0.1 million, or 0.7%.

Provision for income taxes was $10.4 million for the year ended December 31, 2025 compared to $9.9 million for the year ended December 31, 2024, representing an increase of $0.5 million, or 4.9%.

The Company’s effective tax rate was 24.1% for the year ended December 31, 2025 compared to 24.3% for the year ended December 31, 2024.

The year-over-year increase in effective tax rate was primarily due to the decrease in research and development tax credit and the stock compensation windfall.

Net income was $30.8 million for the year ended December 31, 2024 compared to $33.2 million for the year ended December 31, 2023, a decrease of $2.4 million, or 7.1%.

The decrease was primarily driven by a decrease in operating income of $4.3 million, partially offset by an increase in other income, net of $2.0 million, as discussed above.

The year-over-year decrease in effective tax rate was primarily due to the deferred taxes true-up.

Net income was $32.7 million for the year ended December 31, 2025 compared to $30.8 million for the year ended December 31, 2024, representing an increase of $1.8 million, or 6.0%.

The increase was primarily driven by an increase in operating income of $3.7 million, partially offset by a decrease in other income, net of $1.3 million, as discussed above.

Non-GAAP Financial Measures

4 unchanged sentences

Adjusted EBITDA and Adjusted EBITDA Margin

offering transaction costs, (vii) write-off of certain inventory items outside the normal course of business, (viii) impairment expense and loss, net, on disposal of machinery outside the normal course of business, and (ix) operating right-of-use asset impairment.

Adjusted EBITDA is a financial measure calculated as net income excluding (i) interest income, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation expense, (vi) impairment of operating right-of-use asset, and (vii) secondary offering transaction costs by certain executive officers and stockholders of the Company.

Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales.

18 unchanged sentences

Secondary offering transaction costs (1)

Write-off of inventory (2)

— — 1,710 0.4

Impairment expense and loss, net, on disposal of machinery (2)

Impairment of operating right-of-use asset

— — 1,993 0.5

Operating right-of-use asset impairment 1,993 0.5 — —

Adjusted EBITDA $ 55,154 11.8 % $ 55,252 13.1 %

(1) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering, which were directly related to the offering and were incremental to our normal operating expenses.

(2) The write-off of inventory and impairment expense and loss, net, on disposal of machinery represent amounts recognized in connection with the scaling back of production in certain locations.

As part of the execution of this strategy, certain machinery and equipment were disposed of or impaired, and raw materials associated with those machinery and equipment were written-off.

(1) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering by certain executive officers and stockholders of the Company, which were directly related to the offering and were incremental to our normal operating expenses.

Free Cash Flow

Free Cash Flow is a financial measure calculated as cash from operating activities less cash used in (i) purchases of property and equipment, and (ii) deposits paid for property and equipment, offset by (iii) deposits refunded from cancelled machinery orders.

Free Cash Flow is a financial measure calculated as cash from operating activities less cash used in (i) purchases of property and equipment and (ii) deposits paid for property and equipment.

We present Free Cash Flow as a supplemental measure of our financial liquidity.

11 unchanged sentences

Purchases of property and equipment

(934) (2,835)

Deposits paid for property and equipment

(3,749) (3,134)

Deposits refunded from cancelled machinery orders — 503

Free Cash Flow

8 unchanged sentences

We are not required to pay a commitment (unused) fee on the undrawn portion of the Line of Credit and interest is payable monthly.

On March 14, 2023, we amended the Line of Credit.

Prior to March 14, 2023, interest accrued at the annual rate of prime less 0.25% with a minimum floor of 3.25%.

The amendment on March 14, 2023, among other things, (1) extended the maturity date to March 14, 2025, and (2) revised the interest on any Line of Credit borrowings to an annual rate of one month term Secured Overnight Financing Rate ("SOFR") plus 2.50%, with a SOFR floor of 1.0%.

On June 20, 2023, we amended the Line of Credit which increased the standby letter of credit sublimit from $2.0 million to $5.0 million.

On March 3, 2025, the Company amended the Line of Credit.

Prior to March 3, 2025, the revolving loan facility had a maximum borrowing capacity of $40.0 million and interest accrued at an annual rate of one month term Secured Overnight Financing Rate ("SOFR") plus 2.50%, with a SOFR floor of 1.00%.

The amendment on March 3, 2025 among other things, (1) extended the maturity date to March 14, 2027, (2) reduced the revolving loan facility to $20.0 million, and (3) revised the interest on any Line of Credit borrowings to an annual rate of one month term SOFR plus 2.25%, with a SOFR floor of 1.00%.

On March 17, 2025, August 21, 2025, and October 3, 2025, the Company entered into three separate amendments of the Line of Credit, increasing the standby letter of credit sub-limit, respectively, from $5.0 million to $7.5 million, from $7.5 million to $10.0 million, and from $10.0 million to $15.0 million.

As of December 31, 2025, the amount issued under the standby letter of credit was $12.3 million, and the maximum remaining amount that could be borrowed under the Line of Credit was $7.7 million.

As described in Note 22 — Subsequent Events in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, on March 3, 2025, the Company amended the Line of Credit again, which among other things, (1) extended the maturity date to March 14, 2027, (2) reduced the revolving loan facility to $20.0 million, and (3) revised the interest on any Line of Credit borrowings to an annual rate of one month term SOFR plus 2.25%, with a SOFR floor of 1.00%.

As described in Note 9 — Long-Term Debt in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, on June 17, 2022, we entered into a $28.7 million term loan agreement which matures July 1, 2027 (the “2027 Term Loan”).

2 unchanged sentences

Principal and interest payments of $0.1 million are due monthly throughout the term of the loan, with the remaining principal balance due at maturity.

On September 5, 2025, we made an early payment of $3.5 million to reduce the remaining principal balance due at maturity, with total monthly payments remaining the same for the remainder of the loan term.

The 2027 Term Loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of our stockholders.

In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio.

Proceeds from the 2027 Term Loan were used to pay down an existing term loan with the same lender, which was set to mature in May 2029 with interest accruing at prime rate less 0.25%, and had an outstanding balance of $20.6 million as of the repayment date.

Additionally, as of December 31, 2025, we have a $23.0 million term loan that matures September 30, 2026 (the “2026 Term Loan”).

The 2026 Term Loan had an initial balance of $16.1 million and an option to request for additional advances up to a maximum of $6.9 million through September 2022, which we exercised in February 2022.

Interest accrues at a

fixed rate of 3.50% per annum.

The 2026 Term Loan had an initial balance of $16.1 million and an option to request for additional advances

up to a maximum of $6.9 million through September 2022, which we exercised in February 2022.

Interest accrues at a fixed rate of 3.50% per annum.

Principal and interest payments of $0.1 million are due monthly throughout the term of the loan, with the remaining principal balance due at maturity.

On December 18, 2025, we made an early payment of $8.0 million to reduce the remaining principal balance due at maturity, with total monthly payments remaining the same for the remainder of the loan term.

The 2026 Term Loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of our stockholders.

In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio.

The entire remaining balance of $12.3 million under the 2026 Term Loan is reported in long-term debt, current portion on the consolidated balance sheet as of December 31, 2025.

We intend to repay the 2026 Term Loan at maturity using available liquidity, which includes $37.9 million in cash and cash equivalents as of December 31, 2025.

As of December 31, 2025, we were in compliance with the financial covenants under all of our loan agreements, and do not expect material uncertainties in our continued ability to be in compliance with all financial covenants through the remaining term of all of our loan agreements.

As of December 31, 2025, we had no borrowing on the Line of Credit, $23.6 million in outstanding balance under the 2027 Term Loan, and $12.3 million in outstanding balance under the 2026 Term Loan.

As described in Note 4 — Joint Venture in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, we entered into a joint venture agreement (the "JV Agreement") in April 2022 to establish a new corporation, Bio Earth, to build a bagasse factory in Taiwan.

Through March 31, 2023, we had made net payments totaling $6.0 million as stipulated in the JV Agreement.

In May 2023, we entered into a share transfer agreement to sell all of our equity interest in Bio Earth to Keary Global.

Concurrent with the share transfer agreement, the Company also entered into an agreement with Keary Global, Bio Earth and Happiness Moon Co., Ltd.

(“Happiness Moon”) pursuant to which (i) Lollicup agreed to transfer all Bio Earth shares, as well as its rights and obligations under the JV Agreement to Keary Global, (ii) Happiness Moon and Bio Earth agree to foregoing and (iii) Bio Earth shall manage the regulatory and registration requirements related to the share transfer.

As of the end of the second quarter of 2023, the share transfer to Keary Global had been completed and we received the full amount of the total consideration owed to us in connection with the sale of our equity interest in Bio Earth of $6.1 million, representing the original deposits totaling $6.0 million plus interest which accrued at 5% per annum.

Additionally, as discussed in Note 17 — Commitments and Contingencies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, on February 5, 2024, we received a Notice of Determination from U.S.

3 unchanged sentences

In February 2025, we started to receive bills related to certain of our thermal paper shipments.

We are in the process of protesting the received bills with CBP, and are also evaluating other appeal options.

During the year ended December 31, 2025, we submitted protests of certain bills received with CBP and made total payments of $1.9 million related to certain shipments under the investigation.

We are also evaluating other appeal options.

Payments on bills received will be due upon the resolution of the protests, currently expected to occur within the next 12 months.

Although we have an import duty liability reserve of $1.7 million as of December 31, 2025, the amount of the final payments could vary significantly from the estimated liability reserve.

In 2023, our Board of Directors declared and initiated regular quarterly cash dividends.

During the year ended December 31, 2024 and 2023, we paid out regular and special quarterly cash dividend totaling $31.0 million and $20.9 million, respectively.

Additionally, as described in Note 22 — Subsequent Events in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, on February 13, 2025, our Board of Directors declared another regular quarterly cash dividend of $0.45 per share on our common stock, which was paid on or around February 28, 2025 to shareholders of record at the close of business on February 24, 2025.

We have certain contractual obligations, such as operating lease obligations and purchase obligations that require us to make periodic payments.

At December 31, 2024, we had operating leases, primarily for manufacturing and distribution facilities, and purchase obligations primarily for machinery and equipment, expiring at various dates through 2031.

As described further in Note 14 — Leases in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, we had a total of $44.4 million of operating lease liabilities as of December 31, 2024 with minimum lease payments ranging from approximately $5.7 million to $12.2 million on an annual basis over the next five years.

We had purchase obligations of $0.2 million outstanding as of December 31, 2024, all of which are due in 2025.

Such purchase obligations are primarily related to the purchase of machinery and equipment.

Other than these contractual obligations, our off-balance sheet arrangements primarily consists of letters of credits issued under our Line of Credit.

As of December 31, 2024, we had $3.8 million of letters of credits issued and outstanding under our Line of Credit.

Our ongoing operations and growth strategy may require us to continue to make investments in new markets and products, logistics and manufacturing infrastructure, e-commerce platform, talent, and technology capabilities.

In addition, we may consider making strategic acquisitions and investments which could require significant liquidity.

changing macroeconomic and geopolitical dynamics created significant uncertainty in the global economy and capital markets, which could have long-lasting adverse effects.

The rapidly changing macroeconomic and geopolitical dynamics have created significant uncertainty in the global economy and capital markets, which could have long-lasting adverse effects.

In addition, we pay a regular quarterly dividend to our stockholders, subject to approval each quarter by our Board of Directors.

During the year ended December 31, 2025 and 2024, we paid out regular quarterly cash dividend totaling $36.1 million and $31.0 million, respectively.

Additionally, as described in Note 20 — Subsequent Events in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, on February 5, 2026, our Board of Directors declared another regular quarterly cash dividend of $0.45 per share on our common stock, which was paid on or about February 27, 2026 to the stockholders of record at the close of business on February 20, 2026.

Continuation of the regular quarterly dividend is at the discretion of the Board of Directors and depends upon our financial condition, results of operations, capital requirements, general business condition, and other factors deemed relevant by our Board of Directors.

As described in Note 10 — Stockholder's Equity in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, in November 2025, our Board of Directors approved a share repurchase program (the “Share Repurchase Program”) of up to $15.0 million, under which we are authorized to repurchase shares of our outstanding common stock from time to time through open market purchases.

The timing and amount of stock repurchases will depend on a variety of factors, including the market conditions as well as corporate and regulatory considerations.

The Share Repurchase Program has no set expiration date, and may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our common stock under the program of our common stock.

During the year ended December 31, 2025, we repurchased approximately $3.0 million shares of our common stock at an average per share cost of $21.74.

As of December 31, 2025, we had approximately $12.0 million of remaining authorization for purchases under the Share Repurchase Program.

Additionally, we have certain contractual obligations, such as operating lease obligations and purchase obligations that require us to make periodic payments.

At December 31, 2025, we had operating leases, primarily for manufacturing and distribution facilities, expiring at various dates through 2031.

As described further in Note 13 — Leases in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, we had a total of $44.1 million of operating lease liabilities as of December 31, 2025 with minimum lease payments ranging from approximately $0.7 million to $14.6 million on an annual basis over the next five years.

Other than these contractual obligations, our off-balance sheet arrangements primarily consists of letters of credits issued under our Line of Credit.

As of December 31, 2025, we had $12.3 million of letters of credits issued and outstanding under our Line of Credits.

We currently believe that our cash on hand, ongoing cash flows from our operations and funding available under our borrowings will be adequate to meet our working capital needs, service our debt, make lease payments, and fund capital expenditures for at least the next 12 months.

We continue to explore other options to further expand our liquidity to support the business growth and enhance shareholder value.

We continue to explore other options to further expand our liquidity to support business growth and enhance shareholder value.

Beyond the next 12 months, if we require additional capital resources to grow our business, either organically or through acquisition, we may seek to sell additional equity securities, increase use of the Line of Credit, and acquire additional debt.

5 unchanged sentences

The following table summarizes total current assets, current liabilities, and working capital at December 31, 2025 compared to December 31, 2024:

December 31, 2024 December 31, 2023 Increase

December 31, 2025 December 31, 2024 Increase/(Decrease)

(in thousands)

2 unchanged sentences

Working capital $ 90,968 $ 114,550 $ (23,582)

As of December 31, 2024, we had working capital of $114.6 million, compared with $110.5 million as of December 31, 2023, representing an increase of $4.0 million, or 3.6%.

The improvement in working capital was driven by an increase of $6.1 million in current assets, partially offset by an increase of $2.0 million in current liabilities.

The increase in current assets was primarily driven by an increase in cash and cash equivalents and short-term investments of $10.5 million, partially offset by a decrease in prepaid expenses and other current assets of $2.6 million as tax prepayments as of December 31, 2023 were applied in 2024, a decrease in account receivable of $1.0 million, and a decrease in inventories of $0.8 million.

The increase in current liabilities was primarily driven by an increase in operating lease liabilities due within twelve months of $4.2 million primarily from our Chino facility lease renewal and an increase in accrued expenses of $3.0 million, partially offset by a decrease in accounts payable and related party payable of $2.8 million, and a decrease in other current liabilities of $2.2 million.

As of December 31, 2025, we had working capital of $91.0 million, compared with $114.6 million as of December 31, 2024, representing a decrease of $23.6 million, or 20.6%, driven by an increase of $23.8 million in current liabilities partially offset by an increase of $0.2 million in current assets.

The increase in current liabilities was primarily due to an increase in the current portion of long-term debt of $11.8 million as the 2026 Term Loan became mature within twelve months, an increase in accounts payable and related party payables of $10.0 million, and an increase in operating lease liabilities, current portion of $3.0 million primarily due to a higher rate on our Chino, California facility lease extension plus the opening of a new Chino distribution center in 2025, partially offset by a decrease in other current liability of $0.8 million, as the Company paid Global Well's noncontrolling membership interest redemption gain tax withholding.

The increase in current assets was primarily driven by an increase in inventories of $11.0 million as inventory cost reflected elevated duty and tariffs, an increase in accounts receivable of $9.7 million as a result of stronger sales in the three months ended December 31, 2025 compared to the three months ended December 31, 2024, and an increase in prepaid expenses and other current assets of $1.6 million partially offset by a decrease in cash and cash equivalents and short-term investments of $22.0 million.

The following table summarizes cash flow for the years ended December 31, 2025 and 2024:

2 unchanged sentences

Net cash provided by operating activities $ 33,815 $ 47,982

Net cash used in investing activities (5,855) (30,174)

Net cash provided by (used in) investing activities

25,399 (5,855)

Net cash used in financing activities (52,918) (33,619)

1 unchanged sentence

Cash flows provided by operating activities .

Net cash provided by operating activities was $48.0 million for the year ended December 31, 2024, primarily the result of net income of $30.8 million, adjusted for certain non-cash items totaling $21.2 million, consisting mainly of depreciation and amortization of fixed and operating right-of-use assets, stock-based compensation, impairment of operating right-of-use asset, write-off of inventory, loss, net, on disposal of machinery and equipment, adjustments to the allowance for doubtful accounts and inventory reserve, deferred income taxes, and

government grant income.

Net cash provided by operating activities was $33.8 million for the year ended December 31, 2025, primarily the result of net income of $32.7 million, adjusted for certain non-cash items totaling $25.3 million, consisting mainly of depreciation and amortization of fixed, operating right-of-use assets, and loan fees, stock-based compensation, write-off of inventory, gain, net, on disposal of machinery and equipment, adjustments to the allowance for doubtful accounts and inventory reserve, deferred income taxes, and government grant income.

In addition, cash decreased $24.1 million primarily as a result of changes in working capital, which included a decrease of $11.9 million from increased inventory purchases, a decrease of $10.3 million from increased operating lease liabilities, a decrease of $9.8 million from higher accounts receivable balance, and a decrease of $1.3 million from increased prepaid expenses and other current assets, partially offset by an increase of $9.3 million from higher accounts payable and related party payable balance.

In addition, cash decreased $4.1 million primarily as a result of changes in working capital, which included a decrease of $6.7 million from a reduction in operating lease liabilities, a decrease of $2.4 million from a reduction in accounts payable and related party payable, and a decrease of $0.9 million from increased inventory purchases, partially offset by an increase of $2.8 million from a reduction in prepaid expenses and other current assets due to tax prepayments as of December 31, 2023 being applied in 2024, an increase of $3.0 million from increases in accrued expenses, and an increase of $0.6 million from a reduction in accounts receivable.

Net cash provided by operating activities was $53.4 million for the year ended December 31, 2023, primarily the result of net income of $33.2 million, adjusted for certain non-cash items totaling $22.0 million, consisting mainly of depreciation and amortization of fixed and operating right-of-use assets, write-off of inventory and vendor prepayment, loss, net, on disposal of machinery, stock-based compensation, impairment of deposits, deferred income taxes, and adjustments to the allowance for doubtful accounts and inventory reserve.

In addition, cash decreased $1.8 million, primarily as a result of changes in working capital, which included a decrease of $4.6 million from a reduction in operating lease liabilities and a decrease of $3.8 million from additional inventory to accommodate higher sales volume, partially offset by an increase of $2.9 million from lower accounts receivable due to improved cash collections and lower sales, an increase of $1.6 million from higher accrued expenses, an increase of $1.4 million from a reduction in other assets, and an increase of $1.1 million from higher accounts payable and related party payable.

Cash flows used in investing activities .

Cash flows provided by (used in) investing activities .

Net cash provided by investing activities was $25.4 million for the year ended December 31, 2025, which primarily included $44.6 million in redemptions of short-term investments and $1.5 million in proceeds from disposal of property and equipment, partially offset by $16.3 million in purchases of short-term investments, $3.7 million in deposits made towards the purchase of property and equipment, and $0.8 million paid to directly acquire property and equipment.

Net cash used in investing activities was $5.9 million for the year ended December 31, 2024, which primarily included $50.8 million in purchases of short-term investments, $3.1 million in deposits made towards the purchase of property and equipment, and $0.9 million paid to directly acquire property and equipment, partially offset by $48.9 million in redemptions of short-term investments.

Net cash used in investing activities was $30.2 million for the year ended December 31, 2023, which primarily included $49.2 million in purchases of short-term investments, $6.3 million in deposits made towards the purchase of property and equipment, and $2.8 million paid to directly acquire property and equipment, partially offset by $23.0 million in redemptions of short-term investments, $4.0 million of net refund from the joint venture investment, $0.8 million of proceeds from the sale of machinery and equipment, and $0.5 million of deposits refunded from cancelled machinery orders.

Cash flows used in financing activities .

Net cash used in financing activities was $52.9 million for the year ended December 31, 2025, which primarily included $36.1 million of dividend payments to shareholders, $12.7 million of payments towards long-term debt, $4.5 million of repayments on the Line of Credit, $3.0 million of share repurchases, and $0.9 million of payments for Global Wells noncontrolling membership interest redemption gain tax withholdings, partially offset by $4.5 million proceeds from Line of Credit .

Net cash used in financing activities was $33.6 million for the year ended December 31, 2024, which primarily included $31.0 million of dividend payments to shareholders, $2.3 million paid for the redemption of a non-controlling member's interest in Global Wells, and $1.1 million of payments towards long-term debt, partially offset by cash proceeds of $0.7 million received from the exercise of stock options

Net cash used in financing activities was $16.2 million for the year ended December 31, 2023, which primarily included $20.9 million of dividend payments to shareholders, $2.3 million of distributions from our variable interest entity to shareholders, and $1.0 million of payments towards long-term debt, partially offset by $8.0 million of additional borrowings under the 2027 Term Loan.

Related Party Transactions

5 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis