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What changed in Karat Packaging Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Karat Packaging Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+321 added−298 removedSource: 10-K (2026-03-13) vs 10-K (2025-03-14)

Top changes in Karat Packaging Inc.'s 2025 10-K

321 paragraphs added · 298 removed · 233 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

85 edited+29 added−18 removed67 unchanged
Biggest changeIn 2023, we upgraded our company e-commerce platform, which not only enabled us to improve our storefront from an operational standpoint, but also allowed for the integration of multiple applications and extensions to enhance user experience. In 2024, we expanded our online presence to TikTok, adding to our existing list of third-party storefronts which already included Amazon, Walmart, and eBay.
Biggest changeWe expanded our online presence to TikTok in 2024 and Sysco in 2025, adding to our existing list of third-party storefronts which already included Amazon, Walmart, and eBay. Starting in 2025, we scaled back third-party fulfillment on e-commerce platforms, and focused on fulfilling ourselves, which allowed us to significantly enhance our online sales profitability.
Our range of products include but are not limited to: 8 • food and take-out containers; • bags; • boxes; • tableware; • cups; • lids, • cutlery, • straws, • specialty beverage ingredients; • gloves; • utensils; • janitorial and warehouse supplies; and • boba tea supplies and coffee drinks.
Our range of products include but are not limited to: • food and take-out containers; • bags; • boxes; • tableware; • cups; • lids, • cutlery, • straws, 8 • specialty beverage ingredients; • gloves; • utensils; • janitorial and warehouse supplies; and • boba tea supplies and coffee drinks.
Employees, directors, and consultants are eligible to receive stock options and stock awards under the Plan. Additionally, we make matching contributions to to our employees' 401(k) retirement accounts to support their retirement goals.
Employees, directors, and consultants are eligible to receive stock options and stock awards under the Plan. Additionally, we make matching contributions to our employees' 401(k) retirement accounts to support their retirement goals.
Furthermore, these supplier relationships allow us to offer custom-branded and custom-designed products with fast turnaround times and at competitive prices, providing them with both breadth of products and flexibility. Pioneering the way for sustainability with a growing focus on eco-friendly products Our commitment to pursuing environmental sustainability is exhibited in many aspects of our business.
Furthermore, these supplier relationships allow us to offer custom-branded and custom-designed products with fast turnaround times and at competitive prices, providing them with both breadth of products and flexibility. 4 Pioneering the way for sustainability with a growing focus on eco-friendly products Our commitment to pursuing environmental sustainability is exhibited in many aspects of our business.
We have established a scaled and flexible distribution and logistics system, with distribution centers strategically located throughout the United States. We offer multiple ordering channels, including telephone, email, electronic data interchange, Lollicup e-commerce store website and app, and storefronts on marketplaces such as Amazon, Walmart, eBay, and TikTok.
We have established a scaled and flexible distribution and logistics system, with distribution centers strategically located throughout the United States. We offer multiple ordering channels, including telephone, email, electronic data interchange, Lollicup e-commerce store website and app, and storefronts on marketplaces such as Amazon, Walmart, eBay, TikTok, and Sysco.
Key offerings include food and take-out containers, bags, boxes, tableware, cups, lids, 4 cutlery and straws, boba tea supplies and coffee drinks. Our strong relationships with our suppliers allow us to offer customers products that preserve the high food quality and meet the unique needs of their business.
Key offerings include food and take-out containers, bags, boxes, tableware, cups, lids, cutlery and straws, boba tea supplies and coffee drinks. Our strong relationships with our suppliers allow us to offer customers products that preserve the high food quality and meet the unique needs of their business.
Our Company as a whole has also made strides to reduce the need for paper and ink by embracing a more digital form of 11 paperwork retention. Through these various efforts, we play our part to reduce our carbon footprint and will continue to look into and implement further sustainable practices.
Our Company as a whole has also made strides to reduce the need for paper and ink by embracing a more digital form of paperwork retention. Through these various efforts, we play our part to reduce our carbon footprint and will continue to look into and implement further sustainable practices.
We have installed LED bulbs in light fixtures within both the warehouse and office space that are more efficient than their traditional fluorescent counterparts, often with timers that automatically turn off lights after a period of time if no movement is detected.
We have installed LED bulbs in light fixtures within both the warehouse and office 11 space that are more efficient than their traditional fluorescent counterparts, often with timers that automatically turn off lights after a period of time if no movement is detected.
Our national distribution and logistics capacity allows us to provide efficient and cost- 5 effective distribution to customers and reduce reliance on third-party logistics providers. We intend to continue to enhance our distribution capabilities via opening of additional distribution centers in strategic locations across the U.S. and expanding our distribution fleet and workforce.
Our national distribution and logistics capacity allows us to provide efficient and cost-effective distribution to customers and reduce reliance on third-party logistics providers. We intend to continue to enhance our distribution capabilities via opening of additional distribution centers in strategic locations across the U.S. and expanding our distribution fleet and workforce.
Our e-commerce platforms allow us to offer our entire range of products for online procurement and enable us to cross market other products to our customers. These platforms also provide us with the opportunity to continue our expansion into the B2C market in addition to the B2B small retailer customers that we have traditionally served.
Our e-commerce platforms enable us to offer our entire range of products for online procurement and to cross market other products to our customers. These platforms also provide us with the opportunity to continue our expansion into the B2C market in addition to the B2B small retailer customers that we have traditionally served.
We plan to continue to add new experienced sales team members to broaden our reach, expand into new geographic areas, and continue to focus on customer engagement. We are committed to continuously evaluating and expanding our product and service offerings to meet evolving customer needs and enter new markets.
We plan to 6 continue to add new experienced sales team members to broaden our reach, expand into new geographic areas, and continue to focus on customer engagement. We are committed to continuously evaluating and expanding our product and service offerings to meet evolving customer needs and enter new markets.
Our co-founders Alan Yu and Marvin Cheng, have worked together for over 20 years to aggressively drive growth across the business. Daniel Quire joined us in 2018 and was appointed Chief Revenue Officer in 2023, helping to provide leadership to our sales term, lead our customer acquisition and engagement initiatives, and expand our market presence.
Our co-founders, Alan Yu and Marvin Cheng, have worked together for over 20 years to aggressively drive growth across the business. Daniel Quire joined us in 2018 and was appointed Chief Revenue Officer in 2023, helping to provide leadership to our sales team, lead our customer acquisition and engagement initiatives, and expand our market presence.
Our commitment to practicing environmental sustainability is exhibited in almost every aspect of our business. Our Products We are a pioneer and leader in the supply of eco-friendly disposal foodservice products in the United States. Since our inception, we made the conscious choice to never use Styrofoam in any of our products.
Our commitment to practicing environmental sustainability is exhibited in almost every aspect of our business. Our products We are a pioneer and leader in the supply of eco-friendly disposable foodservice products in the United States. Since our inception, we made the conscious choice to never use Styrofoam in any of our products.
Intellectual Property Our intellectual property portfolio includes 12 active trademarks, including Lollicup, Karat, Karat Earth® and Total Clean, and five registered copyrights. Environmental, Social and Governance (ESG) At Karat Packaging, we are committed to pursuing initiatives that positively impact our products, our people, our customers and our planet.
Intellectual Property Our intellectual property portfolio includes 12 active trademarks, including Lollicup, Karat, Karat Earth® and Total Clean, and 5 registered copyrights. Environmental, Social and Governance (ESG) At Karat Packaging, we are committed to pursuing initiatives that positively impact our products, our people, our customers and our planet.
As we broaden our reach and expand into new geographic areas, we have taken significant steps to strengthen our sales force and to scale our distribution network. We have added new sales representatives and regional managers to ensure localized expertise and better customer engagement in key markets.
As we broaden our reach and expand into new product categories and geographic areas, we have taken significant steps to strengthen our sales force and to scale our distribution network. We have added new sales representatives and regional managers to ensure localized expertise and better customer engagement in key markets.
Starting in 2023 and continuing into 2024, 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.
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.
By using recycled resin, we reduce plastic waste, lower our carbon footprint, and contribute to the broader shift toward more sustainable solutions. Our warehouse departments have implemented the practice of reusing paper cardboard boxes and wooden pallets for inventory storage and shipments. We offer credits to certain customers that return and reuse wooden pallets.
By using recycled resin, we reduce plastic waste, lower our carbon footprint, and contribute to the broader shift toward more sustainable solutions. Our warehouses have implemented the practice of reusing paper cardboard boxes and wooden pallets for inventory storage and shipments. We offer credits to certain customers that return and reuse wooden pallets.
We believe we are amongst the leading companies in the supply of eco-friendly disposal foodservice products in the United States. Since our inception, we have made the conscious choice to never use Styrofoam in any of our products.
We believe we are amongst the leading companies in the supply of eco-friendly disposable foodservice products in the United States. Since our inception, we have made the conscious choice to never use Styrofoam in any of our products.
This initiative aims to optimize inventory distribution, reduce lead times for inter-warehouse transfers, expedite order fulfillment, and improved service reliability, all of which strengthen our competitive advantage.
This initiative aims to optimize inventory distribution, reduce lead times for inter-warehouse transfers, expedite order fulfillment, and improve service reliability, all of which strengthen our competitive advantage.
Our compensation package includes a base salary and depending on the role, discretionary bonuses and equity compensation programs. In January 2019, the Company’s board of directors adopted the 2019 Stock Incentive Plan (the “Plan”).
Our compensation package includes a base salary and equity compensation programs, depending on the role. In January 2019, the Company’s Board of Directors adopted the 2019 Stock Incentive Plan (the “Plan”).
Environmental sustainability is a top priority as we strengthen our position as a leading supplier of eco-friendly disposable foodservice products in the United States. Our Karat Earth® line features products primarily made from renewable resources that are commercially compostable. We are dedicated to continuous investment in research and development to broaden and enhance this product line.
Environmental sustainability is a top priority as we strengthen our position as a leading supplier of eco-friendly disposable foodservice products in the United States. Our Karat Earth® line features products primarily made from renewable resources that are commercially compostable. We are committed to continued investment in research and development to broaden and enhance this product line.
Our operating model entails generating the majority of our revenue from the distribution of products sourced from a diversified global network of over 140 vendors, 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.
Our operating model entails generating the majority of our revenue from the distribution of products sourced from a diversified global network of nearly 150 vendors, 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.
We cover approximately 65% of total eligible healthcare costs for part and full-time employees for our approximately 329 participating employees as of December 31, 2024. Learning and Development We believe that high performance is an outcome of a person’s ability to change, adapt, and grow their capabilities throughout their career.
We cover approximately 65% of total eligible healthcare costs for part and full-time employees for our 360 participating employees as of December 31, 2025. Learning and development We believe that high performance is an outcome of a person’s ability to change, adapt, and grow their capabilities throughout their career.
Our diverse and growing blue chip customer base includes well-known fast casual chains such as Applebee’s Neighborhood Grill + Bar, Chili’s Grill & Bar, PF Chang's China Bistro, Chipotle Mexican Grill, and Corner Bakery Cafe, and fast food chains such as The Coffee Bean & Tea Leaf, El Pollo Loco, In-N-Out Burger, Jack in the Box, Panda Express, and Raising Cane’s Chicken Fingers.
Our diverse and growing blue chip customer base includes well-known fast casual chains such as Applebee’s Neighborhood Grill + Bar, Chili’s Grill & Bar, PF Chang's China Bistro, Chipotle Mexican Grill, and Olive Garden, fast food chains such as The Coffee Bean & Tea Leaf, El Pollo Loco, In-N-Out Burger, Jack in the Box, Panda Express, and Raising Cane’s Chicken Fingers.
Our diverse and growing blue chip customer base includes well-known fast casual chains such as Applebee’s Neighborhood Grill + Bar, Chili’s Grill & Bar, PF Chang's China Bistro, Chipotle Mexican Grill, and Corner Bakery Cafe, fast food chains such as The Coffee Bean & Tea Leaf, El Pollo Loco, In-N-Out Burger, Jack in the Box, Panda Express, and Raising Cane’s Chicken Fingers.
Our diverse and growing blue chip customer base includes well-known fast casual chains such as Applebee’s Neighborhood Grill + Bar, Chili’s Grill & Bar, PF Chang's China Bistro, Chipotle Mexican Grill, and Olive Garden, fast food chains such as The Coffee Bean & Tea Leaf, El Pollo Loco, In-N-Out Burger, Jack in the Box, Panda Express, and Raising Cane’s Chicken Fingers.
Additionally, the SEC maintains a website located at www.sec.gov that contains the information we file or furnish electronically with the SEC. 14
Additionally, the SEC maintains a website located at www.sec.gov that contains the information we file or furnish electronically with the SEC. 15
Competitive Strengths We believe the following strengths fundamentally differentiate us from our competitors and drive our success: Extensive portfolio of disposable foodservice products We leverage our diversified global supplier network and domestic production capabilities to offer customers a wide selection of single-use disposable foodservice products and specialty food and beverage products with over 6,900 SKUs across a broad range of product categories.
Competitive Strengths We believe the following strengths fundamentally differentiate us from our competitors and drive our success: Extensive portfolio of disposable foodservice and specialty food and beverage products We leverage our diversified global supplier network and domestic production capabilities to offer customers a wide selection of single-use disposable foodservice products and specialty food and beverage products with nearly 8,400 SKUs across a broad range of product categories.
As of December 31, 2024, we have the following gender and ethnicity breakout for our employees, C-suite executives, and Board of Directors members: Full-Time employees C-Suite Executives Board of Directors Total count 683 3 5 Gender Male 67% 67% 60% Female 33% 33% 40% Ethnicity Hispanic 53% — — Asian 15% 67% 100% White 14% 33% — Black 15% — — Other/Did not self-identify 3% — — Compensation and Benefits Consistent with our core values, we take care of our people by offering competitive compensation and comprehensive benefits programs.
As of December 31, 2025, we have the following gender and ethnicity breakout for our employees, C-suite executives, and Board of Directors members: Full-Time employees C-Suite Executives Board of Directors Total count 636 3 5 Gender Male 66% 67% 60% Female 33% 33% 40% Other/Did not self-identify 1% — — Ethnicity Hispanic 51% — — Asian 16% 67% 100% White 13% 33% — Black 15% — — Other/Did not self-identify 5% — — Compensation and benefits Consistent with our core values, we take care of our people by offering competitive compensation and comprehensive benefits programs.
For example, we utilize recycled resin material in our manufacturing process to reduce our reliance on virgin plastic. After production, any resin waste is meticulously washed and cleaned to remove contaminants, ensuring the recycled resin meets the required quality standards for reuse in our facilities.
Our commitment to sustainability is also demonstrated in our focus on recycling and reusing. For example, we utilize recycled resin material in our manufacturing process to reduce our reliance on virgin plastic. After production, any resin waste is meticulously washed and cleaned to remove contaminants, ensuring the recycled resin meets the required quality standards for reuse in our facilities.
We have seen continued growth in our eco-friendly product line, with sales from these products increasing to 33.6% of our total sales for the year ended December 31, 2024, compared to 32.7% in the previous year.
We have seen continued growth in our eco-friendly product line, with sales from these products increasing to 34.1% of our total sales for the year ended December 31, 2025, compared to 33.6% in the previous year.
A total of 2,000,000 shares of common stock has been authorized and reserved for issuance under the Plan in the form of incentive or nonqualified stock options and stock awards. As of December 31, 2024, a total of 913,900 shares of common stock were awarded under the Plan.
A total of 2,000,000 shares of common stock have been authorized and reserved for issuance under the Plan in the form of incentive or nonqualified stock options and stock awards. As of December 31, 2025, a total of 935,900 shares of common stock were awarded under the Plan.
We own a fleet of 41 trucks (including some that are refrigerated to transport frozen food item), 44 trailers, 13 bobtails, and 47 chassis, and as of December 31, 2024, employed 40 drivers in our logistics division.
We own a fleet of 40 trucks (including some 5 that are refrigerated to transport frozen food item), 46 trailers, 16 bobtails, and 47 chassis, and as of December 31, 2025, employed 41 drivers in our logistics division.
The large breadth and scope of products is reflected in the diverse nature of the industry participants, which range from large international conglomerates to smaller regional and niche businesses. As a result, the industry is represented by a large number of companies and remains highly fragmented. Similarly, end customers of the disposable foodservice products industry are equally diverse in composition.
The large breadth and scope of products is reflected in the diverse nature of the industry participants, which range from large international conglomerates to smaller regional and niche businesses. As a result, the industry is represented by a large number of companies and remains highly fragmented.
References to “Global Wells” or “our variable interest entity” refer to Global Wells Investment Group LLC, a Texas limited liability company and our consolidated variable interest entity, in which the Company has an equity interest and which is controlled by one of our stockholders. References to “Lollicup” refer to Lollicup USA Inc., a California corporation, our wholly-owned subsidiary.
References to “Global Wells” or “our variable interest entity” refer to Global Wells Investment Group LLC, a Texas limited liability company and our consolidated variable interest entity, in which the Company has an equity interest and which is controlled by one of our stockholders.
Additionally, we are transitioning our company fleet from being gas powered to those that run entirely on electricity. To the extent possible, we have also switched over from single use batteries to rechargeable battery packs in our line up of tools and equipment.
Additionally, we are transitioning our company fleet from being gas powered to those that run entirely on electricity. To the extent possible, we have also switched over from single use batteries to rechargeable battery packs in our lineup of tools and equipment. We have installed charger meters to monitor the efficiency of our forklift batteries.
Our major customer retention rate, defined as year-over-year retention of our top 100 customers, was 100%. 6 Expand our customer base via new capabilities, geographies, products, services and end markets We believe our addressable market is substantial in size and continues to grow as food delivery businesses like Grubhub, Uber Eats, DoorDash and others expand the demand for take-out and at-home disposable foodservice products.
Expand our customer base via new capabilities, geographies, products, services, and end markets We believe our addressable market is substantial in size and continues to grow as food delivery businesses like Grubhub, Uber Eats, DoorDash, and others expand the demand for take-out and at-home disposable foodservice products.
As our capabilities, product offering and footprint expand, we aim to continue to focus on the growth in the supermarket sector and broaden our reach to national and regional airlines, entertainment venues, and other non-restaurant customers.
As our capabilities in product offering and footprint expand, we aim to continue to focus on the growth our paper bag business and eco-friendly products and broaden our reach to national and regional airlines, entertainment venues, and other non-restaurant customers.
Generally, we expect relatively more of our earnings and cash flows to be generated in the second and third quarter of the fiscal year. 9 Our Corporate Structure Set forth below is an organizational chart for the Company and its consolidated entities as of December 31, 2024: Please see Note 2 — Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a description of the agreements between Global Wells and us.
Our Corporate Structure 9 Set forth below is an organizational chart for the Company and its consolidated entities as of December 31, 2025: Please see Note 2 — Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a description of the agreements between Global Wells and us.
We have no labor-related work stoppages and believe our relations with our employees are good. Corporate Information We were founded in 2000 by Alan Yu and Marvin Cheng in San Gabriel, California as Lollicup USA Inc., a California corporation. Initially our business was focused on the establishment, franchising and licensing of bubble tea stores nationwide.
Corporate Information We were founded in 2000 by Alan Yu and Marvin Cheng in San Gabriel, California as Lollicup USA Inc., a California corporation. Initially our business was focused on the establishment, franchising, and licensing of bubble tea stores nationwide.
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.
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.
A recent peer-reviewed global study conducted by the American Association for the Advancement of Sciences found that less than 10 percent of plastics is recycled, meaning the vast majority of plastic waste ends up in landfills or the environment. Other studies indicated a large percentage of landfill waste in the United States is comprised of plastic containers and food-ware.
A recent peer-reviewed global study conducted by the American Association for the Advancement of Sciences found that less than 10 percent of plastics is recycled, meaning the vast majority of plastic waste ends up in landfills or the environment.
For the year ended December 31, 2024, approximately 11% of our revenues were generated from the sale of products manufactured in-house. We view distribution as our primary focus and growth driver while our manufacturing capabilities as a complement to the base distribution business.
Domestically, our California, Texas, and Hawaii facilities have a portion of operational capacity dedicated to manufacturing capabilities. For the year ended December 31, 2025, approximately 9% of our revenues were generated from the sale of products manufactured in-house. We view distribution as our primary focus and growth driver while our manufacturing capabilities as a complement to the base distribution business.
Our principal executive and administrative offices are located at 6185 Kimball Avenue, Chino, CA 91708, and our telephone number is (626) 965-8882. Our corporate website address is www.karatpackaging.com.
In October 2025, we redomesticated Lollicup to the State of Texas. Our principal executive and administrative offices are located at 6185 Kimball Avenue, Chino, CA 91708, and our telephone number is (626) 965-8882. Our corporate website address is www.karatpackaging.com.
We continued to enhance our Sarbanes-Oxley (SOX) compliance and cybersecurity awareness training programs to key employees, underscoring our commitment to equipping our workforce with the knowledge to navigate regulatory and digital risks effectively.
We provide technical and leadership training to employees, specifically our production and sales teams who work closely with our products and services. We continued to enhance our Sarbanes-Oxley ("SOX") compliance and cybersecurity awareness training programs to key employees, underscoring our commitment to equipping our workforce with the knowledge to navigate regulatory and digital risks effectively.
This success validates our capabilities and highlights the immense growth opportunity within supermarkets. As we continue to build on this momentum, the supermarket segment will remain a key area of focus for ongoing expansion and development in the coming years.
This success validates our capabilities to grow our business through the expansion of our products and services, and highlights the immense growth opportunity with our other customers. As we continue to build on this momentum, the paper bag business will remain a key area of focus for ongoing expansion and development in the coming years.
The primary purchasers of our products include fast casual restaurants, fast food chains, family dining restaurants, specialty drink establishments like bubble tea and coffee shops, convenience stores, and supermarkets.
Similarly, end customers of the disposable foodservice products industry are 7 equally diverse in composition. The primary purchasers of our products include fast casual restaurants, fast food chains, family dining restaurants, specialty drink establishments like bubble tea and coffee shops, convenience stores, and supermarkets.
Diversity, Equity, and Inclusion (DEI) Diversity, equity and inclusion ("DE&I") are critical underpinnings of our corporate values. DE&I helps foster innovation, cultivate an environment filled with unique perspectives and drive engagement and organizational growth. Our focus to date has been increasing awareness amongst our employees on the importance of DE&I.
Diversity, equity, and inclusion (DE&I) Diversity, equity and inclusion ("DE&I") are critical underpinnings of our corporate values. DE&I helps foster innovation, cultivate an environment filled with unique perspectives and drive engagement and organizational growth.
We emphasize on-the-job learning that enables employees to meet the demands of challenging and changing work and focuses on reinforcing key principles that are designed to support employees' effectiveness in their current job and in their future development. We provide technical and leadership training to employees, specifically our production and sales teams who work closely with our products and services.
We emphasize on-the-job learning that enables employees to meet the demands of challenging and changing work and focuses on reinforcing key principles that are designed to support employees' effectiveness in their current 13 job and in their future development.
We operate our e-commerce channel through our company storefront at www.lollicupstore.com and through our mobile app, available for download on both Apple and Android platforms, as well as third-party storefronts on Amazon, Walmart, eBay, and TikTok. Our e-commerce platforms allow us to offer our entire range of products for online procurement and cross market other products to our customers.
We operate our e-commerce 3 channel through our company storefront at www.lollicupstore.com and through our mobile app, available for download on both Apple and Android platforms, as well as third-party storefronts on Amazon, Walmart, eBay, TikTok, and Sysco.
Additionally, we recognize the value of internal growth and development within our organization, exemplified by the promotion of our inaugural Chief Revenue Officer in 2023 as well as regional sales directors. These strategic appointments underscore our commitment to fostering leadership from within and aligning our sales strategy with long-term growth objectives.
Additionally, we recognize the value of internal growth and development within our organization, exemplified by the promotion of our regional sales directors in 2025. These strategic appointments underscore our commitment to fostering leadership from within and aligning our sales strategy with long-term growth objectives. Together, these efforts position us to drive sales performance and deepen our market presence.
For products that require use of plastic, we try to ensure that the resin we source is both BPA and PFA (or perfluoroalkyl and polyfluoroalkyl) free as these substances are known for their extreme persistence in the environment upon discharge. Our commitment to sustainability is also demonstrated in our focus on recycling and reusing.
The BPI certification is the only third-party verification for compostable products in North America. For products that require use of plastic, we try to ensure that the resin we source is both BPA and PFA (or perfluoroalkyl and polyfluoroalkyl) free as these substances are known for their extreme persistence in the environment upon discharge.
In particular, our focus on employee development has been structured over the last several years through programs designed to embed essential skills and reinforce strategic goals that are aligned to our culture and business goals.
In particular, our focus on employee development has been structured over the last several years through programs designed to embed essential skills and reinforce strategic goals that are aligned to our culture and business goals. This is evidenced by the fact that we promoted 77 and 110 employees during the years ended December 31, 2025, and 2024, respectively.
For additional historical information about us, see Note 1 — Nature of Operations in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For additional historical information about us, see Note 1 — Nature of Operations in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
For the year ended December 31, 2024, manufacturing accounted for approximately 11% of our net sales, down from 20% in the prior year. Our customers include a wide variety of national and regional distributors, restaurant and supermarket chains, retail establishments and online customers. Our products are well suited to address our customers’ needs towards take-out and food delivery orders.
Our customers include a wide variety of national and regional distributors, restaurant and supermarket chains, retail establishments and online customers. Our products are well suited to address our customers’ needs towards take-out and food delivery orders.
For the years ended December 31, 2024 and 2023, no single customer represented more than 10% of our revenue. We are an omni-channel provider and have made significant investments in e-commerce, distribution network, technology, supply chain, and customer initiatives, such as online ordering and same day pickup.
We are an omni-channel provider and have made significant investments in e-commerce, distribution network, technology, supply chain, and customer initiatives, such as online ordering and same day pickup.
For the year ended December 31, 2024, revenue from our top 10 customers, as measured by the amount of revenue in the current year, increased 6.6% year-over-year, as we continued to expand wallet share with existing customers.
For the year ended December 31, 2025, revenue from our major customers increased 11% year-over-year, as we continued to expand wallet share with existing customers.
In the past 24 months, we invested in the significant expansion of our distribution capabilities by adding over 232,000 square feet of distribution space through the opening of three new warehouses; Mesa, Arizona in 2024 and Sugar Land, Texas and Aurora, Illinois in 2023.
In the past 24 months, we invested in the significant expansion of our distribution capabilities by adding over 230,000 square feet of distribution space through the opening of two new warehouses in Chino, California in 2025 and in Mesa, Arizona in 2024. Additionally, we racked up additional areas in existing warehouses.
Our reputation of being a reliable supplier with strong customer service and competitive prices has led to consistent requests for proposals from our existing customers as they look for new and innovative products and diversify their supplier base. We have historically experienced consistently high customer retention rates as a result of our product offerings and dedication to our customers.
We believe there is an opportunity to offer additional product lines allowing us to become a true “one-stop” supplier. Our reputation of being a reliable supplier with strong customer service and competitive prices has led to consistent requests for proposals from our existing customers as they look for new and innovative products and diversify their supplier base.
Outside of the required cooling of manufacturing machines and equipment after production cycles, our manufacturing process does not require large quantities of water. We ensure appropriate drainage and disposal of contaminated water, grease oil, and other chemicals discharged from our production activities in order to limit the pollution of valuable water sources. Reclamation is also a key consideration for us.
We ensure appropriate drainage and disposal of contaminated water, grease oil, and other chemicals discharged from our production activities in order to limit the pollution of valuable water sources. Reclamation is also a key consideration for us. Waste products from our production process are thoroughly inspected and checked for the potential of re-use or recyclability.
As a business founded by representatives from a minority group in the United States, diversity and inclusion is engrained in our corporate history. We believe that a diverse workforce is essential to its long-term success and strive to foster a diverse, equitable, and inclusive culture where all voices are heard, valued, and included.
We believe that a diverse workforce is essential to its long-term success and strive to foster a diverse, equitable, and inclusive culture where all voices are heard, valued, and included.
These platforms also provide us with the opportunity to continue our expansion into the business-to-consumer ("B2C") market in addition to the business-to-business ("B2B") small retailer customers that we have traditionally served. We have elevated our focus on servicing the B2C market by sourcing products tailored for and geared toward these end-users.
Our e-commerce platforms allow us to offer our entire range of products for online procurement and cross market other products to our customers. These platforms also provide us with the opportunity to continue our expansion into the business-to-consumer ("B2C") market in addition to the business-to-business ("B2B") small retailer customers that we have traditionally served.
Additionally, the potential to acquire existing and new suppliers, particularly in the U.S., may further reduce our reliance on the Asian supply chain, creating more diversified sourcing options for our customers.
Additionally, the potential to acquire existing and new suppliers, particularly in the U.S., may further reduce our reliance on the Asian supply chain, creating more diversified sourcing options for our customers. By acquiring businesses with scalable models, we aim to enhance our competitive position, drive long-term growth, and unlock synergies that benefit all stakeholders.
Together, these efforts position us to drive sales performance and deepen our market presence. We continued to significantly expand our distribution network, which we view as one of the key growth drivers of our business. We currently operate manufacturing facilities and distribution centers in Chino, California, Rockwall, Texas and Kapolei, Hawaii.
We continued to significantly expand our distribution network, which we view as one of the key growth drivers of our business. We currently operate manufacturing facilities and distribution centers in Chino, California, Rockwall, Texas and Kapolei, Hawaii. In addition, we have distribution centers located in Branchburg, New Jersey; Puyallup, Washington; Kapolei, Hawaii; Sugar Land, Texas; and Aurora, Illinois.
Waste products from our production process are thoroughly inspected and checked for the potential of re-use or recyclability. Identified items are repackaged and sold or they are transferred to our local waste management facilities for proper disposal, thereby reducing waste and the use of landfill space. Some of our raw materials are also BPI certified.
Identified items are repackaged and sold or they are transferred to our local waste management facilities for proper disposal, thereby reducing waste and the use of landfill space. Some of our raw materials are also BPI certified. For over 20 years, the BPI certification has been the defining symbol of commercial compostability due to its rigorous testing standards.
Through these efforts, we aim to support waste reduction, reduce reliance on non-renewable resources, and help customers achieve their sustainability goals while addressing broader environmental challenges. 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.
Through these efforts, we aim to support waste reduction, reduce reliance on non-renewable resources, and help customers achieve their sustainability goals while addressing broader environmental challenges.
By acquiring businesses with scalable models, we aim to enhance our competitive position, drive long-term growth, and unlock synergies that benefit all stakeholders. 7 Our Industry The disposable foodservice products industry is substantial in size and rapidly growing. The primary categories of disposable foodservice products include food and take-out containers, bags, boxes, tableware, cups, lids, cutlery and straws.
Our Industry The disposable foodservice products industry is substantial in size and rapidly growing. The primary categories of disposable foodservice products include food and take-out containers, bags, boxes, tableware, cups, lids, cutlery, and straws.
We maintain a Code of Business Conduct and Ethics which is attested by every employee and provides our framework for ethical business.
At the same time, our employees are expected to act with integrity and objectivity and to always strive to enhance our reputation and performance. We maintain a Code of Business Conduct and Ethics which is attested by every employee and provides our framework for ethical business.
Additionally, we have also seen continued growth in our eco-friendly product sales, which now represent 33.6% of total sales for the year ended December 31, 2024, up from 32.7% the previous year.
We have seen continued growth in our eco-friendly products, with sales from these products increasing to 34.1% of our total sales for the year ended December 31, 2025, compared to 33.6% in the previous year.
Our e-commerce channel also significantly outperformed all other channels in year-over-year revenue growth in 2024, and we believe the e-commerce channel will continue to be a key growth driver in our business. Grow our base business with incremental revenue from existing customers We have historically achieved tremendous success in gaining wallet-share with existing accounts once we won new customers.
Grow our base business with incremental revenue from existing customers We have historically achieved tremendous success in gaining wallet-share with existing accounts once we won new customers. We intend to continue to drive growth by increasing penetration within our existing customer base.
In 2022, California passed legislation banning styrofoam starting January 1, 2025 and requiring all packaging in the state to be recyclable or compostable by 2032. A variety of individual cities have also passed their own complimentary ordinances to limit single-use plastic products.
In 2024, California further enacted the legislation banning all plastic carry out bags at retail checkout starting January 1, 2026, requiring stores to offer only recycled-paper or compliant reusable bags instead. A variety of individual cities have also passed their own complimentary ordinances to limit single-use plastic products.
Good corporate governance and transparency are fundamental to achieving our vision of becoming a leader in our industry. Our engagement approach involves ongoing communication with our employees.
Good corporate governance and transparency are fundamental to achieving our vision of becoming a leader in our industry. Our engagement approach involves ongoing communication with our employees. We strive to provide relevant market updates to our team members as well as to share important information regarding our revenue trends, inventory status, and other financial and operating metrics as deemed necessary.
Scaled distribution with diversified global sourcing and flexible domestic production capabilities We leverage our diversified global supplier network to offer customers a wide selection of single-use disposable foodservice products. These supplier relationships allow us to offer custom-branded and custom-designed products with fast turnaround times and at competitive prices.
Scaled distribution with diversified global sourcing and flexible domestic production capabilities We leverage our diversified global supplier network to offer customers a wide selection of single-use disposable foodservice products. We have significantly grown our inventory sourcing network from only a handful of vendors initially to nearly 150 active vendors by the end of 2025.
Further, we racked up over 50,000 square feet of additional space within existing warehouses over the past two years to allow for better management and fulfillment of products.
Among the total of ten distribution centers, two were newly opened in the past 24 months located in Chino, California and Mesa, Arizona. Further, we racked up additional space within existing warehouses to allow for better management and fulfillment of products.
These mandates include gradual increases in PCR content for various materials, such as plastic beverage 10 bottles and rigid plastic containers, aligning with long-term sustainability goals. In 2023, both Rhode Island and Delaware passed bills that prohibited food service establishments from using polystyrene foam in their food packaging.
In 2024, New Jersey introduced regulations focusing on increasing post-consumer recycled (PCR) content in packaging. These mandates include gradual increases in PCR content for various materials, such as plastic beverage bottles and rigid plastic containers, aligning with long-term sustainability goals.
We enter into floor stocking agreements with a subset of our national and regional chains customers, providing some visibility into future revenue. • Retail : primarily regional bubble tea shops, boutique coffee shops, frozen yogurt shops and small mom-and-pop restaurants that often purchase our specialty beverage ingredients and related items.
National and regional distributors typically purchase our products to resell to restaurants, offices, schools, government entities and other businesses. • Retail : Primarily regional bubble tea shops, boutique coffee shops, frozen yogurt shops and small mom-and-pop restaurants that often purchase our specialty beverage ingredients and related items.
As our capabilities, product offering and footprint expand, we aim to broaden our reach to national and regional airlines, entertainment venues, and other non-restaurant customers. Our increasingly strong brand recognition in the foodservice industry, nimble operations and scaled distribution position us strongly for new customer acquisition and continued wallet share expansion with existing customers.
Our increasingly strong brand recognition in the foodservice industry, nimble operations and scaled distribution position us strongly for new customer acquisition and continued wallet share expansion with existing customers. For the years ended December 31, 2025 and 2024, no single customer represented more than 10% of our revenue.
We classify our customers into four categories: distributors, national and regional chains, retail and e-commerce/online. • Distributors : national and regional distributors across the U.S. that purchase our products and provide a channel to offer our products to restaurants, offices, schools, government entities and other end users. • National and regional chains : typically fast casual, fast food restaurants, and supermarket chains with locations across multiple states to which we supply specified products.
We have continued to invest in expanding our e-commerce team and optimizing our online marketing efforts. We classify our customers into three categories: chains and distributors, retail, and e-commerce/online. • Chains and distributors : National and regional chains customers are typically fast casual, fast food restaurants, and supermarket chains with locations across multiple states.
This is evidenced by the fact that we promoted 110 and 166 employees during the years ended December 31, 2024, and 2023, respectively. 13 Other Information As of December 31, 2024, we employed approximately 721 employees, out of which 683 were full-time employees. None of our employees are currently covered by a collective bargaining agreement.
Other information As of December 31, 2025, we employed approximately 696 employees, out of which 636 were full-time employees. None of our employees are currently covered by a collective bargaining agreement. We have no labor-related work stoppages and believe our relations with our employees are good.
While we largely maintained our manufacturing infrastructure, we disposed of certain production machinery and related raw materials and reduced our production workforce. Although we expect manufacturing to remain a relatively small portion of our sales mix going forward, we plan to keep manufacturing capabilities domestically to retain our nimble business model.
While we expect manufacturing to remain a relatively small portion of our sales mix going forward, we plan to keep manufacturing capabilities domestically to retain our nimble business model and resilient supply chain. For the year ended December 31, 2025, manufacturing accounted for approximately 9% of our net sales, down from 11% in the prior year.
Our Operations In our manufacturing facilities in the United States, the production process involves intake of water, dischargement and recycling of waste as well as other disposal activities. As a Company, we place strong emphasis on water conservation and reducing water pollution.
As a Company, we place strong emphasis on water conservation and reducing water pollution. Outside of the required cooling of manufacturing machines and equipment after production cycles, our manufacturing process does not require large quantities of water.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeUnless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for: (i) any derivative action or proceeding brought against or on behalf of the Company, (ii) any action asserting a claim of breach of a duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, (iv) any action as to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery in the State of Delaware, or (v) any action asserting a claim governed by the internal affairs doctrine, shall, to the fullest extent permitted by law, be the Court of Chancery in the State of Delaware (or, only if the Court of Chancery in the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court located within the State of Delaware).
Biggest changeOur bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain actions, which could limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company and its directors, officers, or other employees and may discourage lawsuits with respect to such claims. 27 Unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for: (i) any derivative action or proceeding brought against or on behalf of the Company, (ii) any action asserting a claim of breach of a duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, (iv) any action as to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery in the State of Delaware, or (v) any action asserting a claim governed by the internal affairs doctrine, shall, to the fullest extent permitted by law, be the Court of Chancery in the State of Delaware (or, only if the Court of Chancery in the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court located within the State of Delaware).
If this occurs, we may not be able to repay our debt or borrow sufficient funds to refinance it on favorable terms, if any. We depend on cash generated from outside sources of funding to support our growth.
If this occurs, we may not be able to repay our debt or borrow sufficient funds to refinance it on favorable terms, if any. We may depend on cash generated from outside sources of funding to support our growth.
Acquisition-related risks include: • diverting management time and focus from operating our business to acquisition integration; • customers moving to new suppliers as a result of the acquisition; • inability to retain employees from the business we acquire; • challenges associated with integrating employees from the acquired company into our organization; 26 • difficulties integrating accounting, management information, human resource and other administrative systems to permit effective management of the business we acquire and realize efficiencies; • potential requirements for remediating controls, procedures and policies appropriate for a public company in the acquired business that prior to the acquisition lacked these controls, procedures and policies; • potential liability for past or present environmental, hazardous substance, or contamination concerns associated with the acquired business or its predecessors; • possible write-offs or impairment charges resulting from the acquisition; and • unanticipated or unknown liabilities relating to the acquired business.
Acquisition-related risks include: • diverting management time and focus from operating our business to acquisition integration; • customers moving to new suppliers as a result of the acquisition; • inability to retain employees from the business we acquire; • challenges associated with integrating employees from the acquired company into our organization; • difficulties integrating accounting, management information, human resource and other administrative systems to permit effective management of the business we acquire and realize efficiencies; • potential requirements for remediating controls, procedures and policies appropriate for a public company in the acquired business that prior to the acquisition lacked these controls, procedures and policies; • potential liability for past or present environmental, hazardous substance, or contamination concerns associated with the acquired business or its predecessors; • possible write-offs or impairment charges resulting from the acquisition; and • unanticipated or unknown liabilities relating to the acquired business.
Additionally, AI is subject to increasing regulatory scrutiny and an evolving legal framework around data usage, privacy, and algorithmic accountability which may impose additional compliance costs, operational restrictions, or lead to investigations and litigation. The deployment of AI technologies also introduces cybersecurity vulnerabilities, with potential data breaches or unauthorized access threatening sensitive information and customer trust.
Additionally, AI is subject to increasing 21 regulatory scrutiny and an evolving legal framework around data usage, privacy, and algorithmic accountability which may impose additional compliance costs, operational restrictions, or lead to investigations and litigation. The deployment of AI technologies also introduces cybersecurity vulnerabilities, with potential data breaches or unauthorized access threatening sensitive information and customer trust.
Additionally, raw material shortages, especially with respect to key materials such as plastic and paper, or our inability to timely pass through increased costs to our customers may materially and adversely affect our business, financial condition, results of operations and cash flows. 15 We operate in a highly competitive environment and may not be able to compete successfully.
Additionally, raw material shortages, especially with respect to key materials such as plastic and paper, or our inability to timely pass through increased costs to our customers may materially and adversely affect our business, financial condition, results of operations, and cash flows. We operate in a highly competitive environment and may not be able to compete successfully.
There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations, or that we could not have achieved more favorable terms if such transactions had not been entered into with related parties. We may not have adequate insurance coverage.
There can be no assurance that such transactions, 18 individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations, or that we could not have achieved more favorable terms if such transactions had not been entered into with related parties. We may not have adequate insurance coverage.
Accordingly, this concentration of ownership might decrease the market price of our common stock by: • delaying, deferring, or preventing a change in control of the company; • impeding a merger, consolidation, takeover, or other business combination involving us; or 25 • discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the company.
Accordingly, this concentration of ownership might decrease the market price of our common stock by: • delaying, deferring, or preventing a change in control of the company; • impeding a merger, consolidation, takeover, or other business combination involving us; or • discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the company.
The single-use disposable foodservice products industry is extremely competitive and highly fragmented. Many of the companies that compete in our industry are significantly larger with greater resources, have greater brand recognition and have a larger product offering. We may be unsuccessful in our efforts to compete against such large and established companies.
The single-use disposable foodservice products industry is extremely competitive and highly fragmented. Many of the companies that compete in our industry are significantly larger with greater resources, have greater brand recognition and 16 have a larger product offering. We may be unsuccessful in our efforts to compete against such large and established companies.
In all related party transactions, there is a risk that even if the Company personnel negotiating on behalf of the Company with the related party are striving to ensure that the terms of the transaction are arms-length, the related party’s influence may be such that the transaction terms could be viewed as favorable to that related 17 party.
In all related party transactions, there is a risk that even if the Company personnel negotiating on behalf of the Company with the related party are striving to ensure that the terms of the transaction are arms-length, the related party’s influence may be such that the transaction terms could be viewed as favorable to that related party.
There can be no assurance that we will be able to recruit, train, assimilate, motivate and 18 retain employees in the future. The loss of a substantial number of these employees and our inability to hire and replace our workforce could disrupt our business and result in significant losses.
There can be no assurance that we will be able to recruit, train, assimilate, motivate, and retain employees in the future. The loss of a substantial number of these employees and our inability to hire and replace our workforce could disrupt our business and result in significant losses.
If we are unable to make our payments when due or unable to refinance such amounts, our key equipment could be repossessed, our property could be foreclosed and our business could be negatively affected. 28 The terms of our debt agreements impose significant operating and financial restrictions on us.
If we are unable to make our payments when due or unable to refinance such amounts, our key equipment could be repossessed, our property could be foreclosed and our business could be negatively affected. The terms of our debt agreements impose significant operating and financial restrictions on us.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline. The trading market for our common stock will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline. 28 The trading market for our common stock will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business.
Changes in tax laws or changes in our geographic mix of earnings could have a negative impact on our business and results of operations. We are subject to income and other taxes in the many jurisdictions in which we operate.
Changes in tax laws or changes in our geographic mix of earnings could have a negative impact on our business and results of operations. 17 We are subject to income and other taxes in the many jurisdictions in which we operate.
Additionally, defending against these lawsuits and 21 proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, materially and adversely harming our business, financial condition, results of operations and cash flows.
Additionally, defending against these lawsuits and proceedings may be necessary, which could result in substantial costs and diversion of management’s attention and resources, materially and adversely harming our business, financial condition, results of operations, and cash flows.
For certain payment methods, including credit and debit cards, as well as electronic payment systems, we pay interchange and other fees, which may increase over time. We rely on independent service providers for payment processing, including credit and debit cards.
For certain payment methods, 22 including credit and debit cards, as well as electronic payment systems, we pay interchange and other fees, which may increase over time. We rely on independent service providers for payment processing, including credit and debit cards.
The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our results of operations; • the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • sales or potential sales of shares by our stockholders, or the filing of a registration statement for these sales; • adverse market reaction to any indebtedness we may incur or equity we may issue in the future; • announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; • publication of adverse research reports about us, our industry, or individual companies within our industry; • publicity related to problems in our manufacturing or the real or perceived quality of our products, as well as the failure to timely launch new products that gain market acceptance; • changes in operating performance and stock market valuations of our competitors; • price and volume fluctuations in the overall stock market, including as a result of trends in the United States or global economy; • any major change in our board of directors or management; • lawsuits threatened or filed against us or negative results of any lawsuits; • security breaches or cyberattacks; • legislation or regulation of our business; • loss of key personnel; • new products introduced by us or our competitors; • the perceived or real impact of events that harm our direct competitors; • developments with respect to our trademarks, patents, or proprietary rights; • tariffs and other trade restrictions; • inflationary pressures; • general market conditions; and • other events or factors, including those resulting from war, incidents of terrorism, or responses to these events, which could be unrelated to us or outside of our control.
The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our results of operations; • the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; • announcements about our share repurchase program, including repurchases under the program; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • sales or potential sales of shares by our stockholders, or the filing of a registration statement for these sales; • adverse market reaction to any indebtedness we may incur or equity we may issue in the future; • announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; • publication of adverse research reports about us, our industry, or individual companies within our industry; • publicity related to problems in our manufacturing or the real or perceived quality of our products, as well as the failure to timely launch new products that gain market acceptance; • changes in operating performance and stock market valuations of our competitors; • price and volume fluctuations in the overall stock market, including as a result of trends in the United States or global economy; • any major change in our Board of Directors or management; • lawsuits threatened or filed against us or negative results of any lawsuits; • security breaches or cyberattacks; • legislation or regulation of our business; • loss of key personnel; • new products introduced by us or our competitors; • the perceived or real impact of events that harm our direct competitors; • developments with respect to our trademarks, patents, or proprietary rights; • tariffs and other trade restrictions; • inflationary pressures; • general market conditions; and 26 • other events or factors, including those resulting from war, incidents of terrorism, or responses to these events, which could be unrelated to us or outside of our control.
As we rely heavily on our warehouse facilities for production, storage, and distribution of inventory, our business is particularly vulnerable to damage or interruption from earthquakes, fires, floods, criminal acts, terrorism, and similar events. A significant natural disaster could harm our business results and our insurance coverage may be insufficient to compensate us for losses that may occur.
As we rely heavily on our warehouse facilities for production, storage, and distribution of inventory, our business is particularly vulnerable to damage or interruption from earthquakes, fires, floods, pandemics, criminal acts, terrorism, and 23 similar events. A significant natural disaster could harm our business results and our insurance coverage may be insufficient to compensate us for losses that may occur.
We are also expanding the number of distribution centers and warehouses across the United States and these efforts come with considerable challenges and risks, including entering into long term lease contracts with possibly significant termination clauses. If we are not successful, our business, financial condition, results of operations and cash flows could be materially and adversely effected.
We are also expanding the number of distribution centers and warehouses across the United States and these efforts come with considerable challenges and risks, including entering into long term lease contracts with possibly significant termination clauses. If we are not successful, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.
We incur significant expenses to maintain our manufacturing equipment and any interruption in the operations of our facilities could negatively impact our business and results of operations. We regularly incur significant expenses to maintain our manufacturing equipment and facilities.
We incur significant expenses to maintain our manufacturing equipment and any interruption in the operations of our facilities could negatively impact our business and results of operations. 20 We regularly incur significant expenses to maintain our manufacturing equipment and facilities.
In order to meet demand for a product, we have chosen in the past, and may choose in the future, to arrange for additional quantities of the product, if available, to be delivered through air freight, which is significantly more expensive than standard shipping by sea and, consequently, could harm our gross margins.
In order to meet demand for a product, we have chosen in the past, and may choose in the future, to arrange for additional quantities of the product, if available, to be delivered through air freight, which is significantly more expensive than standard shipping by sea and, consequently, could harm our gross margins and profitability, and harm our business.
As we expand our business, we will need significant cash resources to fund operations such as purchasing and manufacturing inventory, marketing and promoting our products, expanding our vendor and customer relationships, enhancing distribution capabilities, paying employees, upgrading information technology systems and tools, and paying for the costs associated with operating as a public company.
As we expand our business, we may need significant cash resources to fund operations such as purchasing and manufacturing inventory, marketing and promoting our products, expanding our vendor and customer relationships, enhancing distribution capabilities, paying employees, upgrading information technology systems and tools, and paying for the costs associated with operating as a public company.
The successful running of our operations is highly dependent upon information technology systems and tools operating as intended without any down-time or disruptions in service. Security incidents and attacks on our information technology systems and tools could lead to significant costs and business disruptions. Information system is the backbone of our business.
The successful running of our operations is highly dependent upon information technology systems and tools operating as intended without any down-time or disruptions in service. Security incidents and attacks on our information technology systems and tools could lead to significant costs and business disruptions. Information systems are the backbone of our business.
Risks Related to Our Business Our business could be harmed if we are unable to accurately forecast demand for our products or our results of operations. To ensure adequate inventory supply, we forecast inventory needs and often place orders with our manufacturers before we receive firm orders from our customers.
Risks Related to Our Business Our business could be harmed if we are unable to accurately forecast demand for our products or our results of operations. To ensure adequate inventory supply, we forecast inventory needs and often place orders with our vendors before we receive firm orders from our customers.
Our reliance on suppliers and manufacturers in foreign markets creates risks inherent in doing business in foreign jurisdictions, including: (a) the burdens of complying with a variety of foreign laws and regulations, including trade and labor restrictions and laws relating to the importation and taxation of goods; (b) weaker protection for intellectual property and other legal rights than in the United States, and practical difficulties in enforcing intellectual property and other rights outside of the United States; (c) compliance with U.S. and foreign laws relating to foreign operations, including the U.S.
Our reliance on vendors in foreign markets creates risks inherent in doing business in foreign jurisdictions, including: (a) the burdens of complying with a variety of foreign laws and regulations, including trade and labor restrictions and laws relating to the importation and taxation of goods; (b) weaker protection for intellectual property and other legal rights than in the United States, and practical difficulties in enforcing intellectual property and other rights outside of the United States; (c) compliance with U.S. and foreign laws relating to foreign operations, including the U.S.
Our business depend on our internally-developed information technology systems and tools, as well as certain software as a service products, to run our business, including storing key data, processing transactions, designing and manufacturing products, sourcing products, managing inventory and hosting and operating our website.
Our business depends on our internally-developed information technology systems and tools, as well as certain software as a service products, to run our business, including storing key data, processing transactions, designing and manufacturing products, sourcing products, managing inventory and hosting and operating our website.
If we underestimate the demand for our products, we, or our manufacturers, may not be able to scale to meet demand timely, and this could result in delays in the shipment of products to customers, lost revenue, and damage to our reputation and customer relationships.
If we underestimate the demand for our products, we, or our vendors, may not be able to scale to meet demand timely, and this could result in delays in the shipment of products to customers, lost revenue, and damage to our reputation and customer relationships.
If our information systems become obsolete or inadequate to support our growth, it could damage our customer and business partner relationships, and our business, financial condition, results of operations and cash flows could be materially and adversely effected.
If our information systems become obsolete or inadequate to support our growth, it could damage our customer and business partner relationships, and our business, financial condition, results of operations, and cash flows could be materially and adversely affected.
For as long as we continue to be an emerging growth company, we intend to take advantage of other exemptions from certain reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended or the Sarbanes-Oxley Act, exemption from any rules that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute arrangements, and reduced financial reporting requirements.
For as long as we continue to be an emerging growth company, we intend to take advantage of other exemptions from certain reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, exemption from any rules that may be adopted by the PCAOB requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute arrangements, and reduced financial reporting requirements.
To maintain and increase sales, we must continue to innovate our products in anticipation of consumer preferences, differentiating our products from those of our competitors, and maintaining the strength of our brand. The design and development of our products is costly and time-consuming, and we typically have several products in development at the same time.
To maintain and increase sales, we must continue to innovate our products in anticipation of consumer preferences, differentiate our products from those of our competitors, and maintain the strength of our brand. The design and development of our products is costly and time-consuming, and we typically have several products in development at the same time.
In addition, our current or potential competitors may offer products at a lower price, or products and services that are superior to ours. Our success is heavily dependent on our ability to source and develop emerging and legislatively mandated raw materials, adapt our manufacturing capabilities, and gain customer acceptance of our new products.
In addition, our current or potential competitors may offer products at a lower price, expand their promotional activities, or offer products and services that are superior to ours. Our success is heavily dependent on our ability to source and develop emerging and legislatively mandated raw materials, adapt our manufacturing capabilities, and gain customer acceptance of our new products.
If one or more of these analysts cease to regularly cover us or fail to publish reports, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline. Outstanding indebtedness may reduce our available funds. We have approximately $48.5 million in outstanding indebtedness as of December 31, 2024.
If one or more of these analysts cease to regularly cover us or fail to publish reports, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline. Outstanding indebtedness may reduce our available funds. We have approximately $35.9 million in outstanding indebtedness as of December 31, 2025.
As of March 1, 2025, our directors, executive officers, and other holders of more than 5% of our common stock, together with their affiliates, own, in the aggregate 65.5% of our outstanding common stock.
As of March 1, 2026, our directors, executive officers, and other holders of more than 5% of our common stock, together with their affiliates, own, in the aggregate 57% of our outstanding common stock.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies.
We are an “emerging growth company” as defined in JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies.
Historically, we have been able to mitigate the impact of higher costs by increasing our selling prices. However, due to the lag between the sourcing or the manufacturing of our products and the subsequent sales to our customers, margin could be negatively impacted in periods of rising raw materials costs.
Even if we are able to mitigate the impact of higher costs by increasing our selling prices, our margin could be negatively impacted in periods of rising raw materials costs due to the lag between the sourcing or the manufacturing of our products and the subsequent sales to our customers.
As global economic conditions continue to be volatile and economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to declines. Any of these factors could materially and adversely affect our business, financial condition, results of operations and cash flows. Periods of significant or prolonged deflation may negatively impact our business and results of operations.
As global economic conditions continue to be volatile and economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to declines. Any of these factors could materially and adversely affect our business, financial condition, results of operations, and cash flows.
Dollar, and in particular the exchange rates of the New Taiwan Dollar, could increase our costs, and have a material adverse impact on our business, financial condition, results of operations and cash flows.
Any fluctuations in foreign exchange rates against the United State Dollar, and in particular the exchange rates of the New Taiwan Dollar, could increase our costs, and have a material adverse impact on our business, financial condition, results of operations, and cash flows.
International political instability and armed conflicts, including recent escalations in regional conflicts, could result in economic sanctions that could impact our operational and financial results.
International political instability and armed conflicts could result in economic sanctions that could impact our operational and financial results.
Our reputation and business could suffer due to non-compliance with ethical and legal standards by our suppliers and manufacturers Our reputation and our customers’ willingness to purchase our products depend in part on our suppliers’ and manufacturers’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, 19 forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses.
Our reputation and our customers’ willingness to purchase our products depend in part on our suppliers’ and manufacturers’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses.
Although we believe the exclusive forum provision benefits us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company and its directors, officers, or other employees and may discourage lawsuits with respect to such claims. 27 We may issue preferred stock, the terms of which could adversely affect the voting power or value of our common stock.
Although we believe the exclusive forum provision benefits us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company and its directors, officers, or other employees and may discourage lawsuits with respect to such claims.
If we are unable to remediate this material weakness, or if we experience additional material weaknesses or deficiencies in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and the price of our common stock may decline.
If we fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and the price of our common stock may decline.
Labor disputes or disruptions at ports, our common carriers, or at our suppliers or manufacturers could create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during periods of significant importing or manufacturing activity, potentially causing delayed or cancelled orders by customers, unanticipated inventory accumulation or shortages, and significant incremental demurrage charges.
Transportation and other delays in shipments, including as a result of heightened security screening, port congestion, inspection processes, or other port-of-entry limitations or restrictions; or labor disputes or disruptions at ports, our common carriers, or at our suppliers or manufacturers could create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during periods of significant importing or manufacturing activity, potentially causing delayed or cancelled orders by customers, unanticipated inventory accumulation or shortages, and significant incremental demurrage charges.
If a material number of our customers were not able to meet their payment obligations, our business, financial condition, results of operations and cash flows could be materially and adversely effected. We have identified a material weakness in our internal control over financial reporting.
If a material number of our customers were not able to meet their payment obligations, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.
We believe that our future growth depends not only on continuing to reach our current customer base and demographic, but also continuing to expand our business into other foodservice sectors and geographies.
Our growth depends, in part, on expanding into additional foodservice and geographic markets, and we may not be successful in doing so. 19 We believe that our future growth depends not only on continuing to reach our current customer base and demographic, but also continuing to expand our business into other foodservice sectors and geographies.
All of these could materially and adversely effect our business, financial condition, results of operations and cash flows. If we fail to timely and effectively obtain shipments of products from our overseas manufacturers, our business and results of operations could be harmed.
All of these could materially and adversely affect our business, financial condition, results of operations, and cash flows. If we fail to obtain shipments of products from our overseas manufacturers with standard shipping by sea, our gross margin, profitability, and our business could be harmed.
We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances or sales of our shares will have on the market price of such shares. As of December 31, 2024, we had 296,999 and 16,668 of vested and unvested stock options, respectively, and 70,800 of unvested restricted stock units outstanding.
We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances or sales of our shares will have on the market price of such shares. As of December 31, 2025, we had 287,467 stock options, all of which were fully vested, and 43,500 of unvested restricted stock units outstanding.
Foreign exchange rate fluctuations could affect our results of operations. Our third-party manufacturers are located in international markets, and we make payment to certain of these manufacturers in currencies other than U.S. Dollars, including payments made in New Taiwan Dollars. Any fluctuations in foreign exchange rates against the U.S.
Foreign exchange rate fluctuations could affect our results of operations. 25 Our third-party vendors are located in international markets, and we make payment to certain of these vendors in their local currencies, including New Taiwan Dollars.
Such disruptions could materially and adversely affect our business, financial condition, results of operations and cash flows. Our net sales and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors. Restaurant dining and food delivery services are generally discretionary items for end-consumers.
Our net sales and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors. Restaurant dining and food delivery services are generally discretionary items for end-consumers. Therefore, the success of our business depends significantly on broader economic factors and trends in consumer spending.
We operate manufacturing facilities in the United States, and are therefore subject to certain environmental regulations with respect to the operation of those facilities.
We are subject to environmental laws and regulations that expose us to a number of risks and could result in significant liabilities and costs. We operate manufacturing facilities in the United States, and are therefore subject to certain environmental regulations with respect to the operation of those facilities.
In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and the prices of our common stock may decline as a result. 22 If our goodwill, other intangible assets, or our property and equipment become impaired, we may be required to record a charge to our earnings.
We may also be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, which may result in investors losing confidence in our financial reporting and the decline in the prices of our common stock.
As we look for opportunities to adopt AI in our business operations, there could be significant risks that could materially and adversely impact our business, financial condition, results of operations and cash flows.
Adopting artificial intelligence (AI) technologies poses risks such as regulatory scrutiny, cybersecurity vulnerabilities, ethical concerns, and system inaccuracies, potentially leading to disruptions, costs, and reputational harm. As we look for opportunities to adopt AI in our business operations, there could be significant risks that could materially and adversely impact our business, financial condition, results of operations, and cash flows.
Any one of these risks could materially and adversely affect our business, financial condition, results of operations and cash flows.
Any one of these risks could materially and adversely affect our business, financial condition, results of operations, and cash flows. Our reputation and business could suffer due to non-compliance with ethical and legal standards by our suppliers and manufacturers.
Failure to procure our products from our third-party contract manufacturers and deliver merchandise to our customers in a timely, effective, and economically viable manner could reduce our sales, gross margin, and profitability, damage our brand, and harm our business.
Such disruptions could materially and adversely affect our business, financial condition, results of operations, and cash flows. Further, failure to procure our products from our suppliers and manufacturers and deliver merchandise to our customers in a timely and effective manner could reduce our sales, gross margin, and profitability, damage our brand, and harm our business.
The increased labor costs in the restaurant industry could also negatively impact the business operations of some of our customers, which could in turn adversely affect our business and results of operations. Our growth depends, in part, on expanding into additional foodservice and geographic markets, and we may not be successful in doing so.
The increased labor costs in the restaurant industry could also negatively impact the business operations of some of our customers, which could in turn adversely affect our business and results of operations.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect or change significantly, our results of operations could be harmed. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Any indebtedness we incur may subject us to covenants that restrict our operations and will require interest and principal payments that would create additional cash demands and financial risk for us. General Risk Factors We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
Any indebtedness we incur may subject us to covenants that restrict our operations and will require interest and principal payments that would create additional cash demands and financial risk for us.
Raw materials are subject to price fluctuations and availability, which could result from external factors, such as inflation, weather-related events, or other supply chain challenges, that are beyond our control. We typically do not enter into long-term fixed price contracts with our suppliers, and our suppliers could pass on raw material price increases to us.
Raw material inflation or shortage of available materials could harm our financial condition and results of operations. Raw materials are subject to price fluctuations and availability, which could result from external factors, such as inflation, weather-related events, or other supply chain challenges, that are beyond our control.
We may be required to record future impairments of goodwill, other intangible assets, or long-lived assets to the extent the fair value of these assets falls below their book value. Our estimates of fair value are based on various assumptions including future cash flows, discount rates, and current market estimates of value.
If our goodwill, other intangible assets, or our property and equipment become impaired, we may be required to record a charge to our earnings. We may be required to record future impairments of goodwill, other intangible assets, or long-lived assets to the extent the fair value of these assets falls below their book value.
Estimates used for future sales growth, gross profit performance, operating expenses, and other assumptions used to estimate fair value are subject to significant judgment. Although impairments are non-cash expenses, they could materially and adversely affect our future financial results and financial condition.
Our estimates of fair value are based on various assumptions including future cash flows, discount rates, and current market estimates of value. Estimates used for future sales growth, gross profit performance, operating expenses, and other assumptions used to estimate fair value are subject to significant judgment.
Any inability to remediate the material weakness effectively or in a timely manner, or the identification of any new material weaknesses in the future, could limit our ability to prevent or detect a misstatement of our accounts or disclosures and could result in a material misstatement of our annual or interim financial statements.
Failure to maintain an effective system of internal controls could limit our ability to prevent or detect a misstatement of our accounts or disclosures and could result in a material misstatement of our annual or interim financial statements.
We have only a limited history operating our business at its current scale. Consequently, if our operations continue to grow at a rapid pace, we may experience difficulties in managing this growth and building the appropriate processes and controls.
If our sales do not increase at a sufficient rate to offset these increases in our operating expenses, our profitability may decline in future periods. If our operations continue to grow at a rapid pace, we may experience difficulties in managing this growth and building the appropriate processes and controls.
Depending on the scale of the pandemic, our future financial performance may differ significantly from historical rates, and our future operating results may also fall below expectations. We may also experience additional operating costs due to increased challenges with our workforce (including as a result of labor shortages, illness, absenteeism or government orders), and access to supplies and capital.
A pandemic or other global health crisis could cause additional operating costs due to increased challenges with our workforce (including as a result of labor shortages, illness, absenteeism or government orders), and access to supplies and capital.
Additionally, failure to adequately source and timely ship our products to the U.S. and then onwards to customers could lead to failure to meet customer demand, loss of potential revenue, strained relationships with customers, and diminishing brand loyalty. Raw material inflation or shortage of available materials could harm our financial condition and results of operations.
Further international conflicts could impact important trade routes, resulting in increased lead times for shipments, elevated freight costs, and suppressed margin. Additionally, failure to adequately source and timely ship our products to the U.S. and then onwards to customers could lead to failure to meet customer demand, loss of potential revenue, strained relationships with customers, and diminishing brand loyalty.
Even with reasonable safeguards, cybersecurity incidents, data loss, programming errors, or employee misconduct could compromise this information, leading to fines, penalties, reputational damage, and other adverse effects on our operations and financial condition. 20 Adopting artificial intelligence (AI) technologies poses risks such as regulatory scrutiny, cybersecurity vulnerabilities, ethical concerns, and system inaccuracies, potentially leading to disruptions, costs, and reputational harm.
Additionally, we handle confidential and personal data subject to privacy laws and contractual obligations. Even with reasonable safeguards, cybersecurity incidents, data loss, programming errors, or employee misconduct could compromise this information, leading to fines, penalties, reputational damage, and other adverse effects on our operations and financial condition.
Because we import many of our products, we are 24 vulnerable to risks associated with products manufactured abroad, including, among other things: (a) risks of damage, destruction, or confiscation of products while in transit to our distribution centers; and (b) transportation and other delays in shipments, including as a result of heightened security screening, port congestion, inspection processes, or other port-of-entry limitations or restrictions in the United States.
Because we import many of our products, we are vulnerable to risks associated with products manufactured abroad, including risks of damage, destruction, or confiscation of products while in transit to our distribution centers.
In addition, the facilities of our suppliers and where our manufacturers produce our products are located in parts of Asia that frequently experience typhoons and earthquakes. Criminal acts such as grand theft and acts of terrorism could also cause disruptions in our or our suppliers’, manufacturers’, and logistics providers’ businesses or the economy as a whole.
In addition, the facilities of our suppliers and where our vendors produce our products are located in parts of Asia that frequently experience typhoons and earthquakes.
Additionally, changing weather patterns could also cause disruptions or the complete shutdown of our operations and facilities, thereby impacting our business and consolidated financial statements. We are subject to environmental laws and regulations that expose us to a number of risks and could result in significant liabilities and costs.
Such policies could result in increased production costs including higher energy and raw materials prices, which could negatively impact our financial condition and results of operations. Additionally, changing weather patterns could also cause disruptions or the complete shutdown of our operations and facilities, thereby impacting our business and consolidated financial statements.
Continuing political and social attention to carbon emissions and sustainability may result in the imposition of additional regulations or restrictions to which we may become subject. Such policies could result in increased production costs including higher energy and raw materials prices, which could negatively impact our financial condition and results 23 of operations.
Climate change and sustainability initiatives may result in significant operational changes and expenditures and adversely affect our business. Continuing political and social attention to carbon emissions and sustainability may result in the imposition of additional regulations or restrictions to which we may become subject.
We may not have sufficient protection or recovery plans in place, and such disruptions could materially and adversely impact our financial results and financial condition. Climate change and sustainability initiatives may result in significant operational changes and expenditures and adversely affect our business.
Criminal acts such as grand theft and acts of terrorism could also cause disruptions in our or our vendors’, and logistics providers’ businesses or the economy as a whole. We may not have sufficient protection or recovery plans in place, and such disruptions could materially and adversely impact our financial results and financial condition.
Even after a pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting supply chain disruptions and economic conditions. Our business is subject to the risk of earthquakes, fires, floods, and other catastrophic events including criminal acts and terrorism.
Risks Related to Societal and Environmental Factors Our business is subject to the risk of earthquakes, fires, floods, pandemics, and other catastrophic events including criminal acts and terrorism.
In the course of our normal business, we have purchased products, raw materials, and supplies from our related parties, including an entity owned by our CEO Alan Yu’s brother, Jeff Yu, who until 2021 was employed as an account manager for our national sales team.
In the course of our normal business, we have purchased products from related parties, including an entity owned by one of the Company's stockholder’s family member.
Removed
Further international conflicts, such as the recent ones in the Middle East and Asia, could impact important trade routes, resulting in increased lead times for shipments, elevated freight costs, and suppressed margin.
Added
We typically do not enter into long-term fixed price contracts with our suppliers, and our suppliers could pass on raw material price increases to us.
Removed
Therefore, the success of our business depends significantly on broader economic factors and trends in consumer spending.
Added
Although impairments are non-cash expenses, they could materially and adversely affect our future financial results and financial condition. If our estimates or judgments relating to our critical accounting policies prove to be incorrect or change significantly, our results of operations could be harmed.
Removed
If the industry we operate in experiences a prolonged period of price decreases resulting from lower raw material, product, and ocean freight costs, as well as prolonged customer destocking, we could see a reduction in our sales, gross 16 margin and overall profitability.
Added
Risks Related to the Global Events and International Nature of Our Operations Recent trade policy shifts and regulatory developments, including increased import tariffs and the renegotiation of trade agreements, could have a material adverse impact on our business, financial condition or results of operations. Both global and domestic economic and geopolitical conditions greatly impact our business.
Removed
These lower costs could also reduce the barrier to entry within the foodservice industry thereby increasing competition and potentially affecting our results of operations.
Added
The current federal administration's trade policy shifts, including increased import tariffs and the renegotiation of trade agreements, has increased the level of uncertainty in the global trading environment.
Removed
Similarly, if our competitors lower their prices and expand their promotional activities, we may be forced to lower our prices as well and our business, financial condition, results of operations and cash flows could be materially and adversely effected.
Added
These tariffs, affecting imports from countries such as China, could substantially increase the cost of our products, including raw materials needed for domestic manufacturing, and/or impact our ability to supply certain products to our customers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese partnerships enable us to stay ahead of evolving threats and implement robust strategies to protect critical systems and data in the event of cybersecurity incidents. 30 Internally, our cybersecurity initiatives are led by our Information Technology ("IT") team headed by our experienced IT Manager, who is a Microsoft Certified Professional and holds certifications in CompTIA Network+ and Cisco Networking.
Biggest changeInternally, our cybersecurity initiatives are led by our Information Technology ("IT") team headed by our experienced IT Manager, who is a Microsoft Certified Professional and holds certifications in CompTIA Network+ and Cisco Networking.
The Company uses various techniques to identify cybersecurity risks, including but not limited to input from internal stakeholders, known and potential information security vulnerabilities identified through historical incidents and self-performed assessments, evaluations from third-party consultants, as well as external data including reported security incidents impacting other companies, and industry trends.
The Company uses various techniques to identify cybersecurity risks, including but not limited to input from internal stakeholders, known and potential information security vulnerabilities identified through historical incidents and self-performed assessments, evaluations from third-party consultants, as well as external data including reported security 30 incidents impacting other companies, and industry trends.
During 2024, we also onboarded a Director of IT Research & Development with over 15 years of experience in IT, systems development, and cybersecurity frameworks, including senior roles at Fortune 500 companies. Both these IT leaders play a key role in driving strategies and solutions for system protection and incident management.
During 2024, we onboarded a Director of IT Research & Development with over 15 years of experience in IT, systems development, and cybersecurity frameworks, including senior roles at Fortune 500 companies. Both these IT leaders play a key role in driving strategies and solutions for system protection and incident management.
Governance Cybersecurity is an important part of our risk management processes and an area of focus for senior management. Our Board of Directors has oversight of our strategic and business risk management, and has delegated cybersecurity risk management oversight to the Audit Committee.
Governance 31 Cybersecurity is an important part of our risk management processes and an area of focus for senior management. Our Board of Directors has oversight of our strategic and business risk management, and has delegated cybersecurity risk management oversight to the Audit Committee.
Our cybersecurity risk management program in particular focuses on the following key areas: Risk Assessment and Management At least annually, we conduct a cybersecurity risk assessment to identify key cybersecurity risks, assess the likelihood of the identified risks, and the potential business impact, and develop related mitigation and enhance plans.
Our cybersecurity risk management program in particular focuses on the following key areas: Risk assessment and management We conduct cybersecurity risk assessment to identify key cybersecurity risks, assess the likelihood of the identified risks and the potential business impact, and develop related mitigation and enhancement plans. Our cyber risk management initiatives are integrated within the Company’s overall risk management process.
Collaboration We periodically engage third-party cybersecurity experts to assess and enhance our cybersecurity risk management program, and to ensure compliance with industry best practices and applicable standards.
Collaboration We periodically engage third-party cybersecurity experts to assess and enhance our cybersecurity risk management program, and to ensure compliance with industry best practices and applicable standards. These partnerships enable us to stay ahead of evolving threats and implement robust strategies to protect critical systems and data in the event of cybersecurity incidents.
Removed
Our cyber risk management initiatives are integrated within the Company’s overall risk management process.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−2 removed2 unchanged
Biggest changeWe also lease and operate (i) an approximately 98,000 square foot warehouse storage and distribution facility in Puyallup, Washington, (ii) an approximately 76,000 square foot manufacturing, warehouse storage and distribution facility in Kapolei, Hawaii, (iii) an approximately 23,000 square foot warehouse storage and distribution facility also in Kapolei, Hawaii, (iv) an approximately 44,000 square foot warehouse storage and distribution facility in 31 Mesa, Arizona, (v) an approximately 83,000 square foot warehouse storage and distribution facility in Sugar Land, Texas, and (vi) an approximately 105,000 square foot warehouse storage and distribution facility in Aurora, Illinois.
Biggest changeWe also lease and operate (i) an approximately 98,000 square foot warehouse storage and distribution facility in Puyallup, Washington, (ii) an approximately 76,000 square foot manufacturing, warehouse storage, and distribution facility in Kapolei, Hawaii, (iii) an approximately 23,000 square foot warehouse storage and distribution facility also in Kapolei, Hawaii, (iv) an approximately 44,000 square foot warehouse storage and distribution facility in Mesa, Arizona, (v) an approximately 83,000 square foot warehouse storage and distribution facility in Sugar Land, Texas, (vi) an approximately 105,000 square foot warehouse storage and distribution facility in Aurora, Illinois, and (vii) an approximately 187,000 square foot warehouse storage and distribution facility in Chino, California.
Removed
In addition, we own and operate an approximately 83,000 square-foot warehouse storage and distribution facility in Summerville, South Carolina.
Added
Additionally, we lease an approximately 70,000 square foot warehouse facility in City of Industry, California, which we sublet since April 2024.
Removed
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 a 187,000 square foot distribution center in Chino, California and are currently in the process of setting up this location to be fully operational by the second quarter of 2025.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+4 added−0 removed2 unchanged
Biggest change(2) This number reflects the weighted-average exercise price of outstanding options and has been calculated exclusive of outstanding restricted stock unit awards issued under the Plan. Sales of Unregistered Securities and Repurchases of Securities During the fourth quarter of fiscal 2024, the Company did not sell any unregistered securities and did not repurchase any securities. ITEM 6. [RESERVED] 33
Biggest change(2) This number reflects the weighted-average exercise price of outstanding options and has been calculated exclusive of outstanding restricted stock unit awards issued under the Plan. Sales of Unregistered Securities We did not sell any unregistered equity securities during the year ended December 31, 2025.
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31, 2024 with respect to all of our compensation plans under which equity securities are authorized for issuance: Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Equity compensation plans approved by stockholders 384,467 (1) $18.57 (2) 1,287,017 Total 384,467 $18.57 1,287,017 (1) This amount consists of (i) 70,800 shares of our common stock subject to unvested restricted stock units granted under the Plan, and (ii) 313,667 shares subject to stock options granted under the Plan.
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31, 2025 with respect to all of our compensation plans under which equity securities are authorized for issuance: Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Equity compensation plans approved by stockholders 330,967 (1) $18.56 (2) 1,277,517 Total 330,967 $18.56 1,277,517 (1) This amount consists of (i) 43,500 shares of our common stock subject to unvested restricted stock units granted under the Plan, and (ii) 287,467 shares subject to stock options granted under the Plan.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on the NASDAQ Global Market under the symbol “KRT.” Our common stock commenced public trading on April 15, 2021.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on the NASDAQ Global Market under the symbol “KRT.” Our common stock commenced public trading on April 15, 2021. Holders of Common Stock As of March 10, 2026, we had 2 stockholders of record of our common stock.
Holders of Common Stock As of March 10, 2025, we had approximately 8 stockholders of record of our common stock. Dividends On August 7, 2023, our Board of Directors approved a quarterly cash dividend policy, which we have paid on a regular basis since then.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions. Dividends On August 7, 2023, our Board of Directors approved a quarterly cash dividend policy, which we have paid on a regular basis since then.
Added
Issuer Purchases of Equity Securities The following table sets forth information regarding our purchases of shares of our common stock during the fourth quarter of fiscal year 2025: 33 Period Total Number of Shares Purchased Weighted-Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) (in thousands) October 1, 2025 - October 31, 2025 — — — — November 1, 2025 - November 30, 2025 107,555 $ 21.64 107,555 $ 12,673 December 1, 2025 - December 31, 2025 29,819 $ 22.09 29,819 $ 12,014 Total 137,374 137,374 (1) On November 5, 2025, the Company announced that our Board of Directors approved a share repurchase program (the "Share Repurchase Program"), authorizing us to repurchase up to $15.0 million of our common stock.
Added
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.
Added
All dollar amounts presented in the table above and in this report related to our share repurchases and our share repurchase authorizations exclude the impact of the excise tax imposed on share repurchases pursuant to the Inflation Reduction Act of 2022.
Added
See Note 10 - Stockholders' Equity in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information related to our share repurchases. ITEM 6. [RESERVED] 34

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

67 edited+31 added−23 removed35 unchanged
Biggest changeWe manage and evaluate our operations in one reportable segment. 2024 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. 34 • 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.
Biggest changeFor 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 continue to explore other options to further expand our liquidity to support the 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.
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.
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 42 government grant income.
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.
As described in Note 10 — 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”).
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”).
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 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 and reliable provider of high-quality products relative to our competitors.
As described in Note 8 — Line of Credit in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, the Line of Credit is available for working capital and general corporate purposes, and is secured by our assets.
As described in Note 7 — Line of Credit in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, the Line of Credit is available for working capital and general corporate purposes, and is secured by our assets.
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 37 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.
Recent Accounting Pronouncements Information regarding recent accounting pronouncements is contained in Note 2 — Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Recent Accounting Pronouncements 44 Information regarding recent accounting pronouncements is contained in Note 2 — Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Conversely, periods of deflation, where raw material costs decrease, may create pricing pressure and start price wars, potentially requiring us to lower prices, 35 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.
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.
Elevated ocean freight rates 36 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.
Additionally, as discussed in Note 19 — 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.
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.
Starting in 2023 and continuing into 2024, 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.
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.
As of December 31, 2024, 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 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.
Additionally, as of December 31, 2024, 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.
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 41 up to a maximum of $6.9 million through September 2022, which we exercised in February 2022.
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. Non-GAAP Financial Measures We use certain non-GAAP financial measures to assess our financial and operating performance that are not defined by, or calculated in accordance with U.S. GAAP.
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 39 We use certain non-GAAP financial measures to assess our financial and operating performance that are not defined by, or calculated in accordance with U.S. GAAP.
These additional allowances could materially affect our future financial results. As of December 31, 2024, and 2023, we had a total allowance for doubtful accounts of $0.8 million and $0.4 million, respectively.
These additional allowances could materially affect our future financial results. As of December 31, 2025, and 2024, we had a total allowance for doubtful accounts of $0.6 million and $0.8 million, respectively.
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.
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.
It consists of a $40.0 million revolving loan facility and a standby letter of credit sublimit. 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.
It consists of a $20.0 million revolving loan facility and a standby letter of credit sublimit. 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 3, 2025, the Company amended the Line of Credit.
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, 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.
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. • 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.
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.
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 $3.1 million as of December 31, 2024, the amount of the final payments could vary significantly from the estimated liability reserve.
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.
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.
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.
In addition, we operate seven other warehouse spaces and distribution centers located in Puyallup, Washington; Summerville, South Carolina; Branchburg, New Jersey; Kapolei, Hawaii; Aurora, Illin ois; Mesa, Arizona; and Sugar Land, Texas. 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.
In addition, we operate seven othe r distribution centers lo cated in Puyallup, Washington; Branchburg, New Jersey; Kapolei, Hawaii; Aurora, Illin ois; Mesa, Arizona; 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.
We had an inventory reserve of $0.6 million and $0.4 million as of December 31, 2024, and 2023, respectively.
We had an inventory reserve of $0.7 million and $0.6 million as of December 31, 2025, and 2024, respectively.
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. We present Free Cash Flow as a supplemental measure of our financial liquidity.
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. 40 We present Free Cash Flow as a supplemental measure of our financial liquidity.
Set forth below is a reconciliation of net cash provided by operating activities to Free Cash Flow: Year Ended December 31, Reconciliation of Free Cash Flow (unaudited): 2024 2023 (in thousands) Net cash provided by operating activities $ 47,982 $ 53,379 Add (deduct): Purchases of property and equipment (934) (2,835) Deposits paid for property and equipment (3,134) (6,309) Deposits refunded from cancelled machinery orders — 503 Free Cash Flow $ 43,914 $ 44,738 Liquidity and Capital Resources Sources and Uses of Funds Our primary sources of liquidity are cash provided by operations, borrowings under our line of credit with the Hanmi Bank (the “Line of Credit”), and promissory notes.
Set forth below is a reconciliation of net cash provided by operating activities to Free Cash Flow: Year Ended December 31, Reconciliation of Free Cash Flow (unaudited): 2025 2024 (in thousands) Net cash provided by operating activities $ 33,815 $ 47,982 Add (deduct): Purchases of property and equipment (756) (934) Deposits paid for property and equipment (3,749) (3,134) Free Cash Flow $ 29,310 $ 43,914 Liquidity and Capital Resources Sources and uses of funds Our primary sources of liquidity are cash provided by operations, borrowings under our line of credit with the Hanmi Bank (the “Line of Credit”), and promissory notes.
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.
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.
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%.
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%.
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 $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 Related Party Transactions For a description of significant related party transactions, see Note 14 — Related Party Transactions in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
As of December 31, 2024, we had no borrowing on the Line of Credit, $27.7 million in outstanding balance under the 2027 Term Loan, and $20.9 million in outstanding balance under the 2026 Term Loan.
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.
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.
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.
Adjusted EBITDA and Adjusted EBITDA Margin 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) secondary 38 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 and Adjusted EBITDA Margin 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.
Year Ended December 31, Reconciliation of Adjusted EBITDA (unaudited): 2024 2023 (in thousands, except percentages) Amount % of Net Sales Amount % of Net Sales Net income $ 30,824 7.3 % $ 33,180 8.2 % Add (deduct): Interest income (2,299) (0.5) (1,803) (0.4) Interest expense 2,123 0.5 2,043 0.5 Provision for income taxes 9,871 2.3 9,804 2.4 Depreciation and amortization 10,675 2.5 10,783 2.7 Stock-based compensation expense 2,065 0.5 770 0.2 Secondary offering transaction costs (1) — — 453 0.1 Write-off of inventory (2) — — 1,710 0.4 Impairment expense and loss, net, on disposal of machinery (2) — — 2,132 0.5 Operating right-of-use asset impairment 1,993 0.5 — — Adjusted EBITDA $ 55,252 13.1 % $ 59,072 14.6 % (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.
Year Ended December 31, Reconciliation of Adjusted EBITDA (unaudited): 2025 2024 (in thousands, except percentages) Amount % of Net Sales Amount % of Net Sales Net income $ 32,664 7.0 % $ 30,824 7.3 % Add (deduct): Interest income (2,210) (0.5) (2,299) (0.5) Interest expense 2,055 0.4 2,123 0.5 Provision for income taxes 10,358 2.3 9,871 2.3 Depreciation and amortization 10,891 2.3 10,675 2.5 Stock-based compensation expense 1,182 0.3 2,065 0.5 Secondary offering transaction costs (1) 214 — — — Impairment of operating right-of-use asset — — 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 by certain executive officers and stockholders of the Company, which were directly related to the offering and were incremental to our normal operating expenses.
Cash Flows The following table summarizes cash flow for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 47,982 $ 53,379 Net cash used in investing activities (5,855) (30,174) Net cash used in financing activities (33,619) (16,170) Net change in cash and cash equivalents $ 8,508 $ 7,035 Cash flows provided by operating activities .
Cash flows The following table summarizes cash flow for the years ended December 31, 2025 and 2024: 43 Year Ended December 31, 2025 2024 (in thousands) Net cash provided by operating activities $ 33,815 $ 47,982 Net cash provided by (used in) investing activities 25,399 (5,855) Net cash used in financing activities (52,918) (33,619) Net change in cash and cash equivalents $ 6,296 $ 8,508 Cash flows provided by operating activities .
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.
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.
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%.
Cost of goods sold 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%.
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. • 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.
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.
Interest accrues at a 40 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. The 2026 Term Loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of our stockholders.
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.
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.
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.
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.
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.
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%.
Net income 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%.
In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio.
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.
Gross profit 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.
Gross profit 38 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%.
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.
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.
Results of Operations Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 36 Year Ended December 31, 2024 2023 (in thousands) Net sales $ 422,633 $ 405,651 Cost of goods sold 258,304 252,608 Gross profit 164,329 153,043 Operating expenses 126,568 110,967 Operating income 37,761 42,076 Other income, net 2,934 908 Provision for income taxes 9,871 9,804 Net income $ 30,824 $ 33,180 Net sales 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%.
Results of Operations Year ended December 31, 2025 compared to the year ended December 31, 2024 Year Ended December 31, 2025 2024 (in thousands) Net sales $ 467,743 $ 422,633 Cost of goods sold 295,607 258,304 Gross profit 172,136 164,329 Operating expenses 130,722 126,568 Operating income 41,414 37,761 Other income, net 1,608 2,934 Provision for income taxes 10,358 9,871 Net income $ 32,664 $ 30,824 Net sales 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%.
On June 11, 2024, CBP completed the administrative review and upheld its initial conclusion. 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.
On June 11, 2024, CBP completed the administrative review and upheld its initial conclusion. In February 2025, we started to receive bills related to certain of our thermal paper shipments. 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 believe this measure also provides investors with an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business. 39 Free Cash Flow should not be considered in isolation or as alternatives to net income or cash flows from operating activities.
Free Cash Flow assists management in assessing our ability to fund growth through generation of additional cash from business operations. We believe this measure also provides investors with an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business.
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.
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.
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%. The Company’s effective tax rate was 24.3% for the year ended December 31, 2024 compared to 22.8% for the year ended December 31, 2023.
Provision for income taxes 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%.
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.
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.
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. The 2027 Term Loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of our stockholders.
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.
Liquidity Position The following table summarizes total current assets, current liabilities, and working capital at December 31, 2024 compared to December 31, 2023: December 31, 2024 December 31, 2023 Increase (in thousands) Current assets $ 160,997 $ 154,929 $ 6,068 Current liabilities 46,447 44,401 2,046 Working capital $ 114,550 $ 110,528 $ 4,022 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%.
Liquidity position The following table summarizes total current assets, current liabilities, and working capital at December 31, 2025 compared to December 31, 2024: December 31, 2025 December 31, 2024 Increase/(Decrease) (in thousands) Current assets $ 161,188 $ 160,997 $ 191 Current liabilities 70,220 46,447 23,773 Working capital $ 90,968 $ 114,550 $ (23,582) 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.
Also, Free Cash Flow is not necessarily comparable to similarly titled measures presented by other companies.
Free Cash Flow should not be considered in isolation or as alternatives to net income or cash flows from operating activities. Also, Free Cash Flow is not necessarily comparable to similarly titled measures presented by other companies.
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 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.
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. As of December 31, 2024, the amount issued under the standby letter of credit was $3.8 million, and the maximum remaining amount that could be borrowed under the Line of Credit was $36.2 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 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.
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.
In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio.
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.
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.
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.
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.
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 .
In addition, we may consider making strategic acquisitions and investments which could require significant liquidity. The rapidly 41 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.
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.
At December 31, 2025, we had operating leases, primarily for manufacturing and distribution facilities, expiring at various dates through 2031.
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.
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.
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.
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.
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.
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.
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%.
Operating expenses 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.
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 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 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 decrease in effective tax rate was primarily due to the deferred taxes true-up.
However, it could also reduce the barrier of entry, intensifying the competition. • U.S. foreign trade policy continues to evolve, such as the imposition of tariffs on imports from China and other countries.
However, it could also reduce the barrier of entry, intensifying the competition. • 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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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 have strategically and swiftly realigned our global supply chain in 2025 against a backdrop of higher tariffs.
Removed
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.
Added
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. 35 • We continued to expand our eco-friendly product offerings, contributing to meaningful sales growth.
Removed
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.
Added
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.
Removed
Inventory reserve adjustment for the year ended December 31, 2024 increased $0.6 million from the year ended December 31, 2023.
Added
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.
Removed
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.

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