CarParts.com, Inc.

(In Thousands, Except Per Share Data)

Note 1 – Summary of Significant Accounting Policies and Nature of Operations

CarParts.com, Inc. (including its subsidiaries) is a leading online retailer of aftermarket auto parts and accessories. The Company primarily sells its products to individual consumers through its flagship website located atwww.carparts.com, our mobile app, online marketplaces, and offline to professional installers and wholesale customers through its wholesale platform. The corporate website is located atwww.carparts.com/investor. References to the “Company,” “we,” “us,” or “our” refer to CarParts.com, Inc. and its consolidated subsidiaries.

The Company’s house brands and marketplace brands are positioned to serve distinct customer segments and sales channels:

•JC Whitney® serves as the Company’s primary private label house brand, offering replacement, maintenance, performance and specialty automotive products.

•Evan Fischer® products are sold primarily through the eBay marketplace channel, with a focus on core replacement and maintenance components.

• Garage-Pro® products are offered primarily through Amazon, serving value-oriented consumers seeking dependable replacement parts.

The Company’s product categories consist of:

Replacement Parts. The replacement parts category primarily consists of parts for the exterior of an automobile. These products are typically used to replace original body components damaged in collisions or through general wear and tear. These products include body panels, lighting components, cooling parts and mirrors. Replacement parts serve both everyday vehicle owners and professional repair customers and represent a foundational category within the Company’s assortment.

Hard Parts. The hard parts category includes engine, chassis, drivetrain, suspension, braking, electrical and other mechanical components necessary for vehicle operation. This category supports routine maintenance, system replacement and mechanical repair across a broad range of domestic and import vehicles.

Other Parts and Accessories. The other parts category includes products designed to enhance vehicle performance, functionality, comfort or appearance. This includes performance upgrades, specialty components and accessories that allow customers to customize or improve their vehicles beyond standard replacement needs, including suspension kits, towing equipment, lift kits and more. The Company has expanded our assortment in this category to serve enthusiast and specialty vehicle segments, including trucks, off-road and muscle car segments.

The Company is a Delaware C corporation and is headquartered in Torrance, California. The Company has employees located in the United States.

Fiscal Year

The Company’s fiscal year is based on a 52/53 week fiscal year ending on the Saturday closest to December 31. The fiscal year ended January 3, 2026 (fiscal year 2025) is a 53 week period and December 28, 2024 (fiscal year 2024) is a 52 week period.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Based on our current operating plan, we believe that our existing cash, cash equivalents, investments, cash flows from operations and available debt or equity financing will be sufficient to finance our operational cash needs through at least the next twelve months.

Segment Information

The Company manages its operations as a single operating and reportable segment in accordance with ASC 280,Segment Reporting. The Company’s chief operating decision maker (“CODM”) reviews the consolidated financial information for purposes of allocating resources and making operating decisions. Refer to “Note 11 – Segment Information” for further information.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. A key estimate made by management relates primarily to determining the net realizable value of inventory. Actual results could differ from this estimate.

Cash and Cash Equivalents

The Company considers all money market funds and short-term investments purchased with original maturities of ninety days or less to be cash equivalents.

Fair Value of Financial Instruments

Certain financial instruments are required to be recorded at initial fair value, including the Convertible Notes (refer to “Note 4 – Borrowings”). Other financial instruments, including cash and cash equivalents, accounts receivable and accounts payable are recorded at cost, and approximates fair value due to their short-term maturities. Refer to “Note 2 – Fair Value Measurements” for further fair value information.

Accounts Receivable and Concentration of Credit Risk

Accounts receivable are stated net of allowance for expected credit losses. The allowance for expected credit losses is determined primarily on the basis of past collection experience and general economic conditions. The Company determines terms and conditions for its customers primarily based on the volume purchased by the customer, customer creditworthiness and past transaction history.

Concentrations of credit risk are primarily limited to the offline sales customer base to which the Company’s products are sold, which is related to trade receivables that are approximately 31% and 22% of total accounts receivable, net, balance as of the year ended January 3, 2026 and December 28, 2024, respectively. The Company does not believe significant concentrations of credit risk exist as a significant portion of the outstanding trade receivables balance is insured by a third-party credit insurance company.

Inventory

Inventories consist of finished goods available-for-sale and are stated at the lower of cost or net realizable value, determined using the first-in first-out (“FIFO”) method. The Company purchases inventory from suppliers both domestically and internationally, and routinely enters into supply agreements with Asia-Pacific based suppliers in China

and Taiwan and also U.S. based suppliers who are primarily drop-ship vendors. The Company believes that its products are generally available from more thanone supplier and seeks to maintain multiple sources for its products, both internationally and domestically. The Company primarily purchases products in bulk quantities to take advantage of quantity discounts and to ensure inventory availability. Inventory is reported at the lower of cost or net realizable value. We recognize provisions for obsolete and slow-moving inventory primarily based on judgments about expected disposition of inventory, generally, through sales, or liquidations of obsolete inventory, and expected recoverable values per SKU based on currently available or historical information.

Inventory as of January 3, 2026 and December 28, 2024 included items in-transit to our distribution centers, in the amounts of $19,286 and $19,964, respectively.

Website and Software Development Costs

The Company capitalizes certain costs associated with website and software developed for internal use according to ASC 350-50 -Intangibles – Goodwill and Other – Website Development Costs and ASC 350-40Intangibles – Goodwill and Other – Internal-Use Software, when both the preliminary project design and testing stage are completed and management has authorized further funding for the project, which it deems probable of completion and to be used for the function intended. Capitalized costs include amounts directly related to website and software development such as payroll and payroll-related costs for employees who are directly associated with, and who devote time to, the internal-use software project and website. Capitalization of such costs ceases when the project is substantially complete and ready for its intended use. These amounts are amortized on a straight-line basis overtwo tofive years once the software and/or website enhancement is placed into service. The Company capitalized website and software development costs of $8,969 and $16,264 during fiscal years 2025 and 2024, respectively. As of January 3, 2026 and December 28, 2024, our internally developed website and software costs amounted to $48,023 and $40,471, respectively, and the related accumulated amortization amounted to $36,633 and $24,625, respectively.

Long-Lived Assets

Property and Equipment, net

The Company accounts for its long-lived assets, in accordance with ASC - 360Property, Plant and Equipment (“ASC 360”)*.*Depreciation and amortization of property and equipment is calculated by using the straight-line method for financial reporting purposes, at rates based on the following estimated useful lives:

*The estimated useful life is the lesser of 3-5 years or the lease term, whichever is shorter.

Leases

The Company accounts for leases in accordance with ASC 842 –Leases (“ASC 842”), which requires lessees to record right-of-use assets and related right-of-use obligations on the balance sheet for all leases with terms longer than 12 months. The Company determines if an arrangement contains a lease at inception. For purposes of calculating operating lease obligations under the standard, the Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option. The Company's leases do not contain material residual value guarantees or material restrictive covenants.

The discount rate used to measure a lease obligation should be the rate implicit in the lease; however, the Company’s operating leases generally do not provide an implicit rate. Accordingly, the Company uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate is an entity-specific rate which represents the rate of interest a lessee would pay to borrow on a collateralized basis over a similar term with similar payments. Lease expense is recognized on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

The Company accounts for any impairment and disposition of long-lived assets in accordance with ASC 360*.* Management assesses potential impairments whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. If an indicator of impairment exists for an asset group, a recoverability test is performed, which consists of comparing the asset group’s undiscounted future cash flows to its carrying value. An impairment loss would be recognized when the carrying value of the asset group exceeds the undiscounted future cash flows. The fair value of the asset group is estimated using a market approach from a third-party valuation. Any impairment losses will be allocated to the long-lived assets in the asset group on a pro rata basis using the relative carrying amounts of those assets. The impairment loss cannot reduce the long-lived asset’s carrying value below its fair value. Impairment losses will be recognized in the consolidated statements of operations. SeeNote 3 “Property and Equipment, Net” under the section* “Impairment of Long-lived Assets”*for further information on the impairment loss recognized in the year ended January 3, 2026.

Deferred Financing Costs

Deferred financing costs are being amortized to interest expense over the term of the revolving loan using the straight-line method, which approximates amortization the effective interest method.

Assets and Liabilities Held for Sale

The Company classifies a disposal group as held for sale when all of the criteria set forth in the ASC 360 have been met. The criteria are as follows: management, having the authority to approve the action, commits to a plan to sell the disposal group; the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal group; an active program to locate a buyer and other actions required to complete the plan to sell the disposal group have been initiated; the sale of the disposal group is probable, and transfer of the disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the disposal group beyond one year; the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A disposal group that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a disposal group until the date of sale. Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group as held for sale in that period.

In December 2025, the Company committed to a plan to sell their Philippines subsidiary, which met the criteria for held for sale under ASC 360. The disposal group was measured at the lower of the carrying amount or fair value less costs to sell. Because the estimated fair value (net of selling costs) was greater than the carrying value of the disposal group, no impairment loss was recognized in connection with the held-for-sale classification. In addition, depreciation and amortization associated with the disposal group ceased as of the held-for-sale classification date. The disposal group did not qualify as a discontinued operation under ASC 205, as it does not represent a strategic shift that will have a major effect on our operations or financial results. As required by ASC 360, any potential gain is recognized upon completion of the sale. Refer toNote 12 “Subsequent Event” for further information on the January 27, 2026 sale of the Philippines subsidiary.

The Philippines subsidiary’s total assets and total liabilities classified as held for sale, as measured at their carry values, as of January 3, 2026 were $3,434 and $3,884, respectively.

Convertible Notes

The Convertible Notes are accounted for in accordance with ASC 470 -Debt. The Company assesses all terms and features of the Convertible Notes in order to identify any potential embedded features that would require bifurcation. The Company determined that the conversion options of the Convertible Notes, including the conversion feature of the $1.20 Conversion Price, was clearly and closely related to the debt host and did not require separate accounting. Additionally, this feature did not meet the definition of a derivative under ASC 815 -Derivatives and Hedging, and as a result, did not require separate accounting as a derivative. Refer toNote 4 “Borrowings” for further information on the Convertible Notes.

Revenue Recognition

The Company recognizes revenue from product sales and shipping revenues, net of promotional discounts and return allowances, when the following revenue recognition criteria are met: a contract has been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated to separate performance obligations and revenue is recognized upon satisfying each performance obligation. The Company transfers the risk of loss or damage upon shipment, therefore, revenue from product sales is recognized when it is shipped to the customer. Return allowances, which reduce product revenue by the Company’s best estimate of expected product returns, are estimated using historical experience.

The Company evaluates the criteria of ASC 606 -Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily responsible for fulfilling the promise to provide a specified good or service, the Company is subject to inventory risk before the good or service has been transferred to a customer and the Company has discretion in establishing the price, revenue is recorded at gross.

Payments received prior to the delivery of goods to customers are recorded as deferred revenue in other current liabilities in the consolidated balance sheets.

The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction.

Sales discounts are recorded in the period in which the related sale is recognized. Sales return allowances are estimated based on historical amounts and are recorded upon recognizing the related sales. Credits are issued to customers for returned products.

No customer accounted for more than 10% of the Company’s net sales.

The following table provides an analysis of the allowance for sales returns and the allowance for expected credit losses (in thousands):

Cost of Sales

Cost of sales consists of the direct costs associated with procuring parts from suppliers and delivering products to customers. These costs include direct product costs, outbound freight and shipping costs, warehouse supplies and warranty costs, partially offset by purchase discounts. Total freight and shipping expense, excluding surcharges, included in cost of sales for fiscal years 2025 and 2024 was $91,732 and $100,768, respectively. Depreciation and amortization expenses are excluded from cost of sales and included in operating expense.

Warranty Costs

The Company or the vendors supplying its products provide the Company’s customers limited warranties on certain products that range from 30 days to lifetime. Historically, the Company’s vendors have been the party primarily responsible for warranty claims. Standard product warranties sold separately by the Company are recorded as deferred revenue and recognized ratably over the life of the warranty, ranging fromone tofive years. The Company also offers extended warranties that are imbedded in the price of selected private label products sold. The product brands that include the extended warranty coverage are offered at three different service levels: (a) afive year unlimited product replacement, (b) afive year one-time product replacement, and (c) athree year one-time product replacement. Warranty costs relating to merchandise sold under warranty not covered by vendors are estimated and recorded as warranty obligations at the time of sale based on each product’s historical return rate and historical warranty cost. The standard and extended warranty obligations are recorded as warranty liabilities and included in other current liabilities in the consolidated balance sheets.

Operating Expense

Operating expense consists of marketing, general and administrative, fulfillment, and technology expense. The Company also includes share-based compensation expense in the applicable operating expense category based on the respective equity award recipient’s function. Marketing costs, including advertising, are expensed as incurred. The majority of advertising expense is paid to internet search engine service providers, television advertising, and internet commerce facilitators. For fiscal years 2025 and 2024, the Company incurred advertising costs of $81,332 and $81,860, respectively. Marketing expense also includes payroll and related expenses associated with our customer service and marketing personnel. General and administrative expense consists primarily of administrative payroll and related expenses, merchant processing fees, legal and professional fees and other administrative costs. Fulfillment expense consists primarily of payroll and related costs associated with warehouse employees and the Company’s purchasing group, facilities rent, building maintenance, depreciation and other costs associated with inventory management and wholesale operations. Technology expense consists primarily of payroll and related expenses of the Company’s information technology personnel, the cost of hosting the Company’s servers, communications expenses and internet connectivity costs, computer support and website and software development amortization expense. Marketing expense, general and administrative expense, and fulfillment expense also includes depreciation and amortization expense.

Share-Based Compensation

The Company accounts for share-based compensation in accordance with ASC 718 -Compensation – Stock Compensation (“ASC 718”). All share-based payment awards issued to employees are recognized as share-based compensation expense in the statements of operations and comprehensive operations based on their respective grant date fair values. Compensation expense for service-based restricted stock units and restricted stock awards are based on the closing stock price of our common stock on the date of grant, and is recognized on a straight-line basis over the requisite service period. Compensation expense for performance-based awards is measured based on the amount of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.

Compensation expense for stock options is based on the fair value estimated on the date of grant using an option pricing model, and is recognized over the vesting period ofthree tofour years. The Company currently uses the Black-Scholes option pricing model to estimate the fair value of share-based payment awards for such stock options, which is affected by the Company’s stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. Expected volatility is based on the historical volatility of the Company’s stock price for a period approximating the expected life. The expected life of an award is based on combining historical exercise data with expected weighted time outstanding. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues for the expected life of awards. The expected dividend yield assumption is based on the Company’s expectation of paying no dividends on its common stock.

In accordance with ASC 718, we recognize forfeitures as they occur.

Other Income, net

Other income, net consists of miscellaneous income or expense and interest income comprised primarily of interest income on investments.

Interest Expense

Interest expense consists primarily of interest expense on our revolving loan and letters of credit balances, deferred financing cost amortization, and finance lease interest.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 -Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. When appropriate, a valuation allowance is established to reduce deferred tax assets, which include tax credits and loss carry forwards, to the amount that is more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback years, tax planning strategies and recent financial operations.

The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. As of January 3, 2026, the Company hadno material unrecognized tax benefits, interest or penalties related to federal and state income tax matters. The Company’s policy is to record interest and penalties as income tax expense.

Taxes Collected from Customers and Remitted to Governmental Authorities

The Company presents taxes collected from customers and remitted to governmental authorities on a net basis in accordance with the guidance on ASC 606-10-32-2 -Taxes Collected from Customers and Remitted to Governmental Authorities.

Foreign Currency Translation

In accordance with ASC 830,Foreign Currency Matters, the functional currency for our Philippines subsidiary is the U.S. dollar, our reporting currency. Foreign currency assets and liabilities are remeasured into U.S. dollars using current exchange rates, except for nonmonetary assets and equity, which are remeasured at historical exchange rates. Revenue and expenses are remeasured using average exchange rates during the fiscal year, except for expenses related to nonmonetary assets, which are remeasured at historical exchange rates.

Comprehensive Loss

The Company reports comprehensive loss in accordance with ASC 220 -Comprehensive Income(“ASC 220”). Accumulated other comprehensive income, included in the Company’s consolidated balance sheets, includes one-time foreign currency translation adjustments related to the Company’s foreign operations, unrealized loss on deferred compensation trust assets, and actuarial gain (loss) on the Company’s defined benefit plan in the Philippines. The Company presents the components of net loss and other comprehensive gain (loss) in its consolidated statements of operations and comprehensive operations.

Recently Adopted Accounting Standard

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosure,” which expands the disclosures required for income taxes, primarily through changes to the rate reconciliation and income taxes paid information. This ASU is effective for fiscal years beginning after December 15, 2024, on a prospective basis, while retrospective application is permitted. The Company adopted the provisions of the ASU with this Annual Report on Form 10-K for the fiscal year ended January 3, 2026, and applied the amendment prospectively in its consolidated financial statements. SeeNote 7 “Income Taxes” for the required new disclosures.

Recent Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires disclosure, in the notes to the consolidated financial statements, of specified information that disaggregates certain costs and expenses into specified categories. In January 2025, the FASB issued ASU 2025-01, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date.” This update applies to all public business entities and will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this update on its consolidated financial statements.

In September 2025, the FASB issued ASU No. 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software,” which revises the guidance for capitalizing costs related to internal-use software to better reflect modern, iterative and agile development practices. This ASU plans to remove project stage references and instead will focus on a new capitalization criteria: (i) management has authorized and committed to the software project and (ii) project completion probability. This ASU requires companies to evaluate whether significant development uncertainty exists before capitalizing costs and also incorporates website development guidance intoSubtopic 350-40. This ASU is effective for annual and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.

Note 2 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

Provisions of ASC Topic 820: “Fair Value Measurements”(“ASC 820”) establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1 – Observable inputs such as quoted prices in active markets;

Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3 – Unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

Financial Assets Valued on a Recurring Basis

As of January 3, 2026 and December 28, 2024, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included the Company’s cash and cash equivalents which consist primarily of money market funds and short-term investments with original maturity dates of three months or less at the date of purchase. The Company determines fair value of these assets through quoted market prices and as such they are considered Level 1 assets. Level 1 cash and cash equivalents were valued at $25,821 and $36,397 as of January 3, 2026 and December 28, 2024, respectively. During fiscal years 2025 and 2024 there wereno transfers into or out of Level 1 and Level 2 assets.

Non-Financial Assets Valued on a Non-Recurring Basis

The Company’s long-lived assets, including intangible assets subject to amortization, are measured at fair value on a non-recurring basis. These assets are measured at cost but are written-down to fair value, if necessary, as a result of impairment. As of January 3, 2026 and December 28, 2024, the Company determined intangible assets were not impaired, as such, they were not measured at fair value.

During the fiscal year ended January 3, 2026, the Company recognized an impairment loss of $3,690 on its long-lived assets, as the fair value of the asset group was less than the carrying value. The fair value of the asset group was estimated using a market approach in an independent third-party valuation. The fair value of the impaired long-lived assets of $4,615 were primarily determined using the cost approach and classified as Level 3 within the ASC 820 fair value hierarchy. See further information about the impairment of long-lived assets below atNote 3 “Property and Equipment, Net” under the section* “Impairment of Long-lived Assets.”*

Note 3 – Property and Equipment, Net

The Company’s property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense for fiscal years 2025 and 2024 was $20,621 and $18,975, respectively. The cost and related accumulated depreciation of assets retired or otherwise disposed of are removed from the accounts and the resultant gain or loss is reflected in earnings. Repairs and maintenance are expensed as incurred.

Property and equipment consisted of the following as of January 3, 2026 and December 28, 2024:

Construction in process primarily relates to the Company’s internally developed software.

Impairment of Long-Lived Assets

The Company accounts for any impairment and disposition of long-lived assets in accordance with ASC 360*.* As of January 3, 2026, the Company considered the significant decline in the Company’s market value, combined with the fiscal year 2025 net cash used in operating activities in the consolidated statements of cash flows, to be changes in circumstances that represent indicators of impairment. Therefore, the consolidated asset group was tested for recoverability by comparing the future undiscounted cash flows against its carrying value. It was determined that the carrying value exceeded the future undiscounted cash flows of the asset group.

The fair value of the asset group, estimated using a market approach in an independent third-party valuation, was less than its carrying amount. Therefore, the excess of the carrying amount above the fair value was the recognized as an impairment loss, which was allocated to the long-lived assets’ carrying values on a pro rata basis. The impairment loss cannot reduce the long-lived asset’s carrying value below its fair value. The Company’s long-lived assets consists of property and equipment, net, right-of-use assets – operating leases, net, and right-of-use assets – finance leases, net. During the fiscal year ended January 3, 2026, the Company recognized an impairment charge of $3,690 on its long-lived assets, resulting in an impairment loss of $3,690 as recorded in operating expense in the consolidated statements of operations. During the fiscal year ended December 28, 2024, no impairment loss was recorded.

Note 4 – Borrowings

Convertible Notes Payable

On September 8, 2025, the Company entered into a Purchase Agreement with certain investors, pursuant to which the Company issued Convertible Notes with an aggregate principal amount of $25,000. The Convertible Notes accrue interest quarterly at a rate oftwo percent (2%) per annum, payable in kind. The outstanding Convertible Notes principal balance, plus any unpaid and accrued interest, is convertible at the option of the investors into shares of common stock of the Company at the maturity date, at a Conversion Price of $1.20 per share. As of January 3, 2026, the Convertible Notes payable balance was $25,161, which included $161 of paid in kind interest. The maturity date of the Convertible Notes is September 10, 2028.

The Company assessed all terms and features of the Convertible Notes in order to identify any potential embedded features that would require bifurcation. The Company determined that the conversion options of the Convertible Notes, including the conversion feature of the $1.20 Conversion Price, was clearly and closely related to the debt host and did not require separate accounting. Additionally, this feature did not meet the definition of a derivative under ASC 815,Derivatives and Hedging, and as a result, did not require separate accounting as a derivative.

Amended Credit Facility

The Company maintains an Amended Credit Facility that provides for, among other things, a revolving commitment, which is subject to a borrowing base derived from certain receivables, inventory and property and equipment. On September 8, 2025, the Company and JPMorgan entered into the First Amendment to the Company’s existing Amended and Restated Credit Agreement, dated as of June 17, 2022. The First Amendment provides for the revolving commitment in an aggregate principal amount of $25,000 (formerly $75,000), a sublimit of $2,500 for the

issuance of letters of credit and allows for an uncommitted ability to increase the revolving commitment by an additional $125,000, subject to certain terms and conditions. The Amended Credit Facility now matures on September 8, 2026 (formerly June 17, 2027).

As of January 3, 2026 and December 28, 2024, the Company’s outstanding revolving loan balance was $0, respectively. During the fiscal years ended January 3, 2026 and December 28, 2024, we borrowed and paid down $20,675 and $0, respectively, from the revolving loan under the Amended Credit Facility. As of January 3, 2026 and December 28, 2024, our outstanding standby letters of credit balance was $680 and $680, respectively, and we had $0 of our trade letters of credit outstanding in accounts payable in our consolidated balance sheets.

Loans drawn under the Amended Credit Facility bear interest, at the Company’s option, at a per annum rate equal to either (a) Adjusted Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 3.00% per annum, or (b) an “alternate prime base rate” plus an applicable margin of 1.50% per annum. As of September 27, 2025, the Company’s SOFR based interest rate was 6.78% and the Company’s prime based rate was 8.25%. A commitment fee, based upon unused availability under the Amended Credit Facility bearing interest at a rate of 0.50% per annum, is payable monthly. The Covenant Testing Trigger Period (as defined under the Amended Credit Agreement) means the period commencing on any day that excess availability is less than $5,000 forthree consecutive business days and will continue until excess availability has been greater than, or equal to, $5,000 at all times for 45 consecutive days. In addition, upon the occurrence of a Covenant Testing Trigger Period, the Company shall be required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0, continuing until excess availability has been greater than or equal to $5,000 for 45 consecutive days.

Certain of the Company’s domestic subsidiaries are co-borrowers (together with the Company, the “Borrowers”) under the Credit Agreement, and certain other domestic subsidiaries are guarantors (the “Guarantors” and, together with the Borrowers, the “Loan Parties”) under the Credit Agreement. The Borrowers and the Guarantors are jointly and severally liable for the Borrowers’ obligations under the Credit Agreement. The Loan Parties’ obligations under the Credit Agreement are secured, subject to customary permitted liens and certain exclusions, by a perfected security interest in (a) all tangible and intangible assets and (b) all of the capital stock owned by the Loan Parties (limited, in the case of foreign subsidiaries, to 65% of the capital stock of such foreign subsidiaries). The Borrowers may voluntarily prepay the loans at any time. The Borrowers are required to make mandatory prepayments of the loans (without payment of a premium) with net cash proceeds received upon the occurrence of certain “prepayment events,” which include certain sales or other dispositions of collateral, certain casualty or condemnation events, certain equity issuances or capital contributions, and the incurrence of certain debt.

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, fundamental changes, investments, dispositions, prepayment of other indebtedness, mergers, and dividends and other distributions. The Credit Agreement requires us to obtain a prior written consent from JPMorgan when we determine to pay any dividends on or make any distribution with respect to our common stock.

Events of default under the Credit Agreement include: failure to timely make payments due under the Credit Agreement; material misrepresentations or misstatements under the Credit Agreement and other related agreements; failure to comply with covenants under the Credit Agreement and other related agreements; certain defaults in respect of other material indebtedness; insolvency or other related events; certain defaulted judgments; certain ERISA-related events; certain security interests or liens under the loan documents cease to be, or are challenged by the Company or any of its subsidiaries as not being, in full force and effect; any loan document or any material provision of the same ceases to be in full force and effect; and certain criminal indictments or convictions of any Loan Party.

Note 5 – Stockholders’ Equity and Share-Based Compensation

Common Stock Issuance

On September 8, 2025, the Company entered into a Purchase Agreement with certain investors. The Company issued and sold an aggregate of 10,319,727 shares of common stock, par value $0.001 per share, at a purchase price of $1.04 per share, resulting in gross proceeds of $10,733.

Stock Repurchase Program

On July 27, 2021, the Company’s Board of Directors authorized a stock repurchase program under which the Company may purchase up to $30 million of the Company’s common stock from time to time. The repurchases of common stock may be executed through open market purchases, block trades, the implementation of a 10b5-1 plan, and/or any other available methods. During the fiscal years ended January 3, 2026 and December 28, 2024, the Company didnot repurchase any shares of common stock. The share repurchase program has an expiration date of July 26, 2026.

Employee Stock Purchase Plan

In May 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan (“ESPP”), and the ESPP was amended in May 2023. Under the ESPP, eligible employees who participate in an offering period may have a certain percentage of their eligible earnings withheld, up to certain limitations, to purchase shares of common stock at 85% of the lower of the fair market value on the first or the last business day of thesix-month offering period. A total of 750 shares of common stock have been reserved for issuance under the ESPP. During the fiscal years ended January 3, 2026 and December 28, 2024,249 shares and 260 shares, respectively, were issued under the ESPP.

The estimated fair value of employee stock purchase rights under the ESPP was determined using the Black-Scholes option pricing model with the following assumptions:

Share-Based Compensation Plan Information

The Company adopted the 2016 Equity Incentive Plan ("2016 Equity Plan") on March 9, 2016, which became effective on May 31, 2016, following stockholder approval. Subject to adjustment for certain changes in the Company’s capitalization, the aggregate number of shares of the Company’s common stock that may be issued under the 2016 Equity Plan will not exceed the sum of (i) two million five hundred thousand (2,500) new shares, (ii) the number of unallocated shares remaining available for the grant of new awards under the Company’s prior equity plans described below (the “Prior Equity Plans”) as of the effective date of the 2016 Plan (which was equal to 3,894 shares as of May 31, 2016) and (iii) any shares subject to a stock award under the Prior Equity Plans that are not issued because such stock award expires or otherwise terminates without all of the shares covered by such stock award having been issued, that are not issued because such stock award is settled in cash, that are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares, or that are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award. In addition, the share reserve will automatically increase on January 1st of each year, for a period ofnine years, commencing on January 1, 2017 and ending on (and including) January 1, 2026, in an amount equal to one million five hundred thousand (1,500) shares per year; however the Board of Directors of the Company may

act prior to January 1st of a given year to provide that there will be no January 1st increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than would otherwise occur pursuant the automatic increase. Options granted under the 2016 Equity Plan generally expire no later thanten years from the date of grant and generally vest over a period offour years. The exercise price of all option grants must be equal to 100% of the fair market value on the date of grant. As of January 3, 2026, approximately 1,099 shares were available for future grants under the 2016 Equity Plan.

The following tables summarizes the Company’s stock option activity for the fiscal years ended, and details regarding the options outstanding and exercisable as of January 3, 2026 and December 28, 2024:

During fiscal years 2025 and 2024,100 and 110 stock options were granted under the 2016 Equity Plan, respectively. The intrinsic value of stock options at the date of the exercise is the difference between the fair value of the stock at the date of exercise and the exercise price. During fiscal years 2025 and 2024, as there wereno stock options exercised, therefore, the total intrinsic value of the exercised options was $0 and $0, respectively. The Company had $82 of unrecognized share-based compensation expense related to stock options outstanding as of January 3, 2026, which the expense is expected to be recognized over a weighted-average period of 1.86 years.

Restricted Stock Units and Restricted Stock Awards

During the fiscal years 2025 and 2024, the Company granted an aggregate of 3,736 and 3,033, respectively, of Restricted Stock Units (“RSUs”) and Restricted Stock Awards (“RSAs”) to certain employees of the Company. The

RSUs and RSAs were granted under the 2016 Equity Incentive Plan and reduced the pool of equity instruments available under that plan.

The vesting of each RSU and RSA is subject to the employee’s continued employment through applicable vesting dates. Some RSUs and RSAs granted to certain executives may vest on an accelerated basis in part or in full upon the occurrence of certain events. The RSUs and RSAs are accounted for as equity awards and are measured at fair value based upon the grant date price of the Company’s common stock. The closing price of the Company’s common stock on each grant date during 2025 ranged from $0.63 to $1.02. The closing price of the Company’s common stock on each grant during 2024 ranged from $0.74 to $2.92. Compensation expense is recognized on a straight-line basis over the requisite service period ofone-to-three years. Compensation expense for performance-based RSUs (“PSUs”) is measured based on the amount of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.

During 2025 there were 3,736 RSUs and RSAs granted that were time-based. During 2024 there were 3,033 RSUs and RSAs granted that were time-based.

For the fiscal year ended January 3, 2026, we recorded compensation expense of $8,931 related to RSUs and RSAs. As of January 3, 2026, there was unrecognized compensation expense of $4,924 related to unvested RSUs and RSAs based on awards that are expected to vest. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.27 years.

Share-Based Compensation Expense

The share-based compensation expense is net of amounts capitalized to internally-developed software of $835 and $746 during the fiscal years 2025 and 2024, respectively.

For the fiscal years 2025 and 2024, the Company recorded share-based compensation expense related to stock options, RSUs and RSAs of $8,108 and $11,985, respectively.

Note 6 – Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share:

For the fiscal years ended January 3, 2026 and December 28, 2024, all outstanding potentially dilutive securities, including the Convertible Notes, have been excluded from the calculation of diluted net loss per share as the effect of including such securities and Convertible Notes would have been anti-dilutive.

Note 7 – Income Taxes

The components of loss before income taxes consist of the following:

The income tax provision consists of the following:

Below is a tabular rate reconciliation pursuant to the disclosure requirements of ASU 2023-09 for the fiscal year ended January 3, 2026:

Below is a reconciliation of the statutory federal income tax expense and the Company’s total income tax expense for the fiscal year ended December 28, 2024:

For fiscal years 2025 and 2024, the effective tax rate for the Company was (0.7)%, (0.7)%, respectively. The Company’s effective tax rate for fiscal years 2025 and 2024 differs from the U.S. federal rate primarily as a result of non-deductible share-based compensation and the change in the valuation allowance maintained against the Company’s deferred tax assets.

Deferred tax assets and deferred tax liabilities consisted of the following:

As of January 3, 2026, federal and state net operating loss (“NOL”) carryforwards were $152,613 and $108,281, respectively. Federal NOL carryforwards of $622 were acquired in the acquisition of WAG which are subject to Internal Revenue Code section 382 and limited to an annual usage limitation of $135. Federal NOL carryforwards begin to expire in 2029, while state NOL carryforwards also begin to expire in 2029. The state NOL carryforwards expire in the respective tax years as follows:

Under the provisions of ASC 740, management is required to evaluate whether a valuation allowance should be established against its deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Realization of deferred tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversal of existing taxable temporary differences. ASC 740 provides that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as

cumulative losses in recent years or losses expected in early future years. As of January 3, 2026, mainly due to cumulative losses in recent years, the Company maintained a valuation allowance in the amount of $55,405 against deferred tax assets that were not more likely than not of being realized.

We are subject to U.S. federal income tax as well as income tax of foreign and state tax jurisdictions. The tax years 2021-2025 remain open to examination by the major taxing jurisdictions to which the Company is subject, except the Internal Revenue Service for which the tax years 2022-2025 remain open.

Included in accrued expenses are income taxes receivable of $(21) and $(284) as of January 3, 2026 and December 28, 2024, respectively, consisting primarily of current state taxes. Included in other non-current liabilities are income taxes payable of $1,418 and $1,227 as of January 3, 2026 and December 28, 2024, respectively, relating to accrued future foreign withholding taxes.

Disclosed below is a summary of income taxes paid (net refunds received) by jurisdiction pursuant to the disclosure requirements of ASU 2023-09, for the fiscal year ended January 3, 2026:

Note 8 – Commitments and Contingencies

Facilities Leases

The Company’s leases its corporate headquarters located in Torrance, California. On February 12, 2026, the Torrance office lease expired. The Company plans to move into their new corporate headquarters location in March 2026. The Company also leases warehouse space in LaSalle, Illinois, Las Vegas, Nevada, Grand Prairie, Texas, and Jacksonville, Florida, in addition to leasing office space for the Philippines subsidiary. Refer to*Note 12 – “Subsequent Event”*for information on the new corporate headquarters lease and information on the Philippines subsidiary being sold to a third-party.

Lease Termination

On September 29, 2025, the Company entered into a lease termination agreement related to its Virginia distribution center, which was closed during the third quarter of 2025 to optimize the supply chain structure. Pursuant to the terms of the agreement, the Company agreed to pay a termination fee of $485. In connection with the lease termination, the loss on early lease termination of $393 was recorded within other income, net, in the consolidated statements of operations for the fiscal year ended January 3, 2026.

Quantitative information regarding the Company’s leases are as follows (in thousands):

Lease commitments as of January 3, 2026 were as follows:

Legal Matters

Asbestos**.** A wholly-owned subsidiary of the Company, Automotive Specialty Accessories and Parts, Inc. and its wholly-owned subsidiary Whitney Automotive Group, Inc. ("WAG"), are named defendants in several lawsuits involving claims for damages caused by installation of brakes during the late 1960’s and early 1970’s that contained asbestos. WAG marketed certain brakes, but did not manufacture any brakes. WAG maintains liability insurance coverage to protect its and the Company’s assets from losses arising from the litigation and coverage is provided on an occurrence rather than a claims made basis, and the Company is not expected to incur significant out-of-pocket costs in connection with this matter that would be material to its consolidated financial statements.

Ordinary course litigation. The Company is subject to legal proceedings and claims which arise in the ordinary course of its business, including, for example, claims relating to product liability, workplace injuries, intellectual property rights, and employment matters. For example, a worker, who was directly employed by the Company’s third party labor contracting firm at the Company’s Grand Prairie, Texas warehouse has filed a negligence claim in the Superior Court of the State of California, Los Angeles Count y, Central District relating to aworkplace* *injury from March 2021. In July 2024, the Court granted the Company’s motion for summary judgment. Appeals could be filed by the plaintiff and the Company intends to continue to defend itself vigorously, although there can be no assurance that there will not be some liability. As of the date hereof, the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position, results of operations or cash flow of the Company. The Company maintains liability insurance coverage to protect the Company’s assets from losses arising out of or involving activities associated with ongoing and normal business operations.

Related Party Matters

The Company has entered into indemnification agreements with the Company’s directors and executive officers. These agreements require the Company to indemnify these individuals to the fullest extent permitted under law against liabilities that may arise by reason of their service to the Company, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.

Note 9 – Employee Retirement Plan and Deferred Compensation Plan

Effective February 17, 2006, the Company adopted a 401(k) defined contribution retirement plan covering all full time employees who have completedone month of service. The Company may, at its sole discretion, match fifty cents per dollar up to 6% of each participating employee’s salary. The Company’s contributions vest in annual installments over three years. Discretionary contributions made by the Company totaled $518 and $981 for fiscal years 2025 and 2024, respectively.

Note 10 – Product Information

As described in detail under*“Note 1 – Summary of Significant Accounting Policies and Nature of Operations”*, the Company’s products consist of replacement parts serving the wear and tear and body repair market, hard parts to serve the maintenance and repair market, and other parts and accessories. The Company sells its products primarily in the United States. The following table summarizes the approximate distribution of the Company’s revenue by product type.

Note 11 – Segment Information

The Company operates as asingle reportable segment (referred to as “segment” herein), engaged in the distribution and selling of aftermarket auto part products (SKUs) to customers through the flagship website,www.carparts.com*,* mobile app, online marketplaces and its wholesale platform. No individual operating segments were identified by the Company.

The Company’s CODM is the Chief Executive Officer. The CODM assesses performance for the entire Company and decides how to allocate resources based on consolidated net loss that is reported on the consolidated statement of operations. The determination that the Company operates as a single segment is consistent with the nature of the operations and the consolidated financial information regularly reviewed by the CODM, for the purposes of evaluating key operating decisions, allocating resources, and planning and forecasting the consolidated operating budget. The measure of segment assets is reported on the consolidated balance sheets as total assets. The Company sells its products primarily to customers in the United States. The accounting policies of the segment are the same as those described in the detail under*“Note 1 – Summary of Significant Accounting Policies and Nature of Operations.”*

The CODM is regularly provided with significant segment expenses. The following table summarizes the Company’s segment net sales, significant segment expenses, and segment loss:

Note 12 – Subsequent Events

Philippines Subsidiary

** **On January 27, 2026, the Company sold 100% of the issued and outstanding shares of its Philippines subsidiary to a third party. The third party will integrate the subsidiary into their organization, and the Company will still utilize the teams across customer service, back office, finance and accounting, marketing and technology.

Corporate Headquarters

On February 12, 2026, the Torrance office lease expired. The Company plans to move into their new corporate headquarters location in Long Beach, California, in March 2026. The sublease agreement for the Long Beach headquarters contains asixty-month lease term. In addition, the Company is obligated to pay approximately $46 in monthly base rent, which shall increase by 3% each year beginning on the second-year anniversary of the lease term.

IEEPA Tariffs

On February 20, 2026, the U.S. Supreme Court issued a ruling relating to tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). Following the ruling, U.S. Customs and Border Protection and other federal agencies issued or may issue additional guidance and take actions affecting the assessment, collection, refund, and/or protest of certain tariffs.

The Company is evaluating the impact of these developments on previously paid tariffs and related matters, including the potential for refunds or other recovery. At this time, the Company cannot reasonably estimate the amount or timing of any recovery, if any, or the ultimate consolidated financial statements’ impact of these developments. Accordingly, no amounts have been recognized in the accompanying consolidated financial statements related to any potential recovery.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

POWER OF ATTORNEY

We, the undersigned officers and directors of CarParts.com, Inc., do hereby constitute and appoint David Meniane and Mark DiSiena, and each of them, our true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby, ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated: