Natural Grocers by Vitamin Cottage, Inc.

NATURAL GROCERS BY VITAMIN COTTAGE,** INC.

Notes to Consolidated Financial Statements

September 30, 2025 and 2024

1. Organization

Nature of Business

Natural Grocers by Vitamin Cottage, Inc. (Natural Grocers or the holding company) and its consolidated subsidiaries (collectively, the Company) operate retail stores that specialize in natural and organic groceries, dietary supplements and body care products. The Company operated 169 retail stores as of September 30, 2025, including 45 stores in Colorado,25 in Texas,14 in Oregon,11 in Arizona, eight in each of Kansas and Utah, seven in Missouri, six in each of Idaho, Iowa, New Mexico and Oklahoma, five in Washington, four in each of Montana and Nevada, three in each of Arkansas, Nebraska and North Dakota, two in Wyoming, andone in each of Louisiana, Minnesota, and South Dakota. The Company also has a bulk food repackaging facility and distribution center in Golden, Colorado. The Company had 169 stores as of September 30, 2024.

2. Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include all the accounts of the holding company’s wholly owned subsidiaries, Vitamin Cottage Natural Food Markets, Inc. (the operating company) and Vitamin Cottage Two Ltd. Liability Company (VC2). All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management reviews its estimates on an ongoing basis, including those related to valuation of inventories, useful lives of long-lived assets for depreciation and amortization, impairment of goodwill, indefinite-lived intangible assets, and long-lived assets, lease assumptions, allowances for self-insurance reserves, deferred tax assets and liabilities, and litigation based on currently available information. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates.

Segment Information

The Company has asingle reportable segment: natural and organic retail stores.

Other Comprehensive Income

The Company has no other comprehensive income.

Cash and Cash Equivalents

Cash and cash equivalents include currency on hand, demand deposits with banks, money market funds, and credit and debit card transactions that typically settle within three business days. The Company considers all highly liquid investments with a remaining maturity of 90 days or less when acquired to be cash equivalents.

Accounts Receivable, Net

Accounts receivable consists primarily of receivables from vendors for certain promotional programs, magazine advertising and other miscellaneous receivables and are presented net of any allowances for credit losses. Accounts receivable also includes receivables from landlords for tenant improvement allowances. Vendor receivable balances are generally presented on a gross basis separate from any related payable due. Allowance for credit losses is calculated based on historical experience, current conditions, and reasonable and supportable forecasts about the future. Allowance for credit losses totaled $0.4 million and $0.2 million as of September 30, 2025 and 2024, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of investments in cash and cash equivalents. The Company’s cash and cash equivalent account balances, which are held in major financial institutions, exceeded the Federal Deposit Insurance Corporation’s federally insured limits by approximately $16.1 million as of September 30, 2025.

Vendor Concentration

For the years ended September 30, 2025 and 2024, purchases from the Company’s largest vendor and its subsidiaries represented approximately 69% and 68%, respectively, of all product purchases made during such periods.

Merchandise Inventory

Merchandise inventory consists of goods held for sale. The cost of inventory includes certain costs associated with the preparation of inventory for sale, including inventory overhead costs. Merchandise inventory is carried at the lower of cost or net realizable value. Cost is determined using the weighted average cost method.

Property and Equipment, Net

Depreciable property and equipment assets, which primarily consist of leasehold and building improvements, fixtures and equipment, and buildings, are stated at historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the useful life of the relevant asset. For land improvements and leasehold and building improvements, depreciation is recorded over the shorter of the assets’ useful lives or related lease terms. Maintenance and repairs that neither add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Gains and losses on disposition of property and equipment are included in store expenses in the year of disposition and primarily relate to store relocations and closures.

The Company capitalizes certain costs, including internal staff compensation and interest, if applicable, as part of the historical costs of buildings and leasehold and building improvements.

Definite-Lived Intangibles and Other Assets

Intangible assets with finite lives, principally internal-use software, are amortized on a straight-line basis over their estimated useful lives. The Company evaluates the reasonableness of the useful lives of these intangibles at least annually. Other assets subject to amortization, primarily SaaS implementation costs, are amortized on a straight-line basis over the expected remaining term of the related software hosting arrangement. The Company capitalizes certain costs, including internal staff compensation and interest, if applicable, incurred with implementing, developing and/or obtaining internal-use software and SaaS implementation costs. Any costs that do not meet capitalization criteria are expensed as incurred.

Impairment of Long-Lived Assets

The Company assesses its long-lived assets, principally property and equipment, lease assets, and intangible and other assets subject to amortization, for possible impairment at least annually, and whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. These events or changes primarily include a significant change in current period performance combined with a history of losses and a projection of continuing losses, or a decision to close or relocate a store. The Company assesses the recoverability of the property and equipment and lease assets at the individual store level, and the intangible and other assets at the consolidated entity level. If the carrying value of such assets over their respective remaining lives is not recoverable through projected undiscounted future cash flows, impairment is recognized for any excess of the carrying value over the estimated fair value of the asset group. The fair value of the asset group is estimated based on either: (i) discounted future cash flows; (ii) an appropriate third-party market appraisal; or (iii) other valuation technique. In performing these analyses, the Company considers factors such as historic and forecasted operating results, trends and future prospects, current market values, significant industry trends, and other economic and regulatory factors. For the years ended September 30, 2025, 2024 and 2023, the Company recorded impairment charges related to long-lived assets of $0.1 million, $2.2 million and $1.3 million, respectively.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and indefinite-lived intangibles, primarily consisting of trademarks, are not amortized; rather, they are tested for impairment on an annual basis during the fourth fiscal quarter, and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. In performing the Company’s analysis of goodwill, the Company first evaluates qualitative factors, including relevant events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value should be recognized. The Company has determined that its business, for purposes of impairment evaluation for goodwill and indefinite-lived intangible assets, consists of a single reporting unit. As of September 30, 2025, the Company has recordedno impairment charges related to goodwill or indefinite-lived intangibles.

Deferred Financing Costs

Certain costs incurred with borrowings or establishment of credit facilities are deferred. These costs are amortized over the life of the credit facility using the straight-line method.

Leases

The Company leases retail stores, a bulk food repackaging facility and distribution center, and administrative offices under long-term operating or finance leases. These leases include scheduled increases in minimum rents and renewal provisions at the option of the Company. The lease term for accounting purposes commences with the date the Company takes possession of the space and ends on the later of the primary lease term or the expiration of any renewal periods that are deemed to be reasonably certain. The Company recognizes a lease asset and corresponding lease liability for all leases with terms greater than 12 months, with the recognition, measurement, and presentation of lease expenses dependent on whether the lease is classified as an operating or finance lease.

Operating Leases

Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets. The rent payment pursuant to the lease agreement is recorded as a reduction of the operating lease liability and lease asset and as single lease expense over the remaining term of the applicable lease.

Finance Leases

Finance lease liabilities represent the present value of lease payments not yet paid. Finance lease assets represent the Company’s right to use an underlying asset and are based upon the lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives and impairment of finance lease assets. The Company does not record single lease expense for the rental payments under finance leases, but rather payments under the finance lease obligations are recognized as a reduction of the finance lease obligation and as interest expense over the remaining term of the lease. The lease asset is depreciated on a straight-line basis over the remaining term of the applicable lease.

Self-Insurance

The Company is self-insured for certain losses, liabilities and employee benefit costs. Stop-loss coverages or deductibles mitigate the Company’s exposure to any significant level of claims. Self-insured losses are accrued based upon the Company’s estimates of the aggregate claims incurred but not reported using analyses of actual claims, historical claims experience, demographic factors and other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if future occurrences and claims differ from the Company’s assumptions.

Revenue Recognition

Revenue is recognized at the point of sale, net of in-house coupons, discounts and returns. Sales taxes are not included in sales. The Company charges sales tax on all taxable customer purchases and remits these taxes monthly to the appropriate taxing jurisdiction. The Company records a contract liability within accrued expenses when it sells the Company’s gift cards and records a sale when a customer redeems the gift card.

Cost of Goods Sold and Occupancy Costs

Cost of goods sold and occupancy costs includes the cost of inventory sold during the period net of discounts and allowances, as well as distribution, shipping and handling costs, store occupancy costs and costs of the bulk food repackaging facility and distribution center. The amount shown is net of various rebates from third-party vendors in the form of quantity discounts and payments. Vendor consideration associated with product discounts is recorded as a reduction in the cost of the product. Store occupancy costs include operating lease expense, common area maintenance and real estate taxes. Store occupancy costs do not include any lease expense amounts for the store leases classified as finance leases.

Store Expenses

Store expenses consist of store-level expenses such as salaries, benefits and share-based compensation, supplies, utilities, depreciation (including depreciation for lease assets related to finance leases), gain or loss on disposal of assets, long-lived asset impairment charges, store closing costs, and other related expenses associated with operations support. Store expenses also include purchasing support services and advertising and marketing costs.

Administrative Expenses

Administrative expenses consist of salaries, benefits and share-based compensation, rent and other occupancy costs, depreciation, office supplies, hardware and software expenses, software services expenses, professional services expenses, and other general and administrative expenses.

Pre-Opening Expenses

Costs associated with the opening of new stores or relocating/remodeling existing stores are expensed as incurred.

Advertising and Marketing

Advertising and marketing costs are expensed as incurred and are included in store expenses and pre-opening expenses in the consolidated statements of income. Total advertising and marketing expenses for the years ended September 30, 2025, 2024 and 2023 were $7.0 million, $7.9 million and $6.9 million, respectively, net of vendor reimbursements of $9.3 million, $7.9 million and $7.1 million for the years ended September 30, 2025, 2024 and 2023, respectively.

Share-Based Compensation

The Company adopted the 2012 Omnibus Incentive Plan in connection with its initial public offering on July 25, 2012. Restricted stock units are granted at the market price of the Company’s common stock on the date of grant and expensed over the applicable vesting period.

The excess tax benefits for recognized compensation costs are reported as a credit to income tax expense and as operating cash flows when such excess tax benefits are realized by a reduction to current taxes payable.

Income Taxes

The Company accounts for income taxes using the asset and liability method. This method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between the tax basis and financial reporting basis of the Company’s assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which the Company operates.

The Company considers the need to establish valuation allowances to reduce deferred income tax assets to the amounts the Company believes are more likely than not to be recovered.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Although the Company believes that its estimates are reasonable, actual results could differ from these estimates. In addition, the Company is subject to periodic audits and examinations by the Internal Revenue Service (IRS) and other state and local taxing authorities.

Any interest or penalties incurred related to income taxes are expensed as incurred and treated as permanent differences for tax purposes.

On July 4, 2025, the U.S. federal government enacted tax legislation commonly referred to as OBBBA. The OBBBA, among other things, makes permanent 100% bonus depreciation for certain capital expenditures and immediate deduction for domestic research or experimental expenditures (R&D deduction). This legislation was effective for the Company’s consolidated financial statements for the year ended September 30, 2025, except for the R&D deduction which will be effective for the Company’s fiscal year 2026. The Company reflected the impact of the OBBBA in its deferred tax liabilities for the year ended September 30, 2025. The enactment of the OBBBA did not have a material impact on the Company’s consolidated financial statements for the year ended September 30, 2025. The Company is currently assessing the impact of the OBBBA on future periods.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, “Improvements to Reportable Segment Disclosures,” ASC Topic 280, “Segment Reporting” (ASU 2023-07). The ASU 2023-07 provisions require enhanced disclosures primarily about significant segment expenses. In addition, the provisions enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The Company adopted ASU 2023-07 effective for the year ended September 30, 2025 by updating its single reportable segment disclosures (see Note 18), but there was no other impact on the Company’s consolidated financial statements upon adoption.

In March 2023, the FASB issued ASU 2023-01, “Common Control Arrangements,” ASC Topic 842, “Leases” (ASU 2023-01). Issue 1, Terms and Conditions to Be Considered, of ASU 2023-01 is not applicable to public entities. Issue 2, Accounting for Leasehold Improvements, of ASU 2023-01 requires leasehold improvements associated with common control leases to be amortized over the useful life of the improvements and certain disclosures when the useful life of leasehold improvements to the common control group exceeds the related lease term. The provisions of ASU 2023-01, Issue 2, were effective for the Company’s first quarter of the year ended September 30, 2025. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements for the year ended September 30, 2025.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses,” ASC Topic 326, “Measurement of Credit Losses on Financial Instruments” (ASU 2016-13), subsequently amended by various standard updates. ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information when determining credit loss estimates. ASU 2016-13 also requires financial assets to be measured net of expected credit losses at the time of initial recognition. ASU 2019-10, issued in November 2019, delayed the effective date of ASU 2016-13 for smaller reporting companies such as the Company. The Company adopted ASU 2016-13 effective October 1, 2023 by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of retained earnings. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements for the year ended September 30, 2024.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures,” ASC Topic 740, “Income Taxes” (ASU 2023-09). The ASU 2023-09 provisions require entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items equal to or greater than 5% of the statutory income tax rate amount. ASU 2023-09 also requires that entities disclose on an annual basis information about the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid. In addition, ASU 2023-09 eliminates some disclosures relating to estimates of the change in unrecognized tax benefits reasonably possible within 12 months. The provisions of ASU 2023-09 will be effective for the Company’s year ending September 30, 2026. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of these provisions will have on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses,” ASC Subtopic 220-40, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures” (ASU 2024-03). The ASU 2024-03 provisions require entities, on both an interim and annual basis, to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption of the entity’s income statement, and disclose a qualitative description of the amounts remaining in the relevant expense captions that are not separately disaggregated quantitatively. In addition, ASU 2024-03 requires the disclosure of the total amount of selling expenses and certain other items. The provisions of ASU 2024-03 will be effective for the Company’s year ending September 30, 2028. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of these provisions will have on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, “Targeted Improvements to the Accounting for Internal-Use Software,” ASC Subtopic 350-40, “Intangibles – Goodwill and Other – Internal-Use Software” (ASU 2025-06). The ASU 2025-06 provisions require entities to start capitalizing software costs when management has authorized and committed to funding the project, and it is probable that the project will be completed and used as intended. In addition, ASU 2025-06 adds some disclosure requirements and incorporates the recognition requirements for website-specific development costs from its present subtopic. The provisions of ASU 2025-06 will be effective for the Company’s first quarter of the year ending September 30, 2029. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of these provisions will have on its consolidated financial statements.

No other new accounting pronouncements effective or issued prior to the filing of this Form 10-K had, or are expected to have, a material impact on the Company’s consolidated financial statements.

3. Revenue Recognition

The nature of the goods the Company transfers to customers at the point of sale consists of merchandise purchased for resale. In these transactions, the Company acts as a principal and recognizes revenue (net sales) from the sale of goods when control of the promised goods is transferred to the customer. Control refers to the ability of the customer to direct the use of, and obtain substantially all the remaining benefits from, the transferred goods.

The Company’s performance obligations are satisfied upon the transfer of goods to the customer (at the point of sale), and payment from the customer is also due at that time. Transaction prices are considered fixed. Discounts provided to customers at the point of sale are recognized as a reduction in revenue as the goods are sold. Revenue excludes sales and usage-based taxes collected.

Proceeds from the sale of the Company’s gift cards are recorded as a liability at the time of sale and recognized as revenue when the gift cards are redeemed by the customer and the performance obligation is satisfied by the Company.

As of September 30, 2025 and 2024, the balance of contract liabilities related to unredeemed gift cards was $1.6 million and $1.5 million, respectively. Revenue for the year ended September 30, 2025 includes $0.8 million that was included in the contract liability balance of unredeemed gift cards at September 30, 2024.

Rewards program points are accrued as deferred revenue at the retail value per point, net of estimated breakage based on historical redemption rates experienced within the rewards program. Rewards points are forfeited at the end of each calendar year.

The following table disaggregates the Company’s revenue by product category for the years ended September 30, 2025, 2024 and 2023, dollars in thousands and as a percentage of net sales:

4. Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed using the treasury stock method and reflects the potential dilution that could occur if the Company’s granted but unvested restricted stock units were to vest, resulting in the issuance of common stock that would then share in the earnings of the Company.

The following table presents the Company’s basic and diluted EPS for the years ended September 30, 2025, 2024 and 2023, dollars in thousands, except per share data:

There were 32,096,27,944 and 62,752 non-vested restricted stock units for the years ended September 30, 2025, 2024 and 2023, respectively, excluded from the calculation of diluted EPS as they are antidilutive.

5. Fair Value Measurements

The Company records its financial assets and liabilities at fair value in accordance with the framework for measuring fair value. The framework establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and market participant’s assumptions (unobservable inputs). Non-financial assets, such as goodwill, indefinite-lived intangibles and long-lived assets, are accounted for at fair value on a non-recurring basis. These items are tested for impairment on the occurrence of a triggering event or, in the case of goodwill and indefinite-lived intangibles, at least on an annual basis.

During fiscal year 2025, long-lived assets with an aggregate carrying value of $0.1 million were written down to their fair value of less than $0.1 million, resulting in asset impairment charges of $0.1 million. During fiscal year 2024, long-lived assets with an aggregate carrying value of $6.1 million were written down to their fair value of $3.9 million, resulting in asset impairment charges of $2.2 million. During fiscal year 2023, long-lived assets with an aggregate carrying value of $5.9 million were written down to their fair value of $4.6 million, resulting in asset impairment charges of $1.3 million. The carrying amounts of the Company’s financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable and other accrued expenses, approximate fair value because of the short maturity of those assets and liabilities.

6. Property and Equipment

The Company had the following property and equipment balances as of September 30, 2025 and 2024, dollars in thousands:

Total costs capitalized for qualifying construction projects of leasehold and building improvements included $0.2 million, $0.4 million and $0.5 million for the years ended September 30, 2025, 2024 and 2023, respectively, related to internal staff compensation. Depreciation expense related to capitalized internal staff compensation was $0.4 million, $0.7 million and $0.7 million for the years ended September 30, 2025, 2024 and 2023, respectively. Capitalized interest costs were $0.3 million for each of the years ended September 30, 2025, 2024 and 2023.

Depreciation and amortization expense for the years ended September 30, 2025, 2024 and 2023 is summarized as follows, dollars in thousands:

7. Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, lease assets, and intangible and other assets subject to amortization, are reviewed for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company assesses the recoverability of the property and equipment and lease assets at the individual store level, and the intangible and other assets subject to amortization at the consolidated entity level. If the carrying value of such assets over their respective remaining lives is not recoverable through projected undiscounted future cash flows, the Company measures the amount of impairment based on either: (i) discounted future cash flows; (ii) an appropriate third-party market appraisal; or (iii) other valuation technique. In performing these analyses, the Company considers factors such as historic and forecasted operating results, trends and future prospects, current market values, significant industry trends, and other economic and regulatory factors.

As of September 30, 2025 and 2024, the Company had property and equipment assets of $182.7 million and $178.6 million, respectively, operating lease assets of $259.6 million and $275.1 million, respectively, finance lease assets of $42.9 million and $40.8 million, respectively, intangible assets subject to amortization of $6.2 million and $7.9 million, respectively, and other assets subject to amortization of $5.1 million and $0.2 million, respectively. In fiscal years 2025, 2024 and 2023, the Company concluded, as a result of its review for potential long-lived asset impairments, that certain long-lived assets were impaired. The Company recorded asset impairments of $0.1 million, $2.2 million and $1.3 million for the years ended September 30, 2025, 2024 and 2023, respectively.

8. Other Assets

Other assets as of September 30, 2025 and 2024, are summarized as follows, dollars in thousands:

Total internal staff compensation costs capitalized related to SaaS implementations were $0.7 million and less than $0.1 million for the years ended September 30, 2025 and 2024, respectively.

9. Goodwill and Other Intangible Assets

Goodwill and other intangible assets as of September 30, 2025 and 2024, are summarized as follows, dollars in thousands:

(1) Internal-use software at September 30, 2024 has been reclassified from other intangibles to be consistent with the current year presentation.

Amortization expense was $1.9 million, $1.7 million and $1.5 million for the years ended September 30, 2025, 2024 and 2023, respectively.

Future aggregate amortization expense associated with intangible assets for the fiscal years subsequent to 2025 is estimated to be approximately as follows, dollars in thousands:

Capitalized costs for internal-use software implementation and development were $0.2 million, $1.1 million and $1.1 million for the years ended September 30, 2025, 2024 and 2023, respectively, primarily due to capitalization of costs incurred related to external consultants.

10. Accrued Expenses

The composition of accrued expenses as of September 30, 2025 and 2024 is summarized as follows, dollars in thousands:

11. Debt

Credit Facility

The Company is party to a credit facility originally entered into on January 28, 2016, as subsequently amended, consisting of a revolving loan facility and, prior to its repayment in September 2024, a $35.0 million term loan (the Term Loan and, collectively, the Credit Facility). As of September 30, 2024, the Company had fully repaid all remaining amounts outstanding under the Term Loan. The operating company is the borrower under the Credit Facility and its obligations under the Credit Facility are guaranteed by the holding company. The Credit Facility is secured by a lien on substantially all of the Company’s assets. At September 30, 2025, the aggregate revolving commitment amount available under the Credit Facility was $72.5 million, including a $5.0 million sublimit for standby letters of credit. The Company has the right to borrow, prepay and re-borrow revolving amounts under the Credit Facility at any time prior to its maturity date without premium or penalty. The aggregate revolving commitment amount will be automatically and permanently reduced by $2.5 million on each anniversary date until the Credit Facility matures on November 16, 2028, unless the Company has previously exercised its option to reduce the aggregate revolving commitments to a lower amount.

Base rate loans under the Credit Facility bear interest at a fluctuating base rate, as determined by the lenders’ administrative agent based on the most recent compliance certificate of the operating company and stated at the highest of: (i) the federal funds rate plus 0.50%; (ii) the prime rate; and (iii) Term SOFR plus 1.00%, subject to the applicable interest rate floor, less the lender spread based upon the Company’s consolidated leverage ratio. Term SOFR borrowings under the Credit Facility bear interest based on Term SOFR for the interest period plus the lender spread based upon the Company’s consolidated leverage ratio. The unused commitment fee is based upon the Company’s consolidated leverage ratio.

The Credit Facility requires compliance with certain customary operational and financial covenants, including a consolidated leverage ratio. The Credit Facility also contains certain other customary limitations on the Company’s ability to incur additional debt, guarantee other obligations, grant liens on assets and make investments or acquisitions, among other limitations. Additionally, the Credit Facility prohibits the payment of cash dividends to the holding company from the operating company without the administrative agent’s consent, provided that so long as no default or event of default exists or would arise as a result thereof, the operating company may pay cash dividends to the holding company in an amount sufficient to allow the holding company to: (i) pay various audit, accounting, tax, securities, indemnification, reimbursement, insurance and other reasonable expenses incurred in the ordinary course of business and (ii) repurchase shares of common stock and pay dividends on the Company’s common stock in an aggregate amount not to exceed $15.0 million during any fiscal year.

On November 16, 2023, the Company amended the Credit Facility to: (i) increase its aggregate revolving commitments from $50.0 million to $75.0 million; (ii) extend the maturity date of the revolving commitments under the Credit Facility to November 16, 2028; (iii) permit payment of a one-time cash dividend of up to $25.0 million no later than December 31, 2023; and (iv) increase the Company’s restricted payment capacity by $2.5 million, allowing the Company to repurchase shares of common stock and pay dividends on its common stock in an aggregate amount not to exceed $15.0 million during any fiscal year.

The Company hadno revolving loan amounts outstanding under the Credit Facility as of September 30, 2025 and 2024. The Company had undrawn, issued and outstanding letters of credit of $2.4 million and $2.2 million as of September 30, 2025 and 2024, respectively, which were reserved against the amount available for borrowing under the terms of the Credit Facility. The Company had $70.1 million and $72.8 million available for borrowing under the Credit Facility as of September 30, 2025 and 2024, respectively.

As of September 30, 2025 and 2024, the Company was in compliance with all covenants under the Credit Facility.

Lease Obligations

The Company had 25 and 24 leases that were classified as finance leases as of September 30, 2025 and 2024, respectively. No rent expense is recorded for these finance leases; rather, rental payments under such leases are recognized as a reduction of the lease obligation and as interest expense. The interest rate on finance lease obligations is determined at the commencement of the lease.

Interest

The Company incurred gross interest expense of $3.3 million, $4.5 million and $3.6 million for the years ended September 30, 2025, 2024 and 2023, respectively. Interest expense relates primarily to interest on finance lease obligations and the Credit Facility. The Company capitalized interest of $0.3 million for each of the years ended September 30, 2025, 2024 and 2023.

12. Leases

The Company leases most of its stores, a bulk food repackaging facility and distribution center and its administrative offices. The Company determines if an arrangement is a lease or contains a lease at inception. Lease terms generally range from 10 to 25 years, with scheduled increases in minimum rent payments.

Operating and finance lease liabilities represent the present value of lease payments not yet paid. Operating and finance lease assets represent the Company’s right to use an underlying asset and are based upon the operating and finance lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives and impairment of operating and finance lease assets.

Most leases include one or more options to renew, with renewal terms normally expressed in periods offive-to-ten year increments. The exercise of lease renewal options is at the Company’s sole discretion. The lease term includes the initial contractual term as well as any options to extend the lease when it is reasonably certain that the Company will exercise that option.

Variable payments related to pass-through costs for maintenance, taxes and insurance or adjustments based on an index such as Consumer Price Index are not included in the measurement of the lease liability or asset and are expensed as incurred.

Because the rate implicit in the Company’s lease agreements is typically not readily determinable, the Company uses an estimated incremental borrowing rate, which is derived from third-party lenders, to determine the present value of lease payments. The Company uses other observable market data to evaluate the appropriateness of the rate derived from the lenders. The estimated incremental borrowing rate is based on the borrowing rate for a secured loan with a term similar to the expected term of the lease.

Leases are recorded at the commencement date (the date the underlying asset becomes available for use) for the present value of lease payments, less tenant improvement allowances received or receivable. Leases with a term of 12 months or less (short-term leases) are not presented on the balance sheet. The Company has elected to account for the lease and non-lease components as a single lease component for all current classes of leases.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company subleases certain real estate or portions thereof to third parties. Such subleases have all been classified as operating leases. Remaining sublease terms extend through fiscal year 2031. Although some sublease arrangements provide renewal options, the exercise of sublease renewal options is at the sole discretion of the subtenant. The Company recognizes sublease income on a straight-line basis.

The Company hasfive operating leases with Chalet Properties, LLC (Chalet), one operating lease with the Isely Family Land Trust LLC (Land Trust) andone operating lease with FTVC, LLC (FTVC), each of which is a related party (see Note 15). The leases began at various times, with the earliest commencing in November 1999, continue for various terms through May 2042 and include various options to renew. The terms and rental rates of these leases have been approved by our audit committee in accordance with our related party transaction policy. As of September 30, 2025, these leases accounted for $10.1 million of operating lease assets and $10.2 million of operating lease liabilities, of which $0.7 million was current, and are included in the disclosures below. Lease expense is recognized on a straight-line basis and was $1.2 million for each of the years ended September 30, 2025, 2024 and 2023.

The components of total lease cost for the years ended September 30, 2025, 2024 and 2023 were as follows, dollars in thousands:

(1) Immaterial balances related to corporate headquarters and distribution center are included in administrative expenses and store expenses, respectively.

Additional information related to the Company’s leases for the years ended September 30, 2025, 2024 and 2023 was as follows, dollars in thousands:

Additional information related to the Company’s leases as of September 30, 2025 and 2024 was as follows:

During the year ended September 30, 2025, the Company early terminated a lease due to a store relocation, and, as a result, the Company wrote off operating lease assets and liabilities of less than $0.1 million each and recorded a gain of less than $0.1 million. During the years ended September 30, 2024 and 2023, the Company paid $0.3 million and $0.2 million in lease termination costs, respectively, to early terminate the leases associated with stores that closed in prior fiscal years, and, as a result, the Company wrote off $0.4 million and $0.1 million in operating lease assets and $0.6 million and $0.2 million in operating lease liabilities and recorded losses of $0.2 million and $0.1 million during the years ended September 30, 2024 and 2023, respectively.

In addition, during the year ended September 30, 2025, the Company purchased a store’s previously leased land and building. This resulted in reductions of $0.2 million and $1.0 million in operating and finance lease liabilities with the offset to their related lease assets, respectively, and the reclassification of less than $(0.1) million and $(0.1) million of operating and finance lease assets, as adjusted by the reduction of their related lease liabilities, respectively, to property and equipment.

Future lease payments under non-cancellable leases as of September 30, 2025 were as follows, dollars in thousands:

The table above excludes $12.8 million of legally binding minimum lease payments for leases that had been executed as of September 30, 2025 but whose terms had not yet commenced.

Future minimum rental commitments and sublease rental income under the terms of the Company’s operating and finance leases were as follows as of September 30, 2025, dollars in thousands:

Total rent expense, including common area expenses and warehouse rent, totaled $60.3 million, $58.4 million and $58.4 million for the years ended September 30, 2025, 2024 and 2023, respectively. In addition, $0.3 million, $0.4 million and $0.3 million is included in pre-opening expense associated with rent expense for stores prior to their opening date for the years ended September 30, 2025, 2024 and 2023, respectively.

13. Share-Based Compensation

The Company adopted the 2012 Omnibus Incentive Plan (as amended, the Plan) on July 17, 2012. Restricted stock unit awards granted pursuant to the Plan, if they vest, are settled in new shares of the Company’s common stock or shares of common stock held in treasury. At the adoption of the Plan, there were 1,090,151 shares of common stock available for issuance or delivery under the Plan. In March 2019, the Company’s stockholders approved a proposal to amend the Plan to: (i) increase the number of shares of common stock reserved for issuance thereunder by 600,000 shares and (ii) extend its term byfive years. In March 2024, the Company’s stockholders approved a proposal to amend the Plan to: (i) increase the number of shares of common stock reserved for issuance thereunder by 600,000 shares and (ii) extend its term by five years. As of September 30, 2025,452,390 shares of common stock remain available for grants under the Plan. The Plan provides for awards of options, stock appreciation rights, stock grants, restricted stock units, other share-based awards and cash-based incentive awards to officers, members of the Board, certain employees who are not named executive officers and consultants. As of September 30, 2025, restricted stock units had been granted under the Plan, at no out-of-pocket cost to officers, Board members and key employees. These restricted stock units generally vest, subject to requisite service requirements, annually in installments over afive-year period or in full following athree-year orfive-year period. The award recipients are not entitled to cash dividends or to vote with regard to non-vested restricted stock units, and the units are subject to forfeiture during the vesting period. Restricted stock units are granted at the market price of the Company’s stock on the date of grant and are expensed on a straight-line basis over the vesting period.

The shares of non-vested restricted stock units as of September 30, 2025 and 2024 were as follows:

During the years ended September 30, 2025 and 2024, the Company accelerated the vesting of certain restricted stock units upon the retirement of the Company’s former Chief Financial Officer and for two grantees, making them fully vested, resulting in incremental share-based compensation expense of $0.5 million and $0.4 million, respectively.

In addition, during the year ended September 30, 2025, the Company awarded fully vested stock grants totaling 2,400 shares of the Company’s common stock to 24 employees who were not named executive officers.

Share-based compensation expense for restricted stock unit awards to certain employees who are not named executive officers was $2.0 million, $2.1 million and $0.9 million for the years ended September 30, 2025, 2024 and 2023, respectively. Share-based compensation expense for restricted stock unit awards to named executive officers was $1.7 million, $0.5 million and $0.3 million for the years ended September 30, 2025, 2024 and 2023, respectively.

Each independent member of the Board receives an annual grant of restricted stock units equal to $60,000 (based on the closing price of common stock on the New York Stock Exchange on the date of grant). Such grants are made each year on the date of the Company’s annual meeting of stockholders, or on a pro rata basis in the case of a mid-year appointment. Share-based compensation expense for the Company’s awards to its Board members was $0.2 million for each of the years ended September 30, 2025, 2024 and 2023.

The Company recorded total share-based compensation expense before income taxes of $4.0 million, $2.8 million and $1.4 million for the years ended September 30, 2025, 2024 and 2023, respectively. The share-based compensation expense is included in cost of goods sold and occupancy costs, store expenses or administrative expenses in the consolidated statements of income consistent with the manner in which the applicable officer, Board member or key employee’s compensation expense is presented. The Company realized a tax benefit from share-based compensation of $0.5 million, $0.6 million and less than $0.1 million for the years ended September 30, 2025, 2024 and 2023, respectively.

As of September 30, 2025, there was $7.5 million of unrecognized share-based compensation expense related to non-vested restricted stock units, net of estimated forfeitures, which the Company anticipates will be recognized over a weighted average period of approximately 2.3 years.

14. Stockholders’** Equity**

As of September 30, 2025, the Company had 50,000,000 shares of common stock authorized, of which 22,954,712 shares were issued and outstanding, as well as 10,000,000 shares of preferred common stock authorized, of which none was issued and outstanding.

Share Repurchases

In May 2016, the Board authorized atwo-year share repurchase program pursuant to which the Company may repurchase up to $10.0 million in shares of the Company’s common stock. The Board subsequently extended the share repurchase program – most recently in May 2024 – and the current program will terminate on May 31, 2026. Repurchases under the Company’s share repurchase program may be made from time to time at management’s discretion on the open market or through privately negotiated transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the Exchange Act), subject to market conditions, applicable legal requirements and other relevant factors. Repurchases of common stock may also be made under a Rule 10b5-1 plan, which permits common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The share repurchase program does not obligate the Company to purchase any particular amount of common stock and may be suspended, modified or discontinued by the Company without prior notice. Between October 1, 2025 and December 8, 2025 (the latest practical date for making the determination), the Company hasnot repurchased any additional shares of the Company’s common stock. The dollar value of the shares of the Company’s common stock that may yet be repurchased under the share repurchase program is $8.1 million.

The following table summarizes share repurchase activity for the years ended September 30, 2025, 2024 and 2023, dollars in thousands, except average price per common share acquired:

During fiscal years 2024 and 2023, the Company reissued 6,497 and 11,501 treasury shares, respectively, each at a cost of $0.1 million, to satisfy the issuance of common stock pursuant to the vesting of certain restricted stock unit awards and the award of stock grants. At September 30, 2025 and 2024, the Company held no shares in treasury.

Dividends

The Company paid a quarterly cash dividend of $0.12, $0.10, and $0.10 per share of common stock in each quarter of fiscal years 2025, 2024 and 2023, respectively, and a special cash dividend of $1.00 per share of common stock in the first quarter of fiscal year 2024.

15. Related Party Transactions

The Company has ongoing relationships with related entities as noted below:

Chalet Properties, LLC: The Company hasfive operating leases (see Note 12) with Chalet. Chalet is owned by the Company’sfour non-independent Board members, Kemper Isely, Zephyr Isely, Heather Isely and Elizabeth Isely, and other related family members. Rent paid to Chalet was $0.9 million for each of the years ended September 30, 2025, 2024 and 2023.

Isely Family Land Trust LLC: The Company hasone operating lease (see Note 12) with the Land Trust. The Land Trust is owned by the Isely Children’s Trust and by the Margaret A. Isely Family Trust. Rent paid to the Land Trust was $0.3 million for each of the years ended September 30, 2025, 2024 and 2023.

*FTVC LLC:*The Company hasone operating lease (see Note 12) with FTVC, which is owned by the Company’sfour non-independent Board members and other related family members. Rent paid to FTVC was less than $0.1 million for each of the years ended September 30, 2025, 2024 and 2023.

16. Income Taxes

The following are the components of the provision for income taxes for the years ended September 30, 2025, 2024 and 2023, respectively, dollars in thousands:

The differences between the United States federal statutory income tax rate and the Company’s effective tax rate are as follows:

Deferred taxes have been classified on the consolidated balance sheets as follows, dollars in thousands:

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows, dollars in thousands:

(1) Equity compensation, prepaid expenses and goodwill at September 30, 2024 have been reclassified from other to be consistent with the current period presentation.

The Company believes that it is more likely than not that it will fully realize all deferred tax assets in the form of future deductions based on the nature of the deductible temporary differences and expected future taxable income.

The Company didnot utilize any federal income tax loss or tax credit carryforwards for the years ended September 30, 2025, 2024 and 2023. The Company didnot utilize any tax effected state income tax loss carryforwards for the years ended September 30, 2025, 2024 and 2023.

The Company didnot have any uncertain tax positions as of September 30, 2025 and 2024.

The Company files income tax returns with federal, state and local tax authorities. With limited exceptions, the Company is no longer subject to federal income tax examinations for fiscal years 2021 and prior and is no longer subject to state and local income tax examinations for fiscal years 2020 and prior.

17. Defined Contribution Plan

The Company has a defined contribution retirement plan (the Retirement Plan) covering substantially all employees who meet certain eligibility requirements as to age and length of service. The Retirement Plan incorporates the salary deferral provisions of Section 401(k) of the Internal Revenue Code of 1986, as amended (the Code). Employees may defer up to the annual maximum limit prescribed by the Code. The Company, on a discretionary basis, may match up to 25% of participant contributions up to a maximum annual employer match of $2,500. As of September 30, 2025, the Company had accrued $1.1 million for matching contributions to be paid out after the plan year ending December 31, 2025. Subsequent to plan years ended December 31, 2024 and 2023, the Company funded matching contributions to participants’ accounts of $1.4 million and $1.3 million, respectively.

18. Segment Reporting

The Company has one operating segment, and therefore, asingle reportable segment: natural and organic retail stores. This segment derives all of its revenue from the sale of grocery, dietary supplements, body care and other products at the Company’s stores located in the United States. The accounting policies of this segment are the same as those described in the Company's summary of significant accounting policies. The Company's chief operating decision maker (CODM) is its Co-President and Chairman of the Board. The CODM uses the segment's net income to assess performance against budget, make key operating decisions, and allocate capital resources, including the rate at which to invest in new or relocated stores. The measure of the segment’s assets is reported on the consolidated balance sheet as total assets and its depreciation and amortization expense is reported in Note 6,Property and Equipment.

The following table represents the significant categories and amounts that are regularly reviewed by the CODM and included in the segment's net income, dollars in thousands:

(1) Other segment items include other general and administrative expenses, selling expenses, asset impairment and disposal net losses, amortization expense, store closure costs, sublease income, and other miscellaneous income and expense.

19. Commitments and Contingencies

Self-Insurance

The Company is self-insured for certain losses, liabilities and employee benefit costs, subject to a stop loss policy or deductible limits. Liabilities associated with the risks that are retained by the Company are estimated, in part, by considering an analysis of actual claims, historical claims experience, demographic factors and other actuarial assumptions. While the Company believes that its assumptions are appropriate, the estimated accrual for these liabilities could be significantly affected if future occurrences and claims materially differ from these assumptions and historical trends.

The Company is periodically involved in various legal proceedings that are incidental to the conduct of its business, including but not limited to labor and employment-related claims, customer injury claims, investigations and other proceedings arising in the ordinary course of business. When the potential liability from a matter can be estimated and the loss is considered probable, the Company records the estimated loss. Due to uncertainties related to the resolution of lawsuits, investigations, and claims, the ultimate outcome may differ from the estimates. Although the Company cannot predict with certainty the ultimate resolution of any lawsuits, investigations, and claims asserted against it, management does not believe any currently pending legal proceeding to which the Company is a party will have a material adverse effect on its financial statements.

20. Subsequent Events

On November 19, 2025, the Board approved the payment of a quarterly cash dividend of $0.15 per share of common stock, which was paid on December 10, 2025 to stockholders of record as of the close of business on December 1, 2025.