What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 404 added, 302 removed, 859 unchanged (45% of the section changed)

38 unchanged sentences

SHAREHOLDERS’ EQUITY:

Preferred Stock, $ 0.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Common Stock, $ 0.0001 par value, 100,000,000 shares authorized, 51,913,411 shares issued, and 51,913,411 shares outstanding as of March 31, 2021 and December 31, 2020, respectively

Preferred Stock, $ 0.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Common Stock, $ 0.0001 par value, 100,000,000 shares authorized, 51,913,411 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 583,723,206 587,579,093

2 unchanged sentences

261,697,527 260,433,886

Noncontrolling interests 4,594,814 4,367,547

Non-controlling interests 3,281,594 4,367,547

TOTAL SHAREHOLDERS’ EQUITY 264,979,121 264,801,433

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended March 31

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Net revenue - third parties $ 190,460,529 $ 101,105,691 $ 347,451,896 $ 271,814,931

17 unchanged sentences

NET INCOME (LOSS) 3,505,039 ( 4,314,190 ) 5,328,238 ( 344,000,722 )

net income attributable to noncontrolling interests 300,267 197,410

net income (loss) attributable to non-controlling interests ( 91,557 ) ( 255,287 ) 208,710 ( 57,877 )

NET INCOME (LOSS) ATTRIBUTABLE TO HF FOODS GROUP INC.

9 unchanged sentences

Deficit) Total Shareholders’

Noncontrolling

Non-controlling

Interests Total

2 unchanged sentences

Shares Amount

Balance at December 31, 2020 51,913,411 $ 5,191 — $ — $ 587,579,093 $ ( 327,150,398 ) $ 260,433,886 $ 4,367,547 $ 264,801,433

Balance at January 1, 2021 51,913,411 $ 5,191 — $ — $ 587,579,093 $ ( 327,150,398 ) $ 260,433,886 $ 4,367,547 $ 264,801,433

Net income — — — — — 1,522,932 1,522,932 300,267 1,823,199

1 unchanged sentence

Balance at March 31, 2021 51,913,411 5,191 — — 587,579,093 ( 325,627,466 ) 261,956,818 4,594,814 266,551,632

Balance at December 31, 2019 53,050,211 5,305 ( 905,115 ) ( 12,038,030 ) 599,617,009 15,823,661 603,407,945 4,248,787 607,656,732

Net income — — — — 3,596,596 3,596,596 ( 91,557 ) 3,505,039

Acquisition of non-controlling interest — — — — ( 3,855,887 ) — ( 3,855,887 ) ( 1,144,113 ) ( 5,000,000 )

Distribution to shareholders — — — — — — — ( 77,550 ) ( 77,550 )

Balance at June 30, 2021 51,913,411 $ 5,191 — $ — $ 583,723,206 $ ( 322,030,870 ) $ 261,697,527 $ 3,281,594 $ 264,979,121

Balance at January 1, 2020 53,050,211 $ 5,305 ( 905,115 ) $ ( 12,038,030 ) $ 599,617,009 $ 15,823,661 $ 603,407,945 $ 4,248,787 $ 607,656,732

Net income (loss) — — — — — ( 339,883,942 ) ( 339,883,942 ) 197,410 ( 339,686,532 )

1 unchanged sentence

Balance at March 31, 2020 53,050,211 5,305 ( 905,115 ) ( 12,038,030 ) 599,617,009 ( 324,060,281 ) 263,524,003 4,321,197 267,845,200

Net loss — — — — — ( 4,058,903 ) ( 4,058,903 ) ( 255,287 ) ( 4,314,190 )

Balance at June 30, 2020 53,050,211 $ 5,305 ( 905,115 ) $ ( 12,038,030 ) $ 599,617,009 $ ( 328,119,184 ) $ 259,465,100 $ 4,065,910 $ 263,531,010

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31

For the Six Months Ended June 30,

Cash flows from operating activities:

6 unchanged sentences

Allowance for inventories 66,609 43,496

Deferred tax benefit (expense) ( 578,934 ) ( 931,471 )

Deferred tax benefit ( 1,305,397 ) ( 2,497,040 )

Income from equity method investment ( 48,461 ) ( 50,337 )

10 unchanged sentences

Accounts payable - related parties 384,202 ( 2,130,874 )

Advance from customers - related parties — 213,354

Operating lease liability ( 321,032 ) ( 200,163 )

5 unchanged sentences

Payment made for acquisition of B&R Realty — ( 94,004,068 )

Payment made for acquisition of non-controlling interest ( 5,000,000 ) —

Net cash used in investing activities ( 5,594,900 ) ( 94,123,153 )

Cash flows from financing activities:

Proceeds from bank overdraft 178,688 —

Repayment of bank overdraft — ( 7,367,573 )

3 unchanged sentences

Repayment of long-term debt ( 2,975,553 ) ( 2,873,572 )

Repayment of long-term debt - related parties — ( 730,998 )

Repayment of promissory note payable - related party ( 1,500,000 ) —

12 unchanged sentences

HF Foods Group Inc.

and subsidiaries (collectively “HF Group”, or the “Company”) markets and distributes fresh produce, frozen and dry food, and non-food products to primarily Asian restaurants and other food service customers throughout the Southeast, Pacific and Mountain West regions in the United States.

and subsidiaries (collectively “HF Group”, or the “Company”) is a leading Asian food service distributor that markets and distributes fresh produce, frozen and dry food, and non-food products to primarily Asian restaurants and other food service customers throughout the Southeast, Pacific and Mountain West regions in the United States.

The Company is the result of a successful merger between two complementary market leaders, HF Group Holding Corporation ("HF Holding") and B&R Global Holdings, Inc.

("B&R Global") on November 4, 2019.

The Company was originally incorporated in Delaware on May 19, 2016 as a special purpose acquisition company under the name Atlantic Acquisition Corp.

(“Atlantic”), in order to acquire, through a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with, one or more businesses or entities.

Reorganization of HF Holding

HF Group Holding Corporation (“HF Holding”) was incorporated in the State of North Carolina on October 11, 2017 as a holding company to acquire and consolidate the various operating entities under one roof.

On August 22, 2018, Atlantic consummated a reverse acquisition transaction resulting in the stockholders of HF Holding becoming the majority shareholders of Atlantic, and changed its name to HF Foods Group Inc.

On November 4, 2019, the Company consummated a merger transaction, resulting in B&R Global becoming a wholly owned subsidiary of HF Group.

On January 17, 2020, B&R Global acquired all the subsidiaries' equity membership interests under B&R Group Realty Holding, LLC ("BRGR"), which owned warehouse facilities that were being leased to B&R Global for its operations in California, Arizona, Utah, Colorado, Washington, and Montana.

See further transaction details below.

Formation of HF Holding

HF Holding was incorporated in the State of North Carolina on October 11, 2017 as a holding company to acquire and consolidate the various operating entities under one roof.

On January 1, 2018, HF Holding entered into a Share Exchange Agreement (the “Exchange Agreement”) with the controlling shareholders of the 11 entities listed below in exchange for all of HF Holding’s outstanding shares.

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Accordingly, the Company has recorded the assets and liabilities transferred from the above entities at their carrying amount.

The following table summarizes all the existing entities under HF Holding after the above-mentioned reorganization, together with new entities formed after the Atlantic Transactions as described below:

Reverse Acquisition of HF Holding

On August 22, 2018, Atlantic consummated a reverse acquisition transaction resulting in HF Holding becoming the surviving entity (the “Atlantic Merger”) and a wholly owned subsidiary of Atlantic (the “Atlantic Acquisition”).

The stockholders of HF Holding became the majority shareholders of Atlantic, and the Company changed its name to HF Foods Group, Inc.

(Collectively, these transactions are referred to as the “Atlantic Transactions”).

At closing, Atlantic issued the HF Holding stockholders an aggregate of 19,969,831 shares of its common stock, equal to approximately 88.5 % of the aggregate issued and outstanding shares of Atlantic’s common stock.

The pre-Transaction stockholders of Atlantic owned the remaining 11.5 % of the issued and outstanding shares of common stock of the combined entity.

Following the consummation of the Atlantic Transactions on August 22, 2018, there were 22,167,486 shares of common stock issued and outstanding, consisting of (i) 19,969,831 shares issued to HF Holding’s stockholders pursuant to the Atlantic Merger Agreement, (ii) 10,000 restricted shares issued to one of Atlantic’s shareholders in conjunction with the Atlantic Transactions, and (iii) 2,587,655 shares originally issued to the pre-Transactions stockholders of Atlantic, less 400,000 shares sold back to Atlantic by one of Atlantic’s pre-Transactions shareholders in conjunction with the Atlantic Transactions.

The Atlantic Acquisition was treated as a reverse acquisition under the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S.

For accounting purposes, HF Holding was considered to be acquiring Atlantic in this transaction.

Therefore, the aggregate consideration paid in connection with the business combination was allocated to Atlantic’s tangible and intangible assets and liabilities based on their fair market values.

The assets and liabilities and results of operations of Atlantic were consolidated into the results of operations of HF Holding as of the completion of the Atlantic Transactions.

HF Holding Entities Organized or Acquired Post-Atlantic Merger

On July 10, 2019, the Company, through its subsidiary Han Feng, formed a new real estate holding company, R&N Charlotte, L.L.C.

("R&N Charlotte").

R&N Charlotte owns a 4.66 acre tract of land with appurtenant 115,570 square foot office/warehouse/industrial facility located in Charlotte, North Carolina.

On December 10, 2019, the Company, through its subsidiary Han Feng, established a new entity, HF Foods Industrial, L.L.C.

("HFFI"), as owner of 60 % of member interests, to operate as a food processing company.

On October 1, 2020, the Company, through its subsidiary HF Group Holding, formed a wholly-owned new real estate lease holding company, 273 Fifth Avenue, L.L.C.

On May 28, 2021, the Company, through its subsidiary HF Group Holding, purchased the 33.33 % non-controlling interest of the stock in Kirnland from the previous minority shareholder.

The following table summarizes all the existing entities under HF Holding after the above-mentioned reorganization, together with new entities formed or acquired after the Atlantic Transactions:

Name Date of Formation /

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NSF December 17, 2008 Florida, USA 100 % Foodservice distributor

HF Foods Industrial, L.L.C.

("HF Foods Industrial") December 10, 2019 North Carolina, USA 60 % Food processing company

HFFI December 10, 2019 North Carolina, USA 60 % Food processing company

Chinesetg July 12, 2011 New York, USA 100 % Design and printing services provider

4 unchanged sentences

HG Realty May 11, 2012 Georgia, USA 100 % Real estate holding company

R&N Charlotte, LLC

R&N Charlotte July 10, 2019 North Carolina, USA 100 % Real estate holding company

1 unchanged sentence

R&N Lexington May 27, 2010 North Carolina, USA 100 % Real estate holding company

273 Fifth Avenue, L.L.C.

273 Co October 10, 2020 Delaware, USA 100 % Real estate lease holding company

Reverse Acquisition of HF Holding

On August 22, 2018, Atlantic consummated a reverse acquisition transaction resulting in HF Holding became the surviving entity (the “Atlantic Merger”) and a wholly owned subsidiary of Atlantic (the “Atlantic Acquisition”).

The stockholders of HF Holding bec the majority shareholders of Atlantic, and the Company changed its name to HF Foods Group, Inc.

(Collectively, these transactions are referred to as the “Atlantic Transactions”).

The pre-Transaction stockholders of Atlantic owned the remaining 11.5 % of the issued and outstanding shares of common stock of the combined entity.

Following the consummation of the Atlantic Transactions on August 22, 2018, there were 22,167,486 shares of common stock issued and outstanding, consisting of (i) 19,969,831 shares issued to HF Holding’s stockholders pursuant to the Atlantic Merger Agreement, (ii) 400,000 shares redeemed by one of Atlantic’s shareholders in conjunction with the Atlantic Transactions, (iii) 10,000 restricted shares issued to one of Atlantic’s shareholders in conjunction with the Atlantic Transactions, and (iv) 2,587,655 shares originally issued to the pre-Transactions stockholders of Atlantic.

For accounting purposes, HF Holding was considered to be acquiring Atlantic in this transaction.

Therefore, the aggregate consideration paid in connection with the business combination was allocated to Atlantic’s tangible and intangible assets and liabilities based on their fair market values.

The assets and liabilities and results of operations of Atlantic were consolidated into the results of operations of HF Holding as of the completion of the business combination.

HF Holding Entities Organized Post-Atlantic Merger

On July 10, 2019, the Company, through its subsidiary Han Feng, formed a new real estate holding company, R&N Charlotte.

R&N Charlotte owns a 4.66 acre tract of land with appurtenant 115,570 square foot office/warehouse/industrial facility located in Charlotte, North Carolina.

On December 10, 2019, the Company, through its subsidiary Han Feng, formed a new food processing company, HF Foods Industrial, as owner of 60 % of member interests.

On October 1, 2020, the Company, through its subsidiary HF Group Holding, formed a wholly-owned new real estate lease holding company, 273 Co.

Business Combination with B&R Global Holdings Inc.

("B&R Global")

On November 4, 2019, HF Group consummated a merger transaction resulting in B&R Global becoming a wholly owned subsidiary of the Company.

Merger with B&R Global

On November 4, 2019, HF Group consummated a merger transaction resulting in B&R Global becoming a wholly owned subsidiary of the Company (the "Business Combination").

At closing, the Company acquired 100 % of the controlling interest of B&R Global, in exchange for the issuance of 30,700,000 shares of Common Stock of the Company to the shareholders of B&R Global.

Pursuant to the B&R Merger Agreement, the aggregate fair value of the consideration paid by HF Group in the Business Combination was $ 576,699,494 , based on the closing share price of the Company’s common stock at the date of Closing.

Pursuant to the B&R Merger Agreement, the aggregate fair value of the consideration paid by the Company in the Business Combination was $ 576,699,494 , based on the closing share price of the Company’s common stock at the date of Closing.

B&R Global was formed in 2014 as a holding company to acquire and consolidate the various operating entities (listed below) under one roof.

Through its subsidiaries, B&R Global supplies foodservice items to approximately 5,000 restaurants across 11 Western states.

The merger with HF Group, created what the Company believes is the largest food distributor to Asian restaurants in the United States.

The combined entity now has 13 distribution centers strategically located in 8 states across the Southeast, Pacific and Mountain West regions of the United States and serves over 10,000 restaurants across 22 states with a fleet of over 300 refrigerated vehicles, a workforce of over 780 employees and subcontractors.

The Company is also supported by two call centers in China which provide round-the-clock sales and service supports to its customers, who mainly converse in Mandarin or Chinese dialects.

The following table summarizes the entities under B&R Global in the Business Combination:

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Yi Z Service LLC (“YZ”) October 2, 2017 California, USA 100 % Logistic service provider

* At the acquisition date and as of March 31, 2021, B&R Global consolidates FUSO, which is considered as a variable interest entity (“VIE”) under U.S.

* On November 4, 2019 and as of June 30, 2021, B&R Global consolidated FUSO, which is considered as a variable interest entity (“VIE”) under U.S.

GAAP, due to its pecuniary and contractual interest in this entity as a result of the funding arrangements outlined in the entity.

Acquisition of Real Estate Companies

On January 17, 2020, the Company completed the transactions contemplated by that certain membership interest purchase agreement dated the same date (the “Purchase Agreement”) by and among its subsidiary B&R Global, B&R Group Realty Holding, LLC ("BRGR"), and nine subsidiary limited liability companies wholly owned by BRGR (the “BRGR Subsidiaries”) (the “Realty Acquisition”).

On January 17, 2020, the Company completed the transactions contemplated by that certain membership interest purchase agreement dated the same date (the “Purchase Agreement”) by and among its subsidiary B&R Global, BRGR, and nine subsidiary limited liability companies wholly owned by BRGR (the “BRGR Subsidiaries”) (the “Realty Acquisition”).

Pursuant to the Purchase Agreement, B&R Global acquired all equity membership interests in the BRGR Subsidiaries, which own 10 warehouse facilities that were being leased by the Company for its operations in California, Arizona, Utah, Colorado, Washington, and Montana for purchase consideration of $ 101,269,706 .

Consideration for Realty

Acquisition was funded by (i) $ 75.6 million in mortgage-backed term loans financed under the Second Amended Credit Agreement (see Note 11 for additional information), (ii) issuance by B&R Global of a $ 7.0 million Unsecured Subordinated Promissory Note (the “Note”) to BRGR, and (iii) payment of $ 18.7 million from funds drawn from the Company’s revolving credit facility.

Consideration for the Realty Acquisition was funded by

(i) $ 75.6 million in mortgage-backed term loans financed under the Second Amended Credit Agreement (see Note 10 for additional information), (ii) issuance by B&R Global of a $ 7.0 million Unsecured Subordinated Promissory Note (the “Note”) to BRGR, and (iii) payment of $ 18.7 million from funds drawn from the Company’s revolving credit facility.

The following table summarizes B&R Global’s additional wholly owned subsidiaries as a result of the Realty Acquisition:

12 unchanged sentences

Murray Properties, LLC ("MP") February 27, 2013 Utah, USA 100 % Real estate holding company

The combined entity, resulting from the merger of B&R Global and HF Group, has 13 distribution centers strategically located in 8 states across the Southeast, Pacific and Mountain West regions of the United States and serves over 10,000 restaurants across 22 states with a fleet of over 300 refrigerated vehicles, a workforce of over 780 employees and subcontractors.

The Company is also supported by two call centers in China which provide round-the-clock sales and service supports to its customers, who mainly converse in Mandarin or Chinese dialects.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

These financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal years ended December 31, 2020 and 2019.

Operating results for the three month periods ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the six month periods ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

The unaudited condensed consolidated financial statements include the financial statements of HF Group, its subsidiaries and the VIE.

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If deemed the primary beneficiary, the Company consolidates the VIE.

As of March 31, 2021 and December 31, 2020, FUSO is considered to be a VIE.

As of June 30, 2021 and December 31, 2020, FUSO is considered to be a VIE.

FUSO was established solely to provide exclusive services to the Company.

9 unchanged sentences

Total liabilities $ 681,949 $ 535,709

For the three months ended March 31

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Net revenue $ 747,831 $ 415,377 $ 1,201,005 $ 1,081,805

Net income $ 150,584 $ 34,667 $ 176,679 $ 99,445

For the three months ended March 31

Net cash provided by operating activities $ 86,743 $ 314,224

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Net cash provided by (used in) operating activities $ ( 34,231 ) $ 19,978 $ 52,512 $ 334,202

Net cash provided by (used in) financing activities ( 6,586 ) ( 23,475 ) 9,855 ( 245,612 )

Net increase in cash and cash equivalents $ 103,184 $ 92,087

Noncontrolling Interests

GAAP requires that noncontrolling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet.

Net increase (decrease) in cash and cash equivalents $ ( 40,817 ) $ ( 3,497 ) $ 62,367 $ 88,590

Non-controlling Interests

GAAP requires that non-controlling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet.

In addition, the amounts attributable to the net income (loss) of those subsidiaries are reported separately in the consolidated statements of operations.

As of March 31, 2021 and December 31, 2020, noncontrolling interests consisted of the following:

On May 28, 2021, the Company, through its subsidiary HF Group Holding, purchased the 33.33 % noncontrolling interest of the stock in Kirnland for $ 5,000,000 .

In accordance with ASC 810-10-45-23, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary shall be accounted for as equity transactions.

Therefore, no gain or loss shall be recognized.

As a result of this transaction, noncontrolling interests were reduced by $ 1,144,113 and the remaining difference of $ 3,855,887 was charged to additional paid-in capital.

As of June 30, 2021 and December 31, 2020, non-controlling interests consisted of the following:

Name of Entity Percentage of

noncontrolling

interest ownership March 31,

Non-controlling

Interest Ownership June 30,

2021 December 31,

8 unchanged sentences

Actual results could differ from those estimates.

Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include, but are not limited to, allowance for doubtful accounts, useful lives of property and equipment, lease assumptions, impairment of long-lived assets, long-term investments, goodwill, the purchase price allocation and fair value of noncontrolling interests with respect to business combinations, realization of deferred tax assets, and uncertain income tax positions.

The Company considers all highly liquid investments purchased with a maturity of three or fewer months to be cash equivalents.

As of March 31, 2021 and December 31, 2020, the Company had no cash equivalents.

price allocation and fair value of non-controlling interests with respect to business combinations, realization of deferred tax assets, and uncertain income tax positions.

The Company considers all highly liquid investments purchased with a maturity of three months or shorter to be cash equivalents.

As of June 30, 2021 and December 31, 2020, the Company had no cash equivalents, respectively.

Accounts Receivable, net

5 unchanged sentences

The Company uses specific criteria to determine uncollectible receivables to be written off, including, e.g., bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due.

As of March 31, 2021 and December 31, 2020, allowances for doubtful accounts were $ 830,306 and $ 909,182 , respectively.

As of June 30, 2021 and December 31, 2020, allowances for doubtful accounts were $ 723,918 and $ 909,182 , respectively.

Inventories, net

The Company’s inventories, consisting mainly of food and other food service-related products, are primarily considered as finished goods.

The Company’s inventories, consisting mainly of food and other food service-related products, are considered as finished goods.

Inventory costs, including the purchase price of the product and freight charges to deliver it to the Company’s warehouses, are net of certain cash or non-cash consideration received from vendors.

1 unchanged sentence

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) method.

As of March 31, 2021 and December 31, 2020, the valuation allowance was $ 202,655 and $ 146,078 , respectively.

As of June 30, 2021 and December 31, 2020, the valuation allowance was $ 232,946 and $ 146,078 , respectively.

Property and Equipment, net

7 unchanged sentences

Machinery and equipment 3 — 10

Repair and maintenance costs are charged to expense as incurred, whereas the cost of renewals and betterment that extends the useful lives of property, plant and equipment are capitalized as additions to the related assets.

Repair and maintenance costs are charged to expense as incurred, whereas the cost of renewals and betterment that extends the useful lives of property and equipment are capitalized as additions to the related assets.

Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with any resulting gain or loss reflected in the consolidated statements of operations in other income or expenses.

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Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests.

The excess of (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over, (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill.

The excess of (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over, (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill.

If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings.

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The Company makes a qualitative assessment of whether the investment is impaired at each reporting date.

If a qualitative assessment indicates that the investment is impaired, the Company has to estimate the investment’s fair value in accordance with the principles of ASC Topic 820 (“ASC 820”), Fair

Value Measurements and Disclosures .

If the fair value is less than the investment’s carrying value, the entity has to recognize an impairment loss in earnings equal to the difference between the carrying value and fair value.

5 unchanged sentences

An impairment loss on the equity method investments is recognized in earnings when the decline in value is determined to be other-than-temporary.

The Company did no t record any impairment loss on its long-term investments as of March 31, 2021 and December 31, 2020.

The Company did no t record any impairment loss on its long-term investments as of June 30, 2021 and December 31, 2020.

Impairment of Long-lived Assets Other Than Goodwill

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If property and equipment, and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair value.

The Company did no t record any impairment loss on its long-lived assets as of March 31, 2021 and December 31, 2020.

The Company did no t record any impairment loss on its long-lived assets as of June 30, 2021 and December 31, 2020.

Revenue Recognition

6 unchanged sentences

The Company’s revenue streams are recognized at a specific point in time.

For the three month periods ended March 31, 2021 and 2020, revenue recognized from performance obligations related to prior periods was insignificant.

For the three and six month periods ended June 30, 2021 and 2020, revenue recognized from performance obligations related to prior periods was insignificant.

Revenue expected to be recognized in any future periods related to remaining performance obligations is insignificant.

The following table summarizes disaggregated revenue from customers by geographic locations:

For the Three Months Ended

2021 March 31,

For the Three Months Ended For the Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Arizona $ 12,376,972 $ 6,914,288 $ 23,516,574 $ 16,926,037

9 unchanged sentences

Shipping and handling costs, which include costs related to the selection of products and their delivery to customers, are included in distribution, selling and administrative expenses.

Shipping and handling costs were $ 1,925,773 and $ 2,558,233 for the three months ended March 31, 2021 and 2020, respectively.

Shipping and handling costs were $ 4,399,210 and $ 3,526,249 for the six months ended June 30, 2021 and 2020, and $ 2,473,438 and $ 968,016 for the three months ended June 30, 2021 and 2020, respectively.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

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The Company records uncertain tax positions in accordance with ASC 740 (“ASC 740”), Income Taxes , on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company does not believe that there were any uncertain tax positions at March 31, 2021 and December 31, 2020.

The Company does not believe that there were any uncertain tax positions at June 30, 2021 and December 31, 2020.

The Company adopted ASU 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740):

4 unchanged sentences

As a result of the Realty Acquisition (see Note 6 for additional information), nine leases previously included in the operating lease asset and liabilities balance were eliminated during consolidation.

As of March 31, 2021, the balances for operating lease assets were $ 15,993,197 and liabilities were $ 16,096,714 .

As of June 30, 2021, the balances for operating lease assets were $ 16,326,011 and liabilities were $ 16,540,991 .

As of December 31, 2020, the balances for operating lease assets were $ 931,630 and liabilities were $ 931,630 .

1 unchanged sentence

The Company determines if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on

the Company’s consolidated balance sheets.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s consolidated balance sheets.

Finance leases are included in property and equipment, net, current portion of finance lease liabilities, and finance lease liabilities, non-current on the consolidated balance sheets.

10 unchanged sentences

Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

There is no anti-dilutive effect for the three month periods ended March 31, 2021 and 2020.

There is no anti-dilutive effect for the three and six month periods ended June 30, 2021 and 2020.

Fair Value of Financial Instruments

6 unchanged sentences

There were no transfers between fair value levels in any of the periods presented herein.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, advances to suppliers, other current assets, accounts payable, bank overdraft, income tax payable, current portion of long-term debt, current portion of obligations under finance and operating leases, and accrued expenses and other liabilities approximate their fair value based on the short-term maturity of these instruments.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, advances to suppliers, other current assets, accounts payable, bank overdraft, current portion of long-term debt, current portion of obligations under finance and operating leases, accrued expenses and other liabilities and Obligations under interest rate swap contracts approximate their fair value based on the short-term maturity of these instruments.

Derivative Financial Instrument

9 unchanged sentences

Concentration risk

There were no receivables from any one customer representing more than 10% of the Company’s consolidated gross accounts receivable at March 31, 2021 and December 31, 2020.

For the three months ended March 31, 2021 and 2020, no supplier accounted for more than 10 % of the total cost of revenue.

As of March 31, 2021, there were two suppliers that accounted for 24 % and 11 % of total outstanding advance payments, and no supplier that accounted for advance payments to related parties.

As of December 31, 2020, two suppliers accounted for 22 % and 18 % of total outstanding advance payments, and one supplier accounted for 96 % of advance payments to related parties, respectively.

There were no receivables from any one customer representing more than 10% of the Company’s consolidated gross accounts receivable at June 30, 2021 and December 31, 2020.

For the six months ended June 30, 2021 and 2020, no supplier accounted for more than 10% of the total cost of revenue.

As of June 30, 2021, there were four suppliers that accounted for a combined 53 % of total outstanding advance payments, and no supplier that accounted for advance payments to related parties.

As of December 31, 2020, two suppliers accounted for a combined 40 % of total outstanding advance payments, and one supplier accounted for 96 % of advance payments to related parties, respectively.

Reclassifications

Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation.

These reclassifications have no impact on previously reported net loss.

Recent Accounting Pronouncements

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Accounts receivable, net consisted of the following:

As of March 31,

As of June 30,

2021 As of December 31,

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Movement of allowance for doubtful accounts is as follows:

For the Three Months Ended

2021 March 31,

For the Six Months Ended

2021 June 30,

Beginning balance $ 909,182 $ 623,970

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Long-term investments consisted of the following:

Ownership as of March 31,

2021 As of March 31, 2021 As of December 31, 2020

Ownership as of June 30,

2021 As of June 30, 2021 As of December 31, 2020

Asahi Food, Inc.

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is accounted for under the equity method due to the fact that the Company has significant influence but does not exercise full control over this investee.

The Company believes there was no impairment as of March 31, 2021 and December 31, 2020 for these investments.

The Company believes there was no impairment as of June 30, 2021 and December 31, 2020 for these investments.

NOTE 5 - PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

As of March 31,

As of June 30,

2021 As of December 31,

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See Note 6 for additional information.

Depreciation expense was $ 1,526,691 and $ 1,651,505 for the three month periods ended March 31, 2021 and 2020, respectively .

NOTE 6 - BUSINESS COMBINATION WITH B&R GLOBAL

Effective November 4, 2019, HF Group acquired 100 % of the controlling interest of B&R Global, in exchange for 30,700,000 shares of HF Group Common Stock.

HF Group is considered as both the legal and accounting acquirer based on the fact that there was no change of control in connection with this Business Combination.

The aggregate fair value of the consideration paid by HF Group in the Business Combination is $ 576,699,494 and is based on the closing share price of the Company’s common stock at the date of Closing.

The Company recorded acquired intangible assets of $ 188,503,000 .

These intangible assets include tradenames valued at $ 29,303,000 and customer relationships valued at $ 159,200,000 .

The associated goodwill and intangible assets are not deductible for tax purposes.

Depreciation expense was $ 3,012,537 and $ 3,264,862 for the six month periods ended June 30, 2021 and 2020, respectively, and $ 1,485,846 and $ 1,607,452 for the three months ended June 30, 2021 and 2020, respectively.

NOTE 6 - ACQUISITION OF B&R REALTY SUBSIDIARIES

On January 17, 2020, B&R Global acquired 100 % equity membership interests of the subsidiaries of BRGR, which own warehouse facilities that were being leased to B&R Global for its operations in California, Arizona, Utah, Colorado, Washington, and Montana.

CEO of the Company, Xiao Mou Zhang, managed and owned an 8.91 % interest in BRGR.

Before the acquisition of BRGR Subsidiaries, CEO of the Company, Xiao Mou Zhang, managed and owned an 8.91 % interest in BRGR.

The total purchase price for the acquisition was $ 101,269,706 , based on independent appraisals of the fair market value of the properties.

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Consideration for the acquisition was funded by (i) $ 75.6 million in mortgage-backed term loans financed under the Second Amended Credit Agreement (see Note 10 for additional information), (ii) issuance by B&R Global of a $ 7.0 million Unsecured Subordinated Promissory Note to BRGR maturing on January 17, 2030, and (iii) payment of $ 18.7 million from funds drawn from the Company’s revolving credit facility.

The reissuance of the mortgage-backed term loans released BRGR from its obligations to the lenders under the First Amended Credit Agreement (See Note 11 for additional information) and predecessor financing arrangements.

The reissuance of the mortgage-backed term loans released BRGR from its

obligations to the lenders under the First Amended Credit Agreement (See Note 10 for additional information) and predecessor financing arrangements.

The following table presents the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

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Impairment loss — — —

Balance at March 31, 2021 $ — $ 68,511,941 $ 68,511,941

Balance at June 30, 2021 $ — $ 68,511,941 $ 68,511,941

The Company booked approximately $ 406.7 million of goodwill on December 31, 2019, resulting from the completion of Business Combination with B&R Global, which represents the excess of the purchase price over the fair value of net assets acquired.

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Potential impairment indicators include (but are not limited to) macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit, or sustained decrease in share price.

Towards the end of first quarter of fiscal year 2020, the Company experienced significant decline in business volume due to mandatory stay-at-home orders issued by governmental authorities in response to the intensification of the COVID-19 pandemic.

Towards the end of first quarter of fiscal year 2020, the Company experienced a significant decline in business volume due to mandatory stay-at-home orders issued by governmental authorities in response to the intensification of the COVID-19 pandemic.

The Company determined that the B&R Global reporting unit was very sensitive to these declines and that it was more likely than not that an impairment may exist.

The Company, therefore, performed an analysis of the fair value of the B&R

Global reporting unit as of March 31, 2020 using a discounted cash flow method for goodwill impairment testing purposes.

The Company, therefore, performed an analysis of the fair value of the B&R Global reporting unit as of March 31, 2020 using a discounted cash flow method for goodwill impairment testing purposes.

Based upon the analysis, the Company concluded that the carrying value of its B&R Global reporting unit exceeded its fair value by approximately $ 338.2 million.

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The calculation of the impairment charge includes substantial fact-based determinations and estimates including weighted average cost of capital ("WACC"), future revenue, profitability, perpetual growth rates and fair values of assets and liabilities.

The fair value conclusions as of March 31, 2020 for the reporting unit are highly sensitive to changes in the WACC, which consider observable data about guideline publicly traded companies, an estimated market participant’s expectations about capital structure and risk premiums.

The fair value conclusions as of March 31, 2020 for the reporting unit are highly sensitive to changes in the WACC, which consider observable data about guidelines on publicly traded companies, an estimated market participant’s expectations about capital structure and risk premiums.

The Company corroborated the reasonableness of the estimated reporting unit fair values by reconciling to its enterprise value and market capitalization.

The Company also observed that the WACC applied on March 31, 2020 increased significantly from the original WACC value as of the acquisition date, mainly driven by the increased risk and volatility observed in the market.

The Company also observed that the WACC applied on March 31, 2020 increased significantly from the original WACC value as of the acquisition date, mainly driven by the increased risk and

volatility observed in the market.

Volatility had primarily been due to concerns about demand for food distribution services, as restaurant activity in much of the country had been reduced to takeout and delivery offerings.

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These key assumptions are inherently uncertain and require a high degree of estimation and judgment and are subject to change based on future conditions, industry and global economic and geo-political factors, and the timing and success of the Company's implementation of current strategic initiatives.

Using historic monthly sales run rate and forecasted sales run rates for the next year, the Company performed goodwill impairment assessment and concluded no further impairment is required as of March 31, 2021.

Acquired Intangible Assets

In connection with the Business Acquisition of B&R Global, HF Group acquired $ 188,503,000 of intangible assets, primarily representing tradenames and customer relationships, which have an estimated amortization period of approximately 10 years and 20 years, respectively.

In connection with the Business Acquisition of B&R Global, HF Group acquired $ 188,503,000 of intangible assets, representing tradenames and customer relationships, which have an estimated amortization period of approximately 10 years and 20 years, respectively.

The components of the intangible assets are as follows:

As of March 31, 2021 As of December 31, 2020

As of June 30, 2021 As of December 31, 2020

Amount Accumulated

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Total $ 188,503,000 $ ( 18,150,500 ) $ 170,352,500 $ 188,503,000 $ ( 12,705,350 ) $ 175,797,650

COVID-19 has had an adverse impact on the Company’s customers, which was a triggering event, the Company performed interim long-lived asset quantitative impairment tests as of March 31, 2021.

T he Company performed interim long-lived asset impairment evaluation as of June 30, 2021.

All intangible assets were tested for recoverability at the asset group level.

ASC Topic 360, Property, Plant and Equipment ("ASC 360") defines the recoverability of these assets as measured by comparison of their (or asset group) carrying amounts to future undiscounted cash flows the assets (or asset group) are expected to generate.

Based on the test for recoverability using undiscounted cash flows attributable to the asset (or asset group), the sum of the undiscounted cash flows exceeded the carrying value of the measured asset (or asset group).

As such, no impairment was recorded for the finite lived assets as of March 31, 2021.

HF Group’s amortization expense for intangible assets was $ 2,722,575 and $ 2,722,575 for the three month periods ended March 31, 2021 and March 31, 2020, respectively.

The Company performed long-lived impairment assessment and concluded no further impairment is required as of June 30, 2021.

HF Group’s amortization expense for intangible assets was $ 2,722,575 and $ 5,445,150 for the three and six month periods respectively ended June 30, 2021 and June 30, 2020, respectively.

Estimated future amortization expense for intangible assets is presented below:

Twelve months ending March 31, Amount

Twelve months ending June 30, Amount

2022 $ 10,890,300

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NOTE 8 - DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes interest rate swaps for the sole purpose of mitigating interest rate fluctuation risk associated to floating rate debt instruments (as defined in Note 11 Lines of Credit, and Note 12 Long-Term Debt).

The Company utilizes interest rate swaps for the sole purpose of mitigating interest rate fluctuation risk associated to floating rate debt instruments (as defined in Note 9 Line of Credit, and Note 10 Long-Term Debt).

The Company does not use any other derivative financial instruments for trading or speculative purposes.

On August 20, 2019, HF Group entered into two IRS contracts with East West Bank (the "EWB IRS") for initial notional amounts of $ 1.05 million and $ 2.625 million, respectively.

The EWB IRS contracts were entered into in conjunction with two mortgage term loans of corresponding amount that were priced at USD 1-month LIBOR (London Interbank Offering Rate) plus 2.25 % per annum for the entire duration of the term loans.

The EWB IRS contracts were entered into in conjunction with two

mortgage term loans of corresponding amount that were priced at USD 1-month LIBOR (London Interbank Offering Rate) plus 2.25 % per annum for the entire duration of the term loans.

The EWB IRS contracts have fixed the two term loans at 4.23 % per annum until maturity in September 2029.

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Hence, the fair value change on the aforementioned interest rate swap contracts are accounted for and recognized as change in fair value of interest rate swap contracts in the unaudited condensed consolidated statements of operations.

As of March 31, 2021 and December 31, 2020, the Company has determined that the fair value of the interest rate swap obligations was $ 281,223 and $ 993,516 , respectively.

As of June 30, 2021 and December 31, 2020, the Company has determined that the fair value of the interest rate swap obligations was $ 393,479 and $ 993,516 , respectively.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in its assessment of fair value.

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The JPM Credit Agreement provides for a $ 100 million asset-secured revolving credit facility maturing on November 4, 2022, with an option to renew at the bank’s discretion.

The credit facility was collateralized by all assets of the Company and was also guaranteed by B&R Group Realty and B&R Realty Subsidiaries, which B&R Realty Subsidiaries were subsequently acquired by the Company on January 17, 2020 (See Note 8 for additional information).

The credit facility was collateralized by all assets of the Company and was also guaranteed by BRGR and BRGR Subsidiaries, which BRGR Subsidiaries were subsequently acquired by the Company on January 17, 2020 (See Note 6 for additional information).

The JPM Credit Agreement was later superseded by a Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") as described below.

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On the same day, B&R Global utilized the $ 75.6 million Term Loan and additional $ 18.7 million drawdown from the Revolving Facility to fund in part the acquisition of ten warehouse facilities owned by the selling BRGR Subsidiaries, which B&R Global had been leasing for its operations in California, Arizona, Utah, Colorado, Washington, and Montana.

The Second Amended Credit Agreement contained certain financial covenants and as of March 31, 2021, the Company was in compliance with the covenants under the Second Amended Credit Agreement.

The outstanding principal balance on the line of credit as of March 31, 2021 was $ 16.4 million.

The Second Amended Credit Agreement contained certain financial covenants and as of June 30, 2021, the Company was in compliance with the covenants under the Second Amended Credit Agreement.

The outstanding principal balance on the line of credit as of June 30, 2021 was $ 19.1 million.

NOTE 10 - LONG-TERM DEBT

Long-term debt at March 31, 2021 and December 31, 2020 is as follows:

Bank name Maturity Interest rate as of March 31,

2021 As of March 31,

Long-term debt at June 30, 2021 and December 31, 2020 is as follows:

Bank name Maturity Interest rate as of June 30,

2021 As of June 30,

2021 As of December 31,

Bank of America – (a) April 2021 - December 2029 3.73 % — 5.51 % $ 5,903,576 $ 5,905,472

Bank of America – (a) November 2021 - December 2029 3.73 % — 5.51 % $ 5,622,528 $ 5,905,472

BMO Harris Bank N.A.

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The terms of the various loan agreements related to long-term bank borrowings require the Company to comply with certain financial covenants.

As of March 31, 2021 and December 31, 2020, the Company was in compliance.

As of June 30, 2021 and December 31, 2020, the Company was in compliance.

The loans outstanding were guaranteed by the following properties, entities or individuals, or otherwise secured as shown:

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Balloon payment for this debt is $ 3,116,687 .

(e) Real estate term loan with a principal balance of $ 72,012,901 as of March 31, 2021 is secured by assets held by nine subsidiaries of the Company, AK, BRR, BSR, FL, GSR, HP, LF, LR, and MP.

Equipment term loan with a principal balance of $ 1,732,164 as of March 31, 2021 is secured by specific vehicles and equipment as defined in loan agreements.

The future maturities of long-term debt as of March 31, 2021 are as follows:

Twelve months ending March 31, Amount

(e) Real estate term loan with a principal balance of $ 71,264,205 as of June 30, 2021 is secured by assets held by nine subsidiaries of the Company, AK, BRR, BSR, FL, GSR, HP, LF, LR, and MP.

Equipment term loan with a principal balance of $ 1,538,120 as of June 30, 2021 is secured by specific vehicles and equipment as defined in loan agreements.

The future maturities of long-term debt as of June 30, 2021 are as follows:

Twelve months ending June 30, Amount

2022 $ 5,804,100

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NOTE 11 - LEASES

The Company leases office space, warehouses and vacant land for building development under non-cancelable operating leases, with terms typically ranging from one to thirty years , as well as operating and finance leases for vehicles and delivery trucks, forklifts and computer equipment with various expiration dates through 2050.

forklifts and computer equipment with various expiration dates through 2050.

The Company determines whether an arrangement is or includes an embedded lease at contract inception.

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The components of lease expense were as follows:

For the Three Months Ended

2021 March 31,

For the Three Months Ended For the Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Operating lease cost $ 513,066 $ 253,820 $ 1,085,201 $ 756,877

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The components of lease expense were as follows:

For the Three Months Ended

2021 March 31,

For the Three Months Ended For the Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Finance leases cost:

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Supplemental cash flow information related to finance leases was as follows:

For the Three Months Ended

2021 March 31,

For the Three Months Ended For the Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Operating cash flows from finance leases $ 16,718 $ 23,218 $ 37,343 $ 51,120

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Maturities of lease liabilities were as follows:

Twelve months ending March 31, Operating

Twelve months ending June 30, Operating

Leases Finance

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An has tendered an unconditional guaranty of all AnHeart liabilities arising from the leases, in favor of the Company, executed by Minsheng Pharmaceutical Group Company, Ltd., a Chinese manufacturer and distributor of herbal medicines.

On February 10, 2021, 273 Co, a newly established Delaware limited liability company and wholly owned subsidiary of the Company, completed the closing of an Assignment and Assumption of Lease Agreement (“Assignment”), dated effective as of January 21, 2021, pursuant to which it has assumed the lease of the premises at 273 Fifth Avenue, New York, New York (the

“273 Lease Agreement”) dated as of July 2, 2018, by and between AnHeart, a former subsidiary of the Company, and Premier 273 Fifth, LLC ("Landlord").

On the same date, the closing documents were delivered to effectuate the amendment of the 273 Lease Agreement pursuant to an Amendment to Lease (the “Lease Amendment”).

On February 10, 2021, 273 Co, a newly established Delaware limited liability company and wholly owned subsidiary of the Company, entered into an Assignment and Assumption of Lease Agreement (“Assignment”), dated effective as of January 21, 2021, with AnHeart and Premier 273 Fifth, LLC ("Landlord"), pursuant to which it has assumed the lease of the premises at 273 Fifth Avenue, New York, New York signed on July 2, 2018 (the “273 Lease Agreement”).

At the same time, the closing documents were delivered to effectuate the amendment of the 273 Lease Agreement pursuant to an Amendment to Lease (the “Lease Amendment”).

The Assignment and the 273 Lease Amendment were negotiated pursuant to guarantee obligations of the Company’s wholly owned subsidiary, HF Holding as guarantor under the Lease Agreement.

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The 273 Lease Agreement and the Lease Amendment provide for a term of 30 years, with option to renew for 10 additional years, at an annual rent starting at $ 325,000 and escalating annually throughout the term, with the annual rent in the final year of the initial term of $ 1,047,974 .

The 273 Lease Amendment further granted certain rent abatement to the premises for 2020 and 2021, including a 20 % reduction of annual rent in 2021.

The 273 Lease Amendment further granted certain rent abatement to the premises for 2020 and 2021, including a 20 % reduction of annual rent in 2021 subject to meeting certain conditions.

The Lease Amendment permits subletting of the premises.

NOTE 13 - SUPPLEMENTAL CASH FLOWS INFORMATION

NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow disclosures and noncash investing and financing activities are as follows:

For the Three Months Ended

2021 March 31,

For the Six Months Ended

2021 June 30,

Supplemental disclosure of cash flow data

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The Company does not expect the repatriation tax and new minimum tax on certain future foreign earnings to have any impact on the Company’s operations since it currently has no foreign income and does not expect to generate any foreign income in the future.

(i) The provision for income taxes of the Company for the three months ended March 31, 2021 and 2020 consists of the following :

For the Three Months Ended

2021 March 31,

(i) The provision for income taxes of the Company for the three and six months ended June 30, 2021 and 2020 consists of the following :

For the Three Months Ended For the Six Months Ended

2021 June 30,

2020 June 30,

2021 June 30,

Current income taxes:

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(ii) Temporary differences and carryforwards of the Company that created significant deferred tax assets and liabilities are as follows:

As of March 31,

As of June 30,

2021 As of December 31,

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Intangibles assets ( 43,901,883 ) ( 45,461,272 )

Right of Use Asset ( 152,934 ) —

Total deferred tax liabilities ( 46,438,440 ) ( 48,122,146 )

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The net deferred tax liabilities presented in the Company's unaudited condensed consolidated balance sheets are as follows:

As of March 31,

As of June 30,

2021 As of December 31,

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(iii) Reconciliations of the statutory income tax rate to the effective income tax rate are as follows:

For the Three Months Ended

2021 March 31,

For the Six Months Ended

2021 June 30,

Federal statutory tax rate 21.0 % 21.0 %

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The Company makes regular purchases from and sales to various related parties.

Related party affiliations were attributed to transactions conducted between the Company and those business entities partially or wholly owned by Company officers and major shareholders.

Related party affiliations were attributed to transactions conducted between the Company and those business entities partially or wholly owned by the Company, the Company officers and/or major shareholders.

Certain related party transactions described in this note are among the issues that are being scrutinized as part of an ongoing internal investigation, and disclosures concerning particular transactions are subject to the outcome of, and conclusions that may ultimately be reached in, this ongoing investigation.

Zhou Min Ni and Mr.

Xiao Mou Zhang were the Co-Chief Executive Officers as of December 31, 2020.

Ni subsequently resigned from all of his official posts on February 23, 2021.

Zhou Min Ni ("Mr.

Xiao Mou Zhang ("Mr.

Zhang") were the Co-Chief Executive Officers as of December 31, 2020.

Ni resigned from all of his official posts on February 23, 2021.

Upon resignation, Mr.

Ni owned 10.7 % of outstanding shares of common stock of the Company.

Xiao Mou Zhang became the sole Chief Executive Officer on February 23, 2021.

Ni directly owned 10.7 % of outstanding shares of common stock of the Company.

Zhang became the sole Chief Executive Officer on February 23, 2021.

Ni and his immediate family members are treated as related parties for purposes of this report because Mr.

Ni continued as an officer and director of the Company during a substantial portion of the three month period ending March 31, 2021 and Mr.

Ni is a holder of more than 10 % of the Company's securities.

The related party transactions as of March 31, 2021 and December 31, 2020 and for the three month periods ended March 31, 2021 and 2020 are identified as follows:

The Company had recently evaluated Mr.

Zhang's ownership interest and his relationship with certain entities that were previously classified as related parties in prior financial statements.

The Company noted that four entities with ownership ranging from 5.0 % to 10 % and are mainly restaurants, were deemed to be non related party in nature.

The Company noted that Mr.

Zhang or his family members do not manage or participate in daily operations and holds no influence over those entities.

Hence, the Company concluded that those entities do not fall under the definition of related party and were excluded from the classification accordingly.

The Company also determined that its 12 % ownership in PT.

Tamron Akuatik Produk Industri ("Tamron"), accounted for using alternative measurement under ASC 321, did not meet the definition of related party due to the fact that the Company does not participate in Tamron's daily operations and holds no influence over it.

Further, the Company evaluated Mr.

Ni's ownership interest and his relationship with certain entities that were previously classified as related parties in prior financial statement.

The Company noted that two entities that were previously owned by Mr.

Ni, 37.67 % and 100 % respectively, were no longer deemed to be related party in nature.

The Company noted Mr.

Ni had disposed off the equity interest on January 1, 2020 and September 29, 2020, respectively.

Ni or his family members do not manage or participate in daily operations and holds no influence over those entities after the disposal.

Hence, the Company concluded that those entities do not fall under the definition of related party anymore, and were excluded from the classification accordingly.

As a result of the Company's evaluation described above, certain related party transactions and balances for the three and six months ended June 30, 2021 and June 30, 2020, and as of June 30, 2021 and December 31, 2020 were reclassified and removed from related party disclosure to conform to current reporting period's presentation.

Other than the reclassification, there are no financial impact to the prior financial statements.

The related party transactions as of June 30, 2021 and December 31, 2020 and for the three and six month periods ended June 30, 2021 and 2020 are identified as follows:

Related Party Sales and Purchases Transactions

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Purchase - related parties

Below is a summary of purchases of goods and services from related parties recorded for the three months ended March 31, 2021 and 2020, respectively:

Below is a summary of purchases of goods and services from related parties recorded for the three months ended June 30, 2021 and 2020, respectively:

Name of Related Party Three Months Ended

March 31, 2021 Three Months Ended

March 31, 2020

June 30, 2021 Three Months Ended

June 30, 2020

(a) Best Food Services, LLC $ 2,353,900 $ 873,122

(b) Eastern Fresh NJ, LLC 1,473,617 445,572

(d) Hanfeng (Fujian) Information Technology Co., Ltd.

(e) Ocean Pacific Seafood Group, Inc.

207,847 52,143

(f) Revolution Industry, LLC — 541,910

(g) Union Food, LLC — 162,816

Others 70,436 65,281

Total $ 4,896,012 $ 3,278,633

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

Ni owns 30 % equity interest in this entity.

Ni owns 40 % equity interest in this entity indirectly through its parent company.

Ni previously owned 100 % equity interest in this entity.

Mr Ni disposed off the ownership and ended his legal representation of this entity on September 29, 2020.

Ni owns 26 % equity interest in this entity.

(f) Raymond Ni, one of Mr.

Ni’s family members, owns 100 % equity interest in this entity.

On February 25, 2021, Han Feng executed an asset purchase agreement to acquire the machinery and equipment from Revolution Industry, LLC ("RIL").

Han Feng has acquired substantially all of the operating assets used or held for use in such business operation for an amount of $ 250,000 plus the original wholesale purchase value of all verified, useable cabbage and egg roll mix inventory of RIL.

Advances due from RIL at the time of transaction were an offset to the purchase payment made to RIL.

Going forward, Han Feng has taken the egg roll production business in house and ceased its vendor relationship with RIL.

(g) Tina Ni, one of Mr.

Ni’s family members, owns 30 % equity interest in this entity.

Anthony Zhang, one of Mr.

Xiao Mou Zhang's family member, owns 10 % of equity interest in this entity.

Below is a summary of purchase from related parties for the six months ended June 30, 2021 and 2020, respectively:

Name of Related Party Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

(a) Allstate Trading Company, Inc.

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(d) First Choice Seafood, Inc.

83,121 336,739

(e) Fujian RongFeng Plastic Co., Ltd 799,917 1,020,353

(f) Hanfeng (Fujian) Information Technology Co., Ltd.

(d) Enson Group, Inc.

(formerly "Enson Group, LLC") 127,577 —

(e) First Choice Seafood, Inc.

159,752 336,739

(g) N&F Logistics, Inc.

(f) Fujian RongFeng Plastic Co., Ltd 1,590,129 1,844,955

(g) Hanfeng (Fujian) Information Technology Co., Ltd.

(h) N&F Logistics, Inc.

2,646 368,529

(h) North Carolina Good Taste Noodle, Inc.

(i) Ocean Pacific Seafood Group, Inc.

338,426 233,175

Tamron Akuatik Produk Industri — 1,012,588

(k) Revolution Industry, LLC 259,257 503,792

(l) UGO USA, Inc.

(j) Revolution Industry, LLC 189,701 1,045,702

(k) UGO USA, Inc.

212,384 220,740

(m) Union Foods, LLC — 1,083,904

(n) Winfar Foods, Inc.

(l) Union Foods, LLC — 1,246,720

Others 160,966 88,345

Total $ 9,237,383 $ 11,722,947

Zhou Min Ni owns 40 % equity interest in this entity.

Xiao Mou Zhang owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

Zhang's children own 10.38 % equity interest in this entity indirectly from November 1, 2020.

Zhou Min Ni owns 30 % equity interest in this entity.

Zhou Min Ni owns 25 % equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns 40 % equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns 100 % equity interest in this entity.

Zhou Min Ni owns 25 % equity interest in this entity.

Jian Ming Ni, former Chief Financial Officer owns 29 % equity interest in this entity.

Zhou Min Ni previously owned 37.34 % equity in this entity as of December 31, 2019.

Mr Zhou Min Ni's equity interest was disposed of on January 1, 2020.Purchase amount disclosed for the three months ended March 31, 2020 was for information purpose.

Zhou Min Ni owns 26 % equity interest in this entity.

(j) B&R Global has 12 % equity interest in this entity.

Entity is not considered as a related party due to lack of control.

Purchase amount disclosed for the three months ended March 31, 2020 for information purpose.

(k) Raymond Ni, one of Mr.

Zhou Min Ni’s family members, owns 100 % equity interest in this entity.

On February 25, 2021, Han Feng executed an asset purchase agreement to acquire the machinery and equipment from Revolution Industry, LLC.

Advances due from Revolution at the time of transaction were an offset to the purchase payment made to Revolution.

Going forward, Han Feng has taken the egg roll production business in house and ceased its vendor relationship with Revolution Industry, LLC.

Zhou Min Ni owns 30 % equity interest in this entity.

(m) Tina Ni, one of Mr.

Zhou Min Ni’s family members, owns 30 % equity interest in this entity.

Ni owns 40 % equity interest in this entity.

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

Ni owns 30 % equity interest in this entity.

Ni owns 25 % equity interest in this entity.

Ni owns 25 % equity interest in this entity indirectly through its parent company.

Ni owns 40 % equity interest in this entity indirectly through its parent company.

Ni previously owned 100 % equity interest in this entity.

Mr Ni disposed off the ownership and ended his legal representation of this entity on September 29, 2020.

Ni owns 25 % equity interest in this entity.

Ni owns 26 % equity interest in this entity.

(j) Raymond Ni, one of Mr.

Ni’s family members, owns 100 % equity interest in this entity.

On February 25, 2021, Han Feng executed an asset purchase agreement to acquire the machinery and equipment from Revolution Industry, LLC ("RIL").

Advances due from RIL at the time of transaction were an offset to the purchase payment made to RIL.

Going forward, Han Feng has taken the egg roll production business in house and ceased its vendor relationship with RIL.

Ni owns 30 % equity interest in this entity.

(l) Tina Ni, one of Mr.

Ni’s family members, owns 30 % equity interest in this entity.

Anthony Zhang, one of Mr.

Xiao Mou Zhang's family member, owns 10 % of equity interest in this entity.

Xiao Mou Zhang owns 5.2 % equity interest in this entity indirectly through its parent company.

Sales - related parties

Below is a summary of sales to related parties recorded for the three months ended March 31, 2021 and 2020, respectively:

Below is a summary of sales to related parties recorded for the three months ended June 30, 2021 and 2020, respectively:

Name of Related Party Three Months Ended

March 31, 2021 Three Months Ended

March 31, 2020

June 30, 2021 Three Months Ended

June 30, 2020

(a) ABC Food Trading, LLC $ 506,306 $ 169,145

6 unchanged sentences

(formerly "Enson Group, LLC") 26,601 123,820

(g) First Choice Seafood, Inc.

(g) Enson Seafood GA, Inc.

(formerly “GA-GW Seafood, Inc.”) 553,985 —

(h) First Choice Seafood, Inc.

7,615 1,145,984

(h) Fortune One Foods, Inc.

(i) Heng Feng Food Services, Inc.

64,878 155,705

(j) N&F Logistics, Inc.

160,466 172,216

Others 71,875 183,519

Total $ 3,085,707 $ 3,454,405

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

(b) The Company, through its subsidiary MF, owns 49 % equity interest in this entity.

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

(d) Tina Ni, one of Mr.

Ni’s family members, owns 26.5 % equity interest in this entity indirectly through its parent company.

Ni owns 30 % equity interest in this entity.

Ni owns 25 % equity interest in this entity.

Ni owns 50 % equity interest in this entity.

Ni owns 25 % equity interest in this entity indirectly through its parent company.

Ni owns 45 % equity interest in this entity.

Ni owns 25 % equity interest in this entity.

Below is a summary of sales to related parties recorded for the six months ended June 30, 2021 and 2020, respectively:

Name of Related Party Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

(a) ABC Food Trading, LLC $ 1,220,212 $ 1,048,298

(b) Asahi Food, Inc.

341,133 221,190

(d) Eagle Food Service, LLC 2,076,021 2,437,025

(e) Eastern Fresh NJ, LLC 99,338 1,449,294

(f) Enson Group, Inc.

(formerly "Enson Group, LLC") 53,113 272,752

(g) Enson Seafood GA, Inc.

(formerly “GA-GW Seafood, Inc.”) 554,949 40,216

(h) First Choice Seafood, Inc.

82,144 1,378,208

(i) Heng Feng Food Services, Inc.

4 unchanged sentences

Total $ 5,476,168 $ 8,548,501

Xiao Mou Zhang owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

Zhang's children own 10.38 % equity interest in this entity indirectly from November 1, 2020.

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

(b) The Company, through its subsidiary MF, owns 49 % equity interest in this entity.

Xiao Mou Zhang owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

Zhang's children own 10.38 % equity interest in this entity indirectly from November 1, 2020.

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

(d) Tina Ni, one of Mr.

Zhou Min Ni’s family members, owns 26.5 % equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns 30 % equity interest in this entity.

Zhou Min Ni owns 25 % equity interest in this entity.

Zhou Min Ni owns 25 % equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns 17.5 % equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns 45 % equity interest in this entity.

Zhou Min Ni owns 25 % equity interest in this entity.

Ni’s family members, owns 26.5 % equity interest in this entity indirectly through its parent company.

Ni owns 30 % equity interest in this entity.

Ni owns 25 % equity interest in this entity.

Ni owns 50 % equity interest in this entity.

Ni owns 25 % equity interest in this entity indirectly through its parent company.

Ni owns 45 % equity interest in this entity.

Ni owns 25 % equity interest in this entity.

Lease Agreements - Related Parties

The Company leases various facilities to related parties.

R&N Holdings leases a facility to UGO USA Inc.

under an operating lease agreement expiring in 2022.

Rental income for the three months ended March 31, 2021 and 2020 was $ 10,500 and $ 10,500 , respectively.

R&N Holdings leased a facility to UGO USA Inc.

under an operating lease agreement which was mutually terminated by both parties effective April 1, 2021.

Rental income for the three months ended June 30, 2021 and 2020 was nil and $ 10,500 , respectively, and the six months ended June 30, 2021 and 2020 was $ 7,000 and $ 21,000 , respectively.

HG Realty leases a warehouse to Enson Seafood GA Inc.

(formerly “GA-GW Seafood, Inc.”) under an operating lease agreement expiring on September 21, 2027.

Rental income for the three months ended March 31, 2021 and 2020 was $ 120,000 and $ 120,000 , respectively.

Han Feng leases a production area to Revolution Industry, LLC under a $ 3,000 month-to-month lease agreement.

Rental income recorded for the three months ended March 31, 2021 and 2020 was $ 6,000 and $ 9,000 , respectively.

The lease agreement was terminated as a result of the asset purchase agreement executed on February 25, 2021.

Rental income for the three months ended June 30, 2021 and 2020 was $ 120,000 and $ 120,000 , respectively, and the six months ended June 30, 2021 and 2020 was $ 240,000 and $ 240,000 , respectively.

B&R Global leased warehouses from related parties owned by the majority shareholder of B&R Global prior to the Realty Acquisition on January 17, 2020.

3 unchanged sentences

In February 2021, Kirnland executed a new 5 -year operating lease agreement with Yoan effective January 1, 2021 and expiring on December 31, 2025.

Rent incurred to the related party was $ 70,485 and $ 30,000 for the three months ended March 31, 2021 and 2020, respectively.

Rent incurred to the related party was $ 77,428 and $ 30,000 for the three months ended June 30, 2021 and 2020, respectively, and $ 154,856 and $ 60,000 for the six months ended June 30, 2021 and 2020, respectively.

Related Party Balances

Accounts receivable - related parties, net

Below is a summary of accounts receivable with related parties recorded as of March 31, 2021 and December 31, 2020, respectively:

Name of Related Party As of March 31,

Below is a summary of accounts receivable with related parties recorded as of June 30, 2021 and December 31, 2020, respectively:

Name of Related Party As of June 30,

2021 As of December 31,

14 unchanged sentences

Total $ 1,921,415 $ 1,261,463

Xiao Mou Zhang owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

Zhang's children own 10.38 % equity interest in this entity indirectly from November 1, 2020..

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

(b) The Company, through its subsidiary MF, owns 49 % equity interest in this entity.

Xiao Mou Zhang owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

Zhang's children own 10.38 % equity interest in this entity indirectly from November 1, 2020.

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

(d) Tina Ni, one of Mr.

Zhou Min Ni’s family members, owns 26.5 % equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns 30 % equity interest in this entity.

Zhou Min Ni owns 50 % equity interest in this entity.

Zhou Min Ni owns 17.5 % equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns 45 % equity interest in this entity.

Zhou Min Ni owns 25 % equity interest in this entity.

Ni’s family members, owns 26.5 % equity interest in this entity indirectly through its parent company.

Ni owns 30 % equity interest in this entity.

Ni owns 50 % equity interest in this entity.

Ni owns 17.5 % equity interest in this entity indirectly through its parent company.

Ni owns 45 % equity interest in this entity.

Ni owns 25 % equity interest in this entity.

All accounts receivable from these related parties are current and considered fully collectible.

No allowance is deemed necessary as of March 31, 2021 and December 31, 2020.

No allowance is deemed necessary as of June 30, 2021 and December 31, 2020.

Accounts payable - related parties, net

All the accounts payable to related parties are payable upon demand without interest.

Below is a summary of accounts payable with related parties recorded as of March 31, 2021 and December 31, 2020, respectively:

Name of Related Party As of March 31,

Below is a summary of accounts payable with related parties recorded as of June 30, 2021 and December 31, 2020, respectively:

Name of Related Party As of June 30,

2021 As of December 31,

4 unchanged sentences

(d) Fujian RongFeng Plastic Co., Ltd 767,593 69,429

(e) Hanfeng (Fujian) Information Technology Co., Ltd.

(f) Hanfeng Information Technology (Jinhua), Inc.

(g) Heng Feng Food Services, Inc.

(h) Revolution Industry, LLC 129,257 —

(i) UGO USA, Inc.

75,616 211,003

(e) Hanfeng Information Technology (Jinhua), Inc.

(f) Heng Feng Food Services, Inc.

(g) UGO USA, Inc.

Others 169,379 26,218

Total $ 1,956,629 $ 1,572,427

Xiao Mou Zhang owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

Zhang's children own 10.38 % equity interest in this entity indirectly from November 1, 2020.

Zhou Min Ni owns 30 % equity interest in this entity.

Zhou Min Ni owns 25 % equity interest in this entity.

Zhou Min Ni owns 40 % equity interest in this entity indirectly through its parent company.

Zhou Min Ni owns 100 % equity interest in this entity.

Zhou Min Ni owns 37 % equity interest in this entity.

Zhou Min Ni owns 45 % equity interest in this entity.

(h) Raymond Ni, one of Mr.

Zhou Min Ni’s family members, owns 100 % equity interest in this entity.

On February 25, 2021, Han Feng executed an asset purchase agreement to acquire the machinery and equipment from Revolution Industry, LLC.

Advances due from Revolution at the time of transaction were an offset to the purchase payment made to Revolution.

Going forward, Han Feng has taken the egg roll production business in house and ceased its vendor relationship with Revolution Industry, LLC.

Zhou Min Ni owns 30 % equity interest in this entity.

Zhang previously owned 10.38 % equity interest in this entity indirectly through its parent company as of October 31, 2020.

The equity interest was transferred to 3 Irrevocable Trusts for the benefits of Mr.

Zhang's children with immediate effect on November 1, 2020.

Ni owns 30 % equity interest in this entity.

Ni owns 25 % equity interest in this entity.

Ni owns 40 % equity interest in this entity indirectly through its parent company.

Ni owns 37 % equity interest in this entity.

Ni owns 45 % equity interest in this entity.

Ni owns 30 % equity interest in this entity.

Advances to suppliers - related parties, net

The Company periodically provides purchase advances to various vendors, including the related party suppliers.

Below is a summary of advances to related party suppliers recorded as of March 31, 2021 and December 31, 2020, respectively:

Name of Related Party As of March 31,

Below is a summary of advances to related party suppliers recorded as of June 30, 2021 and December 31, 2020, respectively:

Name of Related Party As of June 30,

2021 As of December 31,

2 unchanged sentences

Total $ — $ 196,803

Zhou Min Ni owns 26 % equity interest in this entity.

Ni owns 26 % equity interest in this entity.

(b) Raymond Ni, one of Mr.

Zhou Min Ni’s family members, owns 100 % equity interest in this entity.

On February 25, 2021, Han Feng executed an asset purchase agreement to acquire the machinery and equipment from Revolution Industry, LLC.

Advances due from Revolution at the time of transaction were an offset to the purchase payment made to Revolution.

Going forward, Han Feng has taken the egg roll production business in house and ceased its vendor relationship with Revolution Industry, LLC.

Ni’s family members, owns 100 % equity interest in this entity.

On February 25, 2021, Han Feng executed an asset purchase agreement to acquire the machinery and equipment from Revolution Industry, LLC ("RIL").

Advances due from Revolution at the time of transaction were an offset to the purchase payment made to RIL.

Going forward, Han Feng has taken the egg roll production business in house and ceased its vendor relationship with RIL.

Promissory note payable - related party

B&R Global issued a $ 7.0 million Unsecured Subordinated Promissory Note to BRGR.

B&R Global issued a $ 7.0 million Unsecured Subordinated Promissory Note to BRGR in January 2020 as part of the payment for the acquisition of BRGR (Refer to Note 6).

The note bears an interest rate of 6 % per annum that matures in January 2030.

At March 31, 2021, outstanding balance was $ 6.5 million and accrued interest payable was nil .

Notes Receivable - related Parties

The Company had previously made advances or loans to certain entities that are either owned by our former Chairman and Co-CEO of the Company, Mr.

Zhou Min Ni or family members of Mr.

On September 30, 2019, the Company and Mr.

Ni entered into a Loan Purchase and Sale Agreement (the "Loan Sale Agreement").

Pursuant to the Loan Sale Agreement, all notes receivable from Enson Seafood GA Inc, Han Feng Global, Inc.

dba NSG Interntional Inc., and Revolution Automotive LLC, with a combined outstanding balance of $ 8,415,525 ("Total Notes Receivable"), were sold to Mr.

Zhou Min Ni in exchange for 632,746 shares of common stock of the Company, which shares were received and recorded in treasury stock by the Company as of September 30, 2019.

In connection with the sale of the above notes, the Company also required 208,806 additional shares of common stock of the Company owned by Mr.

Ni to be placed in an escrow account for a period of one year until September 30, 2020 (the “Escrow Period”), which will then be delivered to the Company in part or in full, if the volume weighted average price ("VWAP") of the Company’s common stock for the 250-trading-day period immediately preceding the expiration of the Escrow Period is less than $ 13.30 .

On October 9, 2020, in accordance with the terms of the Loan Sale Agreement, the Company and Mr.

Ni determined and agreed that the 250-day VWAP was $ 10.59 , and that, therefore, 161,966 of the Escrow Shares would be transferred to and recorded as treasury stock by the Company and the remaining 46,840 Escrow Shares would be returned to Mr.

Following which, the Total Notes Receivable guaranteed by Mr.

Ni is considered fully settled.

The Company has retired all treasury stock in October 2020.

At June 30, 2021, outstanding balance was $ 5.5 million and accrued interest payable was nil .

NOTE 15 - SEGMENT REPORTING

6 unchanged sentences

Frequency, volume and profit margins are uniquely different between the two reporting segments.

Segment reporting for the three months ended March 31, 2020 were re-presented below.

Segment reporting for the three and six months ended June 30, 2020 were re-presented below.

All the Company's revenue was generated from its business operation in the U.S.

The following table presents net sales by segment for the three month periods ended March 31, 2021 and 2020, respectively:

For the Three Months Ended

March 31, 2021 March 31, 2020

The following table presents net sales by segment for the three and six month periods ended June 30, 2021 and 2020, respectively:

For the Three Months Ended For the Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Sales to independent restaurants $ 187,516,460 $ 98,620,662 $ 340,557,245 $ 265,892,978

Wholesales 5,826,265 8,531,401

Wholesale 6,029,776 5,939,434 12,370,819 14,470,454

Total $ 193,546,236 $ 104,560,096 $ 352,928,064 $ 280,363,432

For the Three Months Ended March 31, 2021

Sales to independent restaurants Wholesales Total

For the Three Months Ended June 30, 2021

Sales to Independent Restaurants Wholesale Total

Revenue $ 187,516,460 $ 6,029,776 $ 193,546,236

Cost of revenue $ 152,284,008 $ 6,127,924 $ 158,411,932

Gross profit (loss) $ 35,232,452 $ ( 98,148 ) $ 35,134,304

Depreciation and amortization $ 4,126,735 $ 132,699 $ 4,259,434

Cash capital expenditures $ 208,614 $ 6,880 $ 215,494

For the Three Months Ended June 30, 2020

Sales to Independent Restaurants Wholesale Total

Revenue $ 98,620,662 $ 5,939,434 $ 104,560,096

Cost of revenue $ 78,415,142 $ 5,532,170 $ 83,947,312

Gross profit $ 20,205,520 $ 407,264 $ 20,612,784

1 unchanged sentence

Cash capital expenditures $ 46,652 $ 3,060 $ 49,712

For the Three Months Ended March 31, 2020

Sales to independent restaurants Wholesales Total

For the Six Months Ended June 30, 2021

Sales to Independent Restaurants Wholesale Total

Revenue $ 340,557,245 $ 12,370,819 $ 352,928,064

3 unchanged sentences

Cash capital expenditures $ 640,404 $ 23,263 $ 663,667

The following table presents total assets by reportable segment as of March 31, 2021 and December 31, 2020, respectively:

As of March 31,

For the Six Months Ended June 30, 2020

Sales to Independent Restaurants Wholesale Total

Revenue $ 265,892,978 $ 14,470,454 $ 280,363,432

Cost of revenue $ 217,144,426 $ 13,631,177 $ 230,775,603

Gross profit $ 48,748,552 $ 839,277 $ 49,587,829

Depreciation and amortization $ 8,260,460 $ 449,552 $ 8,710,012

Cash capital expenditures $ 199,127 $ 10,837 $ 209,964

The following table presents total assets by reportable segment as of June 30, 2021 and December 31, 2020, respectively:

As of June 30,

2021 As of December 31,

1 unchanged sentence

Sales to independent restaurants $ 491,418,936 $ 456,775,742

Wholesales 18,306,961 23,501,433

Wholesale 15,802,059 27,509,341

Total Assets $ 507,220,995 $ 484,285,083

10 unchanged sentences

Therefore, if one or more of these ordinary-course legal matters were resolved against us for amounts in excess of management's expectations, our results of operations and financial condition, including in a particular reporting period, could be materially adversely affected.

Beginning on March 29, 2020, two putative class actions and two derivative actions were filed against us, our directors, and/or certain of our officers alleging violation of securities laws or breach of fiduciary duties in connection with allegations that we failed to disclose in public statements that the Company engaged in certain related party transactions, that insiders and related parties were enriching themselves by misusing shareholder funds, and that the Company masked the true number of free-floating shares, These cases seek unspecified damages and other forms of relief.

We intend to continue to vigorously defend these lawsuits.

As previously disclosed, an analyst report published in March 2020 suggested certain improprieties in the Company’s operations, many of which later became the subject of allegations in two putative class actions and two derivative actions that were filed on or after March 29, 2020 against the Company, the Company's then current directors, and/or certain of the Company’s then current officers, alleging violation of securities laws or breach of fiduciary duties in connection with claims that the Company failed to disclose in public statements that the Company engaged in certain related party transactions, that insiders and related parties were enriching themselves by misusing shareholder funds, and that the Company masked the true number of free-floating shares (the “Class Actions”).

The Company intends to continue to vigorously defend these lawsuits.

These cases now are all pending in the U.S.

2 unchanged sentences

The derivative actions are stayed pending the outcome of that motion to dismiss.

In addition, the events alleged in the lawsuits became the subject of an investigation by the Securities and Exchange Commission, with which we are cooperating.

There have been no changes to the status of these proceedings as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

In response to the analyst report, the Company's Board of Directors appointed a Special Committee of Independent Directors to conduct an internal independent investigation with the assistance of counsel (“Special Committee”).

In addition, the SEC initiated a formal, non-public investigation of the Company, and the SEC informally requested, and later issued a subpoena for, documents and other information.

The subpoena relates to but is not necessarily limited to the matters identified in the Class Actions.

The Special Committee and the Company are cooperating with the SEC.

The SEC and the Special Committee investigations are ongoing.

There have been no changes to the status of these proceedings as described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

While the Special Committee has reached no final conclusions in conjunction with its investigation, it has made a number of recommendations to management regarding improvements to Company operations and structure, including but not limited to its dealings with related parties.

The Company has also instituted structural changes including the retirement of the former Co-Chief Executive Officer and Chairman of the Board.

The Company now has an independent Chairman of the Board.

In addition, the Company recently hired an in-house General Counsel and Chief Compliance Officer, who will report to the Chief Executive Officer and the Chairman of the Board.

(See Note 17, Subsequent Events)

NOTE 17 - SUBSEQUENT EVENTS

The Company evaluated subsequent events through May 10, 2021, which is the date the financial statements were available to be issued.

The Company evaluated subsequent events through August 9, 2021, which is the date the financial statements were available to be issued.

On August 2, 2021, the Company appointed Ms.

Christine Chang to become the General Counsel and Chief Compliance Officer of the Company, effective as of September 8, 2021.

CAUTIONARY NOTE ABOUT FORWARD LOOKING STATEMENTS

15 unchanged sentences

• Disruption of relationships with or loss of customers;

• Our ability to renew or replace the current lease of our warehouse in Georgia;

• Failure to retain our senior management and other key personnel, particularly Xiao Mou Zhang and Kong Hian Lee;

22 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements