Revenue and Profitability - Revenue for the year ended December 31, 2025, was $11,425,463, representing a 15% increase from $9,901,987 in 2024, primarily driven by increased sales of the Freedom Alert Mini[144] - Gross profit for 2025 was $7,630,601, maintaining a gross profit margin of 67%, consistent with 2024[145] - The company generated an operating loss of $7.9 million and a net loss of $7.5 million for the year ended December 31, 2025[157] - Interest income for 2025 was $397,658, a 148% increase from $160,664 in 2024[154] Operating Expenses and Financial Position - Total operating expenses increased to $15,529,893 in 2025, up from $14,286,724 in 2024, reflecting a $1,243,169 increase[146] - Cash and cash equivalents as of December 31, 2025, were $3.6 million, with total investments of $5.9 million, resulting in working capital of $9.7 million, up from $3.3 million in 2024[157] - The company raised approximately $14.4 million in gross proceeds from a public offering in February 2025, which will be used for new product development and working capital[137] - The company plans to raise additional funds through equity or debt offerings to support its long-term strategic plan for product development[158] Stock and Market Compliance - The company completed a reverse stock split of 1-for-750 on October 28, 2025, consolidating shares to enhance stock price compliance[141] - The company’s common stock was delisted from Nasdaq and is now traded on the OTC Markets under the symbol "LGMK" due to non-compliance with minimum bid price requirements[140] Business Model and Growth Strategy - The company continued to build a durable business model with a recurring revenue base to generate significant cash flow and invest in efficient growth during the year ended December 31, 2025[164] - The company has maintained profit margins through higher productivity, better supply chain management, and transferring much of its contract manufacturing from China and Hong Kong to Taiwan[165] Risk Management and Compliance - The company does not have any off-balance sheet arrangements or undisclosed borrowings, minimizing exposure to financing, liquidity, market, or credit risk[166] - The company conducts an annual goodwill impairment test in the fourth quarter, evaluating if fair value may be less than carrying value[168] - The company is not required to provide market risk disclosures as it qualifies as a smaller reporting company[174] Revenue Recognition - Revenue primarily consists of product sales to end customers or resellers, with most sales recognized at a point-in-time when control transfers to the customer[170] - For contracts with multiple performance obligations, the company allocates the transaction price based on relative standalone selling price, requiring management judgment[171] - The company recognizes revenue from leased products and monthly subscription services based on the predominant component of the contract[172] Inventory Management - Regular reviews of inventory quantities are performed, with adjustments made for excess, obsolete, and slow-moving inventory[173] Economic Impact - The company has been modestly impacted by inflationary trends over the past four fiscal years, with potential cost increases due to U.S. administration's tariff activities expected in fiscal year 2026[165]

Financial Performance - Net income for the year ended December 31, 2025, increased to $15,826, up from $7,623 in 2024, reflecting a significant growth due to net interest margin expansion and a lower provision for credit losses [161]. - Interest income rose to $75,313 in 2025 from $70,035 in 2024, while interest expense decreased to $29,752 from $33,724, resulting in a net interest income of $45,561 compared to $36,311 in the previous year [161]. - The net interest margin improved to 2.66% in 2025 from 2.19% in 2024, indicating enhanced profitability of interest-generating activities [161]. - The efficiency ratio improved to 60.70% in 2025 from 68.90% in 2024, demonstrating better operational efficiency [167]. - The return on average assets increased to 0.87% in 2025 from 0.44% in 2024, while the return on average equity rose to 9.29% from 5.17% [161]. - Total noninterest income for 2025 was $10,002 million, an increase of $956 million or 10.57% compared to $9,046 million in 2024 [196]. - Total noninterest expense for 2025 was $36,413 million, reflecting an increase of $1,405 million or 4.01% from $35,008 million in 2024 [202]. Asset Quality - The company recorded a recovery of provision for credit losses of $16 in 2025, compared to a provision of $1,227 in 2024, indicating improved credit quality [161]. - Nonaccrual loans decreased significantly to $188 million from $2,222 million, indicating improved asset quality [173]. - The ratio of ACLL to loans net of deferred fees and costs improved to 0.99% in 2025 from 1.04% in 2024, indicating better credit risk management [173]. - Nonperforming loans to total loans decreased to 0.02% in 2025 from 0.22% in 2024, with nonaccrual loans at $188 million compared to $2,222 million in the previous year [219]. - The total net charge-offs for 2025 were $307 million, with a charge-off percentage of 0.03% to average loans, consistent with the previous year [221]. Loan and Deposit Growth - As of December 31, 2025, net loans increased to $989,418 million, reflecting a growth of 1.20% compared to $977,688 million in 2024 [169]. - Customer deposits decreased to $1,626,933 million, down 1.08% from $1,644,752 million in 2024, due to strategic pricing adjustments on time deposits [171]. - Total loans, net of deferred fees and costs, increased to $989,418 million in 2025 from $977,688 million in 2024, reflecting growth in various loan categories [212]. - Total deposits decreased by 1.08% to $1,626,933 million in 2025 from $1,644,752 million in 2024, with noninterest-bearing demand deposits increasing by 7.91% [246]. - The Company had a loan to deposit ratio of 61.42% as of December 31, 2025, indicating effective management of loan and deposit growth [262]. Capital and Borrowing - Stockholders' equity improved to $184,908 million, an increase of 18.22% from $156,409 million, attributed to reduced unrealized losses on securities and retained earnings [172]. - The Common Equity Tier I Capital Ratio was 16.16% as of December 31, 2025, exceeding the regulatory minimum of 4.50% [268]. - The Company has borrowing capacity of $306,870 from the FHLB and $190,586 from the Federal Reserve discount window, with no amounts advanced against those lines [257]. - The Company is well-capitalized as of December 31, 2025, with no restrictions on purchased deposits or borrowing ability at the Federal Reserve discount window [259]. Operational Developments - The acquisition of FCB on June 1, 2024, added $118,743 in loans, $129,717 in deposits, and $14,299 in equity to the balance sheet, along with one-time expenses of $2,916 and a provision for credit loss of $1,290 [158]. - The core system conversion was completed in the second quarter of 2025, which is expected to enhance operational capabilities moving forward [157]. - The Federal Reserve's interest rate cuts between September 2024 and December 2025 eased deposit pricing pressure, positively impacting the financial performance for the fourth quarter of 2024 [156]. Income and Expense Analysis - Salaries and employee benefits rose to $20,858 million, an increase of $1,677 million or 8.74% compared to $19,181 million in 2024, due to the addition of employees and merit adjustments [202]. - Trust income increased by $295 million or 13.55%, reaching $2,472 million in 2025, reflecting the Company's investment in business development [196][199]. - Other income rose to $1,312 million, an increase of $278 million or 26.89% from $1,034 million in 2024, driven by improved commissions from investment and insurance sales [196][200]. - The Company reported an income tax expense of $3,340 million for 2025, compared to $1,499 million in 2024, with an effective tax rate of 17.43% for 2025 [208].

Loan Portfolio - As of December 31, 2025, commercial real estate loans totaled $401.4 million, representing 53.2% of the loan portfolio[188] - The non-owner occupied commercial loan portfolio amounted to $321.7 million, or 42.6% of the total loan portfolio[188] - One- to four-family residential real estate loans accounted for $258.5 million, or 34.2% of the loan portfolio[190] - The real estate loans accounted for 93.20% of the total loan portfolio, with the largest segment being commercial investor loans at $321.7 million, which is 42.61% of total loans[430] - Total loans amounted to $754,921 million, with a notable increase from $195,389 million in the previous period[1] - Total loans as of December 31, 2025, amounted to $754,921,000, an increase from $737,760,000 in 2024, representing a growth of approximately 2.3%[449] - The total real estate loans reached $703,552,000 in 2025, up from $694,892,000 in 2024, indicating a year-over-year increase of about 1.9%[449] - The total balance for One to four family - owner occupied loans reached $163.964 million, with $34.231 million in Pass Special Mention[442] - The total balance for One to four family - non owner occupied loans was $94.511 million, with $8.148 million in Pass[442] - The total balance for Commercial investor loans was $321.675 million, with $34.551 million in Pass Special Mention[442] Credit Quality and Allowance for Credit Losses - The allowance for credit losses was 0.85% of total loans and 284.72% of non-performing loans as of December 31, 2025[196] - The allowance for credit losses decreased to $6.4 million as of December 31, 2025, down from $8.5 million in the previous year, indicating improved credit quality[430] - The provision for credit losses per the Consolidated Statement of Income showed a recovery of $(2,429) thousand in 2025 compared to $(203) thousand in 2024[440] - The total amount of substandard loans was $7,437 million, indicating potential risks in the loan portfolio[4] - The total amount of loans classified as loss was negligible, suggesting effective collection strategies[4] - The total estimated collateral values for loans were $12,574 million, providing a buffer against potential losses[4] Financial Performance - Net income for 2025 was $13,495 thousand, up from $11,723 thousand in 2024, indicating a growth of 15.1%[359] - Basic earnings per share increased to $1.44 in 2025 from $1.10 in 2024, reflecting a growth of 30.9%[359] - Total interest income increased to $49,707 thousand in 2025, compared to $46,682 thousand in 2024, marking an increase of 6.5%[359] - The company reported a total comprehensive income of $13,986 thousand in 2025, compared to $12,060 thousand in 2024, an increase of 15.9%[361] - Total stockholders' equity decreased to $183,804 thousand in 2025 from $195,499 thousand in 2024, a decline of 6.0%[356] Deposits and Liquidity - Total deposits increased by $24.6 million, or 3.8%, to $676.1 million at December 31, 2025, from $651.5 million at December 31, 2024[210] - Liquidity is essential, and significant deposit withdrawals could materially reduce liquidity, requiring replacement with higher-cost borrowings[212] - Noninterest-bearing checking accounts increased to $138,360,000 (20.46% of total deposits) in 2025 from $129,724,000 (19.91%) in 2024[461] Regulatory and Operational Risks - The company is subject to extensive regulation, which may increase operational costs and limit business opportunities[213] - The reliance on technology poses operational risks, including potential failures, interruptions, or security breaches[225] - The company has experienced a rise in security breaches and cyber-attacks within the financial services industry, particularly in the commercial banking sector, necessitating increased resources for protective measures[228] - The company outsources critical operations to third-party service providers, which exposes it to risks related to system failures and cybersecurity breaches[232] Market and Economic Conditions - Economic conditions, especially local conditions, could lead to increased loan delinquencies and non-performing loans, adversely affecting financial results[203] - Inflation levels have remained elevated, impacting the value of assets and increasing noninterest expenses[206] - Changes in interest rates could reduce profits and asset values, affecting the company's overall financial condition[198] - Changes in trade policies and tariffs could negatively impact economic conditions and customer financial stability, leading to increased loan delinquencies[208] Mergers and Acquisitions - The company continually evaluates merger and acquisition opportunities to expand market presence and improve profitability through economies of scale[237] - Acquisitions may involve risks such as payment of premiums that could dilute tangible book value and earnings per share, as well as potential integration challenges[238] - Future results will depend on the successful integration of acquired institutions and retention of their employees and customers[240] Cybersecurity - The company has cyber liability insurance, but there are limitations on coverage, and significant costs could be incurred from potential breaches[227] - The Board of Directors actively monitors cybersecurity risk tolerance and receives annual training, but relies on management and outside consultants for oversight[231] Stock and Compensation - The Company recognized $1.7 million in compensation expense related to stock options for the year ended December 31, 2025, up from $667,000 in 2024[482] - The intrinsic value of stock options outstanding as of December 31, 2025, was $3,156,104[482] - The Company granted zero shares of restricted stock in 2025, compared to 343,562 shares in 2024, with related compensation expenses of $2.2 million and $986,000, respectively[484]

Financial Position - As of December 31, 2025, the company's cash, cash equivalents, and investments totaled $140.4 million, expected to last through at least December 31, 2027[292]. - The company sold 1,181,540 shares at $16.25 per share on October 30, 2024, yielding net proceeds of approximately $17.8 million[293]. - On December 23, 2024, the company sold 798,655 shares at $23.79 per share, generating net proceeds of approximately $37.4 million[294]. - The company reported a net loss of $13.7 million for the year ended December 31, 2025, an improvement from a net loss of $15.6 million in 2024, representing a decrease of $1.87 million[323]. - Cash flow used in operating activities increased to $12.2 million in 2025 from $6.4 million in 2024, primarily due to a $3 million payment related to the in-licensing of ALXN1840[332]. - Cash flow provided by financing activities increased to $91.6 million in 2025, up from $59.3 million in 2024, primarily due to net proceeds from a capital raise[332]. - The company has an accumulated deficit of approximately $89.5 million as of December 31, 2025, and anticipates continued losses in the foreseeable future[328]. - The company plans to fund operations through various methods, including the sale of common stock and strategic partnerships, with available funds expected to last through December 31, 2027[328]. Research and Development - A pivotal Phase 3 clinical trial for ALXN1840 enrolled 214 patients, demonstrating three-times greater copper mobilization compared to standard-of-care (LSM Diff 2.18 µmol/L; p< 0.0001)[298]. - Patients on ALXN1840 showed improved neurological symptoms (45% vs. 20% for SoC) and fewer worsened symptoms (5% vs. 17% for SoC) in the Phase 3 trial[299]. - The company expects to submit its NDA for ALXN1840 in mid-2026, pending further regulatory discussions[306]. - MNPR-101-Zr received regulatory clearance in Australia for a Phase 1 imaging trial, with the first patient enrolled in July 2024[309]. - The company presented significant uptake data for MNPR-101-Zr in advanced ovarian cancer at the European Association of Nuclear Medicine Annual Congress 2024[310]. - The FDA cleared the IND application for MNPR-101-Lu on September 26, 2025, for a Phase 1 trial targeting uPAR-expressing tumors[312]. - The company is advancing the development of ALXN1840 for Wilson disease and has two active clinical trials for its MNPR-101 radiopharmaceutical program[314]. - Anticipated expenses will significantly increase due to the development and commercialization of the ALXN1840 investigational drug candidate and ongoing clinical trials for MNPR-101-Zr and MNPR-101-Lu[337]. Expenses and Income - Research and development (R&D) expenses decreased to $9.9 million in 2025 from $13.0 million in 2024, a reduction of $3.1 million primarily due to the absence of one-time expenses related to the in-licensing of ALXN1840[324]. - General and administrative (G&A) expenses increased to $6.8 million in 2025 from $3.2 million in 2024, an increase of $3.6 million attributed to higher board compensation and personnel expenses[325]. - Interest income rose significantly to $3.0 million in 2025, up from $404,000 in 2024, an increase of $2.6 million due to higher bank balances and interest earned on investments[327]. - The company incurred a total operating expense of $16.7 million in 2025, slightly higher than $16.2 million in 2024, resulting in an operating loss of $16.7 million[323]. - The company has not generated any revenue from product sales to date and does not expect to do so until regulatory approval and commercialization of drug candidates occur[336]. Future Plans and Agreements - Future capital requirements will depend on obtaining regulatory approvals, establishing sales and marketing infrastructure, and developing manufacturing capabilities[339]. - The company has entered a License Agreement with Alexion, issuing 387,329 shares and agreeing to a $4.0 million upfront cash payment, with potential milestone payments of up to $94.0 million[344][345]. - The company has a long-term supply agreement with NorthStar for actinium-225, enhancing its ownership of the MNPR-101 radiopharmaceutical platform[347]. - A non-exclusive license with XOMA Ltd. for humanization technology may require payments totaling up to $14.925 million upon achieving certain milestones[348]. - The company plans to finance future cash needs primarily through equity offerings, debt financings, and strategic collaborations, which may dilute current stockholders' ownership[343]. - The company has entered into various service agreements for R&D and may require additional long-term commitments for future collaborations[349]. - The company has no current material legal proceedings and has not incurred any indemnification claims to date[351][352].

Industry Risks and Competition - The company faces significant risks in the rapidly developing holographic technology service industry, which requires continuous strategic investments and product development to meet customer needs[44]. - Intense competition in the holographic service market may lead to pricing pressures, affecting profitability and customer retention[47]. - The market adoption of LiDAR technology, particularly holographic LiDAR, remains uncertain, which could adversely affect the company's business if adoption does not progress as expected[50]. - Future revenue growth is anticipated to depend on the company's ability to expand into new markets outside of automotive applications, such as industrial and security robots[52]. - Continued pricing pressures from automotive OEMs could lead to low profitability or losses if production cost savings are not achieved[66]. Financial Performance and Investments - Research and development of new technologies necessitates substantial investments, with no guarantee of successful returns on these investments[45]. - The company expects to incur substantial research and development costs, which may significantly reduce profitability without guaranteed revenue generation[56]. - The development cycle for new products in the automotive market can take five to seven years, leading to significant resource investment before revenue realization[63]. - The company may need to raise additional capital in the future to support its business plan, which could lead to dilution for existing shareholders if not secured on favorable terms[58]. - The company has a high customer concentration, with the top five customers accounting for approximately 48.9% of revenues for the year ended December 31, 2025[60]. Operational and Management Challenges - Rapid growth has placed significant strain on management and resources, with future growth uncertain and dependent on various external factors[68]. - Attracting and retaining skilled personnel is critical for success, with intense competition for qualified employees in the technology sector[69]. - Management has limited experience in operating a public company, which may strain resources and affect growth[87]. - The company identified material weaknesses in its internal control over financial reporting, which could lead to misstatements in financial statements[94]. - The company lacks sufficient resources regarding financial reporting and accounting personnel familiar with U.S. GAAP, which may hinder compliance[95]. Regulatory and Compliance Risks - The company is subject to evolving PRC laws and regulations governing Internet-related industries, which may create compliance challenges[88]. - The company faces risks related to data security and protection, which could lead to increased compliance costs and potential penalties[92]. - The evolving regulatory landscape in China regarding data security and privacy may impact the company's operations and compliance requirements[119]. - The PRC legal system's uncertainties regarding enforcement of laws could materially affect the company's business operations and legal protections[116]. - The Cybersecurity Law (CSL) became effective in June 2017, imposing penalties for violations, including fines and business suspensions[124]. Taxation and Financial Regulations - The PRC enterprise income tax law may classify the company as a "PRC resident enterprise," subjecting it to a 25% tax rate on worldwide income[136]. - Non-PRC resident holders of Ordinary shares may face a 10% withholding tax on dividends sourced from within the PRC[141]. - The withholding tax rate on dividends paid by PRC subsidiaries to foreign investors is currently 10%, which may be reduced to 5% under certain conditions[143]. - The PRC tax authorities may adjust capital gains and impose tax obligations on internal restructuring, potentially increasing costs and affecting investment value[142]. - Compliance with labor laws in China may increase operating expenses and affect employment policies, potentially leading to penalties[153]. Market and Economic Conditions - Adverse changes in China's economic, political, or social conditions could materially affect the company's financial condition and results[102]. - The global macroeconomic environment presents challenges that could adversely affect the company's business and financial condition[105]. - The U.S. government announced an additional 10% tariff on all Chinese goods effective March 3, 2025, citing fentanyl concerns, leading to a 15% tariff on certain U.S. imports by China[106]. - Fluctuations in the Renminbi against the U.S. dollar could adversely affect the company's financial results and investment value[176]. - Government controls on currency conversion may limit the company's ability to utilize revenues effectively and affect the value of investments[177]. Shareholder and Market Risks - The company does not intend to pay cash dividends for the foreseeable future, focusing instead on business development and expansion[197]. - The trading prices of the company's ordinary shares may be volatile due to market fluctuations and investor sentiment towards PRC companies[195]. - The company may be subject to securities litigation, which could divert management's attention and incur substantial costs[198]. - Sales of substantial amounts of ordinary shares could adversely affect the market price and the company's ability to raise capital[200]. - The lack of coverage or unfavorable research from analysts could negatively impact the trading price and volume of the company's ordinary shares[201].

Financial Performance - Net sales for the three months ended February 28, 2026, were $154.807 million, an increase of 6.8% compared to $145.528 million for the same period in 2025[13] - Gross profit for the six months ended February 28, 2026, was $144.997 million, down 2.3% from $148.083 million in the prior year[13] - Operating profit decreased to $25.020 million for the three months ended February 28, 2026, compared to $30.820 million in the same period of 2025, reflecting a decline of 18.8%[13] - Net earnings for the three months ended February 28, 2026, were $16.308 million, a decrease of 22.5% from $20.901 million in the prior year[13] - Earnings per share (EPS) for the three months ended February 28, 2026, were $0.31, down from $0.38 in the same period of 2025, representing a decline of 18.4%[13] - Comprehensive income for the three months ended February 28, 2026, was $24.131 million, an increase from $16.074 million in the same period of 2025[15] - Net earnings for the six months ended February 28, 2026, were $35,439 thousand, a decrease of 16.2% compared to $42,624 thousand in the same period of 2025[21] - The company reported a net income of $21,723,000 for the fiscal year ending August 31, 2024[24] Assets and Liabilities - Total assets as of February 28, 2026, were $795.495 million, a decrease from $827.867 million as of August 31, 2025[18] - Cash and cash equivalents decreased to $98.719 million from $151.558 million as of August 31, 2025, indicating a decline of 34.9%[18] - Current liabilities remained relatively stable at $136.420 million compared to $137.102 million as of August 31, 2025[18] - Total liabilities as of February 28, 2026, were $387.960 million, a slight decrease from $394.173 million as of August 31, 2025[18] - Total shareholders' equity as of February 28, 2026, was $407,535 thousand, down from $433,694 thousand at the end of August 31, 2025[23] - The accumulated other comprehensive loss decreased to $100,928 thousand from $104,134 thousand, indicating a slight improvement in overall financial health[29] Cash Flow and Investments - Cash provided by operating activities increased to $29,027 thousand, up from $16,108 thousand year-over-year, reflecting improved operational efficiency[21] - Capital expenditures for the six months were $5,734 thousand, significantly lower than $11,517 thousand in the prior year, indicating a reduction in investment spending[21] - The company reported a net decrease in cash and cash equivalents of $52,839 thousand, compared to a decrease of $47,585 thousand in the previous year[21] - The company did not make any cash payments for business acquisitions during the six months ended February 28, 2026, compared to $27,196 thousand in the prior year[21] - Capital expenditures for the consolidated total in the three months ended February 28, 2026, were $3.057 million, a decrease of 46.0% from $5.660 million in the prior year[70] Segment Performance - For the three months ended February 28, 2026, the IT&S segment reported net sales of $148.685 million, a 5.4% increase from $140.716 million in the prior year[69] - The gross profit for the IT&S segment for the three months ended February 28, 2026, was $68.751 million, down from $71.505 million in the prior year, indicating a decrease of 3.9%[70] - The operating profit for the IT&S segment for the three months ended February 28, 2026, was $31.520 million, a decline of 18.5% from $38.736 million in the prior year[70] - The IT&S segment's operating profit margin for the three months ended February 28, 2026, was 21.2%, down from 27.1% in the prior year[70] Restructuring and Acquisitions - The company reported restructuring charges of $3.283 million for the three months ended February 28, 2026, with no such charges in the prior year[13] - The company recorded $3.3 million in restructuring costs in the second quarter of fiscal 2026 as part of a plan to align the IT&S segment with current market conditions[47] - The acquisition of DTA was completed for an initial purchase price of $26.7 million, with potential earn-out payments of up to €36.0 million based on financial performance[49] Debt and Financing - The Company has $187.5 million in long-term debt as of February 28, 2026, down from $190 million as of August 31, 2025, after accounting for current maturities[52] - The Company refinanced its senior credit facility in September 2022, establishing a $600 million facility with a $400 million revolving line of credit and a $200 million term loan, maturing in September 2027[53] - The Company was in compliance with all financial covenants under the credit facility as of February 28, 2026, including a net leverage ratio not exceeding 3.75 to 1.00[54] Shareholder Activities - The Company repurchased 1,655,307 shares for $65.9 million in the six months ended February 28, 2026, under a new share repurchase program authorized in October 2025[63] - The cash dividend declared was $0.04 per share, resulting in a total cash dividend of $1,000 for the period[23] - The Company has repurchased a total of 33,436,688 shares for $973.5 million since the inception of its initial share repurchase program in fiscal 2012[63] Tax and Compliance - The effective income tax rate for the Company was 26.3% for the three months ended February 28, 2026, compared to 24.5% for the same period in 2025[65] - The effective tax rate for the three months ended February 28, 2026, was 26.3%, an increase from 24.5% in the prior year, primarily due to year-to-date losses and deductions in jurisdictions without tax benefits[66]

IPO and Share Structure - The company completed its IPO on April 4, 2023, issuing 2,400,000 Class A Ordinary Shares at a public offering price of $4.00 per share, raising approximately $8.5 million in net proceeds after expenses[37]. - The company has undergone significant share capital amendments, including a subdivision of its share capital to 400,000,000 Class A Ordinary Shares and 100,000,000 Class B Ordinary Shares[40]. - As of the date of the report, Shengfeng Logistics is held by various shareholders, with the largest being Fujian Yunlian Shengfeng Industry Co., Ltd. at 54.58%[43]. Subsidiaries and Corporate Structure - The company has a corporate structure that includes 31 majority owned/wholly owned subsidiaries, primarily engaged in transportation and warehouse storage management services[30]. - The company has established multiple subsidiaries across various provinces in China, focusing on transportation and warehouse storage management services, with ownership percentages ranging from 51% to 100%[24][25][26][27][28][29][30][31][32][33][34][35][36][41][42][43][44][45][46][47][48][49][50][51][52]. - The company has a diverse portfolio of subsidiaries across various provinces in China, all focused on logistics and supply chain management[44]. - The company is actively expanding its operations and services through new subsidiaries and technology initiatives to enhance its market position[31][32]. VIE Structure and Agreements - The company controls and receives economic benefits from its VIE, Shengfeng Logistics, through contractual arrangements, allowing consolidation of financial results under U.S. GAAP[39]. - The VIE Agreements, effective since January 7, 2021, allow the company to consolidate the financial results of Shengfeng Logistics and its subsidiaries under U.S. GAAP, despite not owning shares directly[47][48]. - The company is regarded as the primary beneficiary of the VIE for accounting purposes, enabling it to treat the VIE and its subsidiaries as consolidated entities[48]. - The Technical Consultation and Service Agreement stipulates that the service fees collected by the company from Shengfeng Logistics are based on 50% of the after-tax income, plus a floating fee determined by various factors[50]. - The Technical Consultation and Service Agreement is effective for 20 years and can be extended unilaterally by the company prior to expiration[51]. - The Equity Pledge Agreement ensures that Shengfeng Logistics Shareholders pledged 100% of their shares to Tianyu to guarantee performance under the Technical Consultation and Service Agreement[53]. - The Call Option Agreement allows Tianyu to purchase all or part of the shares in Shengfeng Logistics for RMB1, ensuring Tianyu's control over the company[57]. - The Voting Rights Proxy Agreement enables Tianyu to exercise all shareholder rights, including voting and appointing senior management, for a duration of 20 years[63]. Regulatory Risks and Compliance - The company faces inherent risks associated with the VIE structure, including potential breaches of contract by Shengfeng Logistics and its shareholders, which could adversely affect its business operations[49]. - The company is subject to regulatory risks regarding the interpretation and application of PRC laws related to the VIE structure, which may impact its ability to enforce the VIE Agreements[49]. - The company is subject to risks related to the interpretation of PRC laws regarding the validity and enforcement of VIE Agreements, which could impact operations and share value[66]. - The company is subject to evolving PRC laws regarding privacy, data security, and cybersecurity, which may impose liabilities for improper use of personal information[120]. - The company is not currently required to apply for a cybersecurity review, but future regulations could impose significant compliance burdens[129]. - The PRC government may strengthen oversight over overseas offerings and foreign investments in China-based issuers, which could limit the company's ability to offer its Class A Ordinary Shares and reduce their value[135]. - The company has not received permission from Chinese authorities to list on U.S. exchanges, and future actions by the government could significantly affect its financial performance and operations[136]. - The PRC legal system is evolving, and uncertainties in the interpretation and enforcement of laws may impair the company's ability to operate profitably[137]. Financial Performance - Revenues reached $572,478 thousand, with a gross profit of $53,088 thousand after accounting for cost of revenues of $519,390 thousand[90]. - Net income for the fiscal year was $12,209 thousand, reflecting a significant increase compared to previous periods[90]. - Operating expenses totaled $36,208 thousand, which included $1,538 thousand in gross profit from logistics operations[90]. - Total assets amounted to $346,967 thousand, with current assets at $216,593 thousand and non-current assets at $130,374 thousand[90]. - The company reported technical service income from VIE and its subsidiaries amounting to $11,984 thousand[90]. - For the fiscal year ended December 31, 2024, total revenues reached $504.158 million, a slight increase from $404.121 million in 2023, representing a growth of approximately 24.7%[92]. - Net income for 2024 was $10.827 million, compared to $10.308 million in 2023, marking an increase of approximately 5%[92]. Dividend and Profit Distribution - The Company has not made any dividends or distributions to U.S. investors as of the annual report date, and does not anticipate paying dividends in the foreseeable future[78]. - Current PRC regulations allow the PRC subsidiary to pay dividends to Shengfeng HK only from accumulated profits, which are determined according to Chinese accounting standards[81]. - Each Affiliated Entity in China must set aside at least 10% of its after-tax profits to fund a statutory reserve until it reaches 50% of its registered capital[81]. - Cash dividends on Class A and Class B Ordinary Shares would be paid in U.S. dollars and may be subject to PRC withholding tax at a rate of up to 10%[82]. - The withholding tax rate on dividends from the PRC subsidiary to offshore subsidiaries is generally 10%, but may be reduced to 5% under certain conditions related to ownership and duration[206]. Labor and Employment Issues - The company is currently not in full compliance with PRC labor-related laws and regulations, particularly regarding social insurance and housing fund contributions[178]. - The company has not made adequate contributions for social insurance and housing funds, which may lead to penalties and fines[182]. - The average wage level for employees in China is expected to continue to grow, leading to increased labor costs for the company[176]. - The company has exceeded the 10% limit on dispatched workers as per the Interim Provisions on Labor Dispatching, which may result in fines if not corrected[179]. Currency and Taxation Risks - Fluctuations in exchange rates, particularly between RMB and USD, may materially affect the company's operations and investment value, with RMB appreciating over 20% against USD from 2005 to 2008[193]. - The company may be classified as a PRC "resident enterprise," subjecting it to a 25% enterprise income tax on worldwide income, which could reduce net income and affect shareholder returns[196]. - Indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies are subject to SAT Circular 7 and SAT Circular 37, which impose tax obligations and potential penalties[199]. - The PRC subsidiary is restricted from paying dividends or making other distributions, which may adversely affect the company's liquidity and ability to conduct business[203]. Operational Risks - Service disruptions at regional sorting centers and Cloud OFCs could adversely affect business operations, leading to delays and reputational damage[223]. - The company handles a large volume of freight daily, facing risks of theft, damage, or loss, which could result in significant liabilities[224]. - Transportation safety risks are inherent in the company's operations, and insurance may not fully cover damages from accidents[225]. - The company's technology systems are critical for operations, and failure to maintain or upgrade these systems could lead to economic losses and competitive disadvantages[227].

Sales Performance - Tommy Bahama accounted for 56% of the company's net sales in Fiscal 2025, with 95% of its sales generated in the United States[50]. - Direct to consumer operations for Tommy Bahama represented 85% of its net sales in Fiscal 2025, with e-commerce contributing $203 million, or 25% of total sales[51][52]. - Lilly Pulitzer's direct to consumer distribution channel represented 83% of its net sales in Fiscal 2025, with e-commerce operations generating $164 million, or 49% of total sales[67]. - Tommy Bahama's wholesale sales accounted for 15% of its net sales in Fiscal 2025, with 11% of sales coming from its 10 largest wholesale customers[63]. - Wholesale operations accounted for 17% of Lilly Pulitzer's net sales in Fiscal 2025, with 33% of wholesale sales going to off-price retailers[74]. - Johnny Was generated $72 million in net sales from its website, representing 43% of its total net sales in Fiscal 2025[77]. - Emerging Brands, including Southern Tide and TBBC, achieved total net sales of $142.9 million in Fiscal 2025[87]. - Approximately 82% of net sales in Fiscal 2025 were direct-to-consumer sales, indicating a strong focus on this sales channel[126]. Retail Operations - The company operated 102 Tommy Bahama full-price retail stores and 28 food and beverage locations as of January 31, 2026[58]. - Lilly Pulitzer had 67 full-price retail stores as of January 31, 2026, with 51% of sales generated from Florida[71]. - Tommy Bahama's outlet stores generated 8% of total sales in Fiscal 2025, playing a key role in inventory management[56]. - The average cost to build a Tommy Bahama Marlin Bar location exceeds $5 million, reflecting significant capital investment requirements[61]. - In Fiscal 2026, the company plans to open three new full-price retail locations and one outlet store, while potentially closing underperforming locations[60]. - Lilly Pulitzer opened a total of 7 new full-price retail stores in Fiscal 2025, ending the year with 67 stores, and plans to open at least 4 new stores in Fiscal 2026[73]. - Southern Tide opened 6 new stores during Fiscal 2025, increasing its total to 34 stores by year-end[90]. Financial Performance - Advertising expenses for the company were $104 million, or 7% of net sales, in Fiscal 2025[96]. - The company aims to improve gross profit and margin performance through effective merchandising strategies, focusing on inventory productivity and consumer demand alignment[103]. - As of January 31, 2026, the company had $116 million of borrowings outstanding under its U.S. Revolving Credit Agreement, with a weighted average interest rate of 5%[408]. - A 100 basis point increase in interest rates would increase interest expense by $1 million based on the current variable-rate debt[408]. - The company expects to decrease debt levels during Fiscal 2026, utilizing expected cash flows from operations to reduce borrowings[408]. - Planned capital expenditures are expected to be significantly reduced in Fiscal 2026 compared to Fiscal 2025[408]. Supply Chain and Sourcing - In Fiscal 2025, the company purchased products from approximately 360 suppliers, a significant increase from Fiscal 2024, with the 10 largest suppliers accounting for about 25% of product purchases[107]. - The sourcing from China decreased to 29% in Fiscal 2025 from an initial projection of 40%, with an annualized run rate for China production reduced to approximately 15% going into Fiscal 2026[108]. - The company has made significant progress in diversifying its sourcing footprint, with 24% of products sourced from Vietnam and 10% from Indonesia in Fiscal 2025[110]. Market and Economic Conditions - Total duties and tariffs paid on products imported into the U.S. increased to $95 million in Fiscal 2025, up from $60 million in Fiscal 2024, with an average duty rate of approximately 30%[116]. - The global trade environment remains dynamic, with potential for additional tariff increases or trade restrictions that could impact operations and costs[118]. - Inflation risks are managed through negotiating product prices in advance and selective price increases[411]. - Future product costs could increase due to fluctuations in the exchange rate between the U.S. dollar and local currencies of suppliers[409]. Digital and Marketing Strategies - The company continues to enhance its digital marketing strategies to engage consumers and drive traffic to its e-commerce platforms[97]. - The company’s information systems incorporate advanced data analytics and AI tools to support demand forecasting and inventory management[128]. Employment and Workforce - As of January 31, 2026, the company employed over 6,000 individuals globally, with 96% based in the U.S.[140].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-9610 Commission file number: 001-15136 Carnival Corporation Carnival plc (Exact name of registrant as specified in its chart ...

Revenue Performance - Passenger ticket revenues increased by $191 million, or 5.0%, to $4.0 billion in 2026 from $3.8 billion in 2025, accounting for 65% of total revenues[93] - Onboard and other revenues rose by $164 million, or 8.3%, to $2.1 billion in 2026 from $2.0 billion in 2025, representing 35% of total revenues[94] - The North America segment's passenger ticket revenues were $2.4 billion in both 2026 and 2025, with a 0.7% increase[95] - The Europe segment's passenger ticket revenues increased by $172 million, or 12%, to $1.6 billion in 2026 from $1.4 billion in 2025[98] Operating Expenses - Operating expenses increased by $173 million, or 4.6%, to $3.9 billion in 2026 from $3.8 billion in 2025[103] - Selling and administrative expenses rose by $76 million, or 9.0%, to $924 million in 2026 from $848 million in 2025[104] - Depreciation and amortization expenses increased by $42 million, or 6.4%, to $696 million in 2026 from $654 million in 2025[105] Profitability - Consolidated operating income increased by $64 million to $607 million in 2026 from $543 million in 2025[115] - North America segment's operating income rose by $54 million to $569 million in 2026, while Europe segment's operating income increased by $30 million to $170 million[115] - The company anticipates that changes in fuel costs and regulatory requirements related to greenhouse gas emissions will impact profitability in the short and long term[89] Financial Position - As of February 28, 2026, the company had $5.9 billion of liquidity, including $1.4 billion in cash and cash equivalents[117] - Working capital deficit improved slightly to $8.7 billion as of February 28, 2026, compared to $8.9 billion as of November 30, 2025[118] - Interest expense decreased by $85 million, or 23%, to $291 million in 2026 from $377 million in 2025 due to lower average interest rates[116] Cash Flow - Net cash flows from operating activities increased to $1.3 billion during the three months ended February 28, 2026, up from $0.9 billion in the same period in 2025[121] - Net cash used in investing activities was $597 million, primarily for capital expenditures related to ship improvements[122] - Net cash used in financing activities was $1.2 billion, driven by repayments of $945 million of long-term debt and $208 million in cash dividends[124] Debt Composition - As of February 28, 2026, the company had a debt composition of 52% fixed rate and 5% floating rate[128] - Future export credit facilities are projected to be $1.4 billion in 2027 and $1.5 billion in 2030[126] Operational Metrics - Fuel cost per metric ton consumed decreased to $559 in 2026 from $643 in 2025[91] - The occupancy percentage remained stable at 103% for both 2026 and 2025[91]