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Item 1. Financial Statements

2023-01-31 compared with 2023-01-31 · 185 added, 198 removed, 617 unchanged (38% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data) June 30, 2022 December 31, 2021

(In thousands, except share data) March 31, 2022 December 31, 2021

CURRENT ASSETS

13 unchanged sentences

TOTAL ASSETS $ 620,066 $ 596,946

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

17 unchanged sentences

SHAREHOLDERS’ EQUITY

Preferred stock, $ 0.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021

Common stock, $ 0.0001 par value, 100,000,000 shares authorized, 53,706,392 shares issued and outstanding as of June 30, 2022 and December 31, 2021

Preferred stock, $ 0.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021

Common stock, $ 0.0001 par value, 100,000,000 shares authorized, 53,706,392 shares issued and outstanding as of March 31, 2022 and December 31, 2021

Additional paid-in capital 597,517 597,227

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended March 31,

(In thousands, except share and per share data) 2022 2021

17 unchanged sentences

NET INCOME AND COMPREHENSIVE INCOME 3,140 1,658

net income (loss) attributable to noncontrolling interests ( 70 ) ( 91 ) ( 44 ) 209

NET INCOME AND COMPREHENSIVE INCOME ATTRIBUTABLE TO HF FOODS GROUP INC.

net income attributable to noncontrolling interests 26 300

NET INCOME AND COMPREHENSIVE INCOME

ATTRIBUTABLE TO HF FOODS GROUP INC.

$ 3,114 $ 1,358

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Three Months Ended March 31,

(In thousands) 2022 2021

3 unchanged sentences

Depreciation and amortization expense 5,779 4,730

Gain from disposal of property and equipment ( 1,351 ) ( 49 )

Gain from disposal of equipment ( 65 ) ( 4 )

Provision for doubtful accounts ( 12 ) ( 83 )

Allowance for inventories 67

Deferred tax benefit ( 2,154 ) ( 487 )

7 unchanged sentences

Changes in operating assets and liabilities (excluding effects of acquisitions):

Accounts receivable, net ( 6,529 ) ( 5,428 )

Accounts receivable ( 7,026 ) ( 5,406 )

Accounts receivable - related parties ( 669 ) 96

10 unchanged sentences

Purchase of property and equipment ( 2,672 ) ( 448 )

Proceeds from disposal of property and equipment 7,667 69

Payment made for acquisition of noncontrolling interest — ( 5,000 )

Payment made for acquisition of Sealand ( 34,849 ) —

Proceeds from disposal of equipment 79 8

Payment made for acquisition of Great Wall Group ( 17,339 ) —

4 unchanged sentences

Repayment of line of credit ( 268,298 ) ( 157,829 )

Proceeds from long-term debt 45,952 —

Repayment of long-term debt ( 1,475 ) ( 1,477 )

2 unchanged sentences

Repayment of obligations under finance leases ( 616 ) ( 508 )

Proceeds from noncontrolling interest shareholder 240 —

Proceeds from noncontrolling interests shareholder 240 —

Cash distribution to shareholders ( 89 ) ( 73 )

3 unchanged sentences

Cash at end of the period $ 16,426 $ 11,255

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

HF FOODS GROUP INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Six Months Ended June 30,

(In thousands) 2022 2021

Supplemental disclosure of cash flow data:

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Shareholders’

(In thousands, except for shares) Number of

(In thousands, except share data) Number of

Shares Amount

3 unchanged sentences

Balance at March 31, 2021 51,913,411 $ 5 $ 587,579 $ ( 327,071 ) $ 260,513 $ 4,594 $ 265,107

Net income (loss) — — — 3,407 3,407 ( 91 ) 3,316

Acquisition of noncontrolling

interest — — ( 3,856 ) — ( 3,856 ) ( 1,144 ) ( 5,000 )

Distribution to shareholders — — — — — ( 77 ) ( 77 )

Balance at June 30, 2021 51,913,411 $ 5 $ 583,723 $ ( 323,664 ) $ 260,064 $ 3,282 $ 263,346

Balance at January 1, 2022 53,706,392 $ 5 $ 597,227 $ ( 306,284 ) $ 290,948 $ 4,041 $ 294,989

4 unchanged sentences

Balance at March 31, 2022 53,706,392 $ 5 $ 597,517 $ ( 303,170 ) $ 294,352 $ 4,784 $ 299,136

Net income (loss) — — — 4,564 4,564 ( 70 ) 4,494

Distribution to shareholders — — — — — ( 97 ) ( 97 )

Stock-based compensation — — 221 — 221 — 221

Balance at June 30, 2022 53,706,392 $ 5 $ 597,738 $ ( 298,606 ) $ 299,137 $ 4,617 $ 303,754

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

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The total acquisition price for all operating assets and inventory was approximately $ 68.2 million.

On April 29, 2022, the Company completed the acquisition of substantially all of the assets of Sealand Food, Inc.

This included the acquisition of equipment, machinery and vehicles for cash consideration of $ 20.0 million, inventory for cash consideration of $ 14.4 million, and additional fixed assets for cash consideration of approximately $ 0.5 million (the "Sealand Acquisition").

The acquisition was completed as part of the Company’s strategy to develop a national footprint through continued expansion in the East Coast of the United States, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

See Note 7 - Acquisitions for additional information on recent acquisitions.

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The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information pursuant to the rules and regulations of the SEC and have been consistently applied.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

These financial statements are condensed and should be read in conjunction with the audited financial statements and notes thereto for the fiscal years ended December 31, 2021 and 2020.

Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The accompanying consolidated financial statements include the accounts of HF Group and certain variable interest entities for which the Company is the primary beneficiary.

All intercompany balances and transactions have been eliminated in consolidation.

For consolidated entities where we own or are exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interest in its consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entity by the respective noncontrolling party.

For consolidated entities where we own or are exposed to less than 100% of the economics, the Company

records net income (loss) attributable to noncontrolling interest in its consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entity by the respective noncontrolling party.

Variable Interest Entities

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In addition, the amounts attributable to the net income of those subsidiaries are reported separately in the condensed consolidated statements of income and comprehensive income.

As of June 30, 2022 and December 31, 2021, noncontrolling interest equity consisted of the following:

As of March 31, 2022 and December 31, 2021, noncontrolling interest equity consisted of the following:

($ in thousands) Ownership of

Noncontrolling

Interest June 30,

Interest March 31,

2022 December 31,

6 unchanged sentences

Syncglobal Inc.

43.00 % 402 —

Total $ 4,784 $ 4,041

2 unchanged sentences

contributing $ 0.6 million and acquiring developed technology.

During the three months ended June 30, 2022, the joint venture began to wind down operations, accordingly, the developed technology was fully impaired.

See Note 8 - Goodwill and Intangibles for additional information.

See Note 8 - Goodwill and Acquired Intangible Assets for additional information.

Uses of Estimates

6 unchanged sentences

ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

ASU 2016-13 was further amended in

November 2019 in “Codification Improvements to Topic 326, Financial Instruments-Credit losses”.

ASU 2016-13 was further amended in November 2019 in “Codification Improvements to Topic 326, Financial Instruments-Credit losses”.

This guidance is effective for fiscal years beginning after December 15, 2019, including those interim periods within those fiscal years.

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In addition, the Company receives the economic benefits from the entity and has concluded that the Company is the primary beneficiary.

The carrying amounts of the assets, liabilities, the results of operations and cash flows of

the VIE included in the Company’s consolidated balance sheets, statements of income and comprehensive income (loss) and statements of cash flows are immaterial.

The carrying amounts of the assets, liabilities, the results of operations and cash flows of the VIE included in the Company’s consolidated balance sheets, statements of income and comprehensive income (loss) and statements of cash flows are immaterial.

Staffing Agencies

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There were immaterial assets held, immaterial liabilities owed by the Staffing Agencies and immaterial equity.

The Company has determined it was the primary beneficiary for the Staffing Agencies through December 31, 2021 as it controlled how and when the labor force would be utilized.

Company has determined it was the primary beneficiary for the Staffing Agencies through December 31, 2021 as it controlled how and when the labor force would be utilized.

The Company did not have any guarantees, commitments or other forms of financing to the Staffing Agencies.

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The Company did not have any guarantees, commitments, or other forms of financing with these entities.

All transactions with Revolution Industry and UGO ceased in 2021, therefore, these entities are no longer considered VIEs as of June 30, 2022.

All transactions with Revolution Industry and UGO ceased in 2021, therefore, these entities are no longer considered VIEs as of March 31, 2022.

Related party transactions, such as purchases of goods and services, with Revolution Industry and UGO are disclosed in Note 13 - Related Party Transactions .

AnHeart, Inc.

("AnHeart") was previously a subsidiary of the Company designed to sell traditional Chinese medicine, sold to a third-party in February 2019.

was previously a subsidiary of the Company designed to sell traditional Chinese medicine, sold to a third-party in February 2019.

As discussed in Note 15 - Commitments and Contingencies, after the sale, the Company continued to provide a guarantee for all rent and related costs associated with two leases of AnHeart in Manhattan, New York.

The Company reassessed its relationship with AnHeart and determined that AnHeart is a VIE as a result of the guarantee.

The Company reassessed its relationship with AnHeart and determined that AnHeart was a VIE as a result of the guarantee.

However, the Company concluded it was not the primary beneficiary of AnHeart because it does not have the power to direct the activities of AnHeart that most significantly impact AnHeart's economic performance.

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

For the three and six months ended June 30, 2022 and 2021, revenue recognized from performance obligations related to prior periods was immaterial.

For the three months ended March 31, 2022 and 2021, revenue recognized from performance obligations related to prior periods was immaterial.

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

The following table presents the Company's net revenue disaggregated by principal product categories:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended March 31,

($ in thousands) 2022 2021

8 unchanged sentences

Accounts receivable, net consisted of the following:

(In thousands) June 30, 2022 December 31, 2021

(In thousands) March 31, 2022 December 31, 2021

Accounts receivable $ 44,147 $ 37,121

2 unchanged sentences

Movement of allowance for doubtful accounts is as follows:

Six Months Ended June 30,

Three Months Ended March 31,

(In thousands) 2022 2021

1 unchanged sentence

Increase (decrease) in provision for doubtful accounts ( 12 ) ( 83 )

Write off ( 8 ) ( 162 )

write off / (recovery) ( 1 ) 4

Ending balance $ 827 $ 830

Long-term investments consisted of the following:

($ in thousands) Ownership as of June 30,

2022 June 30, 2022 December 31, 2021

($ in thousands) Ownership as of March 31,

2022 March 31, 2022 December 31, 2021

Asahi Food, Inc.

5 unchanged sentences

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

The Company determined there was no impairment as of June 30, 2022 and December 31, 2021 for these investments.

The Company determined there was no impairment as of March 31, 2022 and December 31, 2021 for these investments.

Property and equipment, net consisted of the following:

(In thousands) June 30, 2022 December 31, 2021

(In thousands) March 31, 2022 December 31, 2021

Automobiles $ 32,069 $ 31,577

7 unchanged sentences

Property and equipment, net $ 147,244 $ 145,908

Depreciation expense was $ 2.2 million and $ 2.0 million for the three months ended June 30, 2022 and 2021, respectively.

Depreciation expense was $ 4.4 million and $ 4.0 million for the six months ended June 30, 2022 and 2021, respectively.

Depreciation expense was $ 2.2 million and $ 2.0 million for the three months ended March 31, 2022 and 2021, respectively.

NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS

9 unchanged sentences

For the Company's fixed rate debt, the fair values were estimated using discounted cash flow analyses, based on the current incremental borrowing rates for similar types of borrowing arrangements.

As of June 30, 2022, the carrying value of the fixed rate debt was $ 5.0 million and the fair value was $ 3.7 million.

As of March 31, 2022, the carrying value of the fixed rate debt, which includes the Company's promissory note payable to related party, was $ 14.5 million and the fair value was $ 10.5 million.

As of December 31, 2021, the carrying value of the fixed rate debt, which included the Company's promissory note payable to related party, was $ 15.0 million and the fair value was $ 12.2 million.

The variable and fixed rate debt are both classified as Level 2.

Of the $ 5.0 million of fixed rate debt as of June 30, 2022, $ 2.4 million is attributable to real estate term loans with East West Bank, $ 2.3 million is attributable to vehicle and equipment term loans with Bank of America, and $ 0.3 million is attributable to vehicle loans with other financial institutions.

Of the $ 15.0 million of fixed rate debt as of December 31, 2021, $ 4.5 million is related to the Company’s promissory note payable to related party, $ 2.5 million is attributable to real estate term loans with East West Bank, $ 2.7 million is attributable to vehicle and equipment term loans with Bank of America, $ 4.5 million is attributable to loans with First Horizon Bank, and $0.8 million is attributable to vehicle loans with other financial institutions.

Please refer to Note 10 - Debt and Note 13 - Related Party Transactions for additional information regarding the Company's debt.

Of the $ 14.5 million of fixed rate debt as of March 31, 2022, $ 4.5 million is related to the Company’s promissory note payable to related party, $ 2.4 million is attributable to real estate term loans with East West Bank, $ 2.5 million is attributable to vehicle and equipment term loans with Bank of America, $ 4.5 million is attributable to loans with First Horizon Bank, and $ 0.6 million is attributable to vehicle loans with other financial institutions.

Of the $ 15.0 million of fixed rate debt as of December 31, 2021, $ 4.5 million is related to the Company’s promissory note payable to related party, $ 2.5 million is attributable to real estate term loans with East West Bank, $ 2.7 million is attributable to vehicle and equipment term loans with Bank of America, $ 4.5 million is attributable to loans with First Horizon Bank, and $ 0.8 million is attributable to vehicle loans with other financial institutions.

Please refer to Note 9 - Derivative Financial Instruments for additional information regarding the fair value of the Company's derivative financial instruments which are classified as Level 2.

NOTE 7 - ACQUISITIONS

Sealand Acquisition

On April 29, 2022, the Company completed the acquisition of substantially all of the operating assets of Sealand including equipment, machinery and vehicles.

The acquisition was completed to expand the Company's territory along the East Coast, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

The price for the purchased assets was $ 20.0 million paid in cash at closing.

In addition to the closing cash payment, the Company separately acquired all of the Sellers' saleable product inventory for approximately $ 14.4 million and additional fixed assets for approximately $ 0.5 million.

The Company is in the process of finalizing its purchase accounting, which relates to the valuation of intangible assets, which may impact the valuation of goodwill.

The Company accounted for this transaction under ASC 805, Business Combinations, by applying the acquisition method of accounting and established a new basis of accounting on the date of acquisition.

The assets acquired by the Company were measured at their estimated fair values as of the date of acquisition.

Goodwill is calculated as the excess of the purchase price over the net assets recognized and represent synergies and benefits expected as a result from combining operations with an emerging national presence.

The transaction costs for the acquisition totaled approximately $ 0.6 million for the six months ended June 30, 2022 and were reflected in distribution, selling and administrative expenses in the unaudited condensed consolidated statement of income and comprehensive income.

The information included herein has been prepared based on the allocation of the purchase price using estimates of the fair value of assets acquired and liabilities assumed which were determined using a combination of quoted market prices, discounted cash flows, and other estimates made by management.

The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets and liabilities acquired are fully evaluated by the Company, not to exceed one year as permitted under ASC 805 .

Preliminary Purchase Price Allocation

The Company has performed an allocation of the total consideration paid to acquire the assets and liabilities of Sealand is as set forth below:

(In thousands) Amount

Inventory $ 13,846

Property plant, and equipment 1,424

Right-of-use assets 127

Intangible assets 14,717

Total assets acquired 30,114

Obligations under operating leases 127

Total liabilities assumed 127

Net assets 29,987

Goodwill 4,861

Total consideration $ 34,848

The Company recorded acquired intangible assets of $ 14.7 million, which were measured at fair value using Level 3 inputs.

These intangible assets include tradenames and trademarks of $ 4.4 million, customer relationships of $ 8.9 million and non-compete agreements of $ 1.4 million.

The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology and Level 3 inputs including a discount rate.

The fair value of tradenames and trademarks was determined by applying the income approach utilizing the relief from royalty methodology and Level 3 inputs including a royalty rate of 1% and a discount rate.

The fair value of non-competition agreements was determined by applying the income approach and Level 3 inputs including a discount rate.

Discount rates used in determining fair values for customer relationships, tradenames and trademarks, and non-competition agreements ranged from 17.5% to 18.0%.

The useful lives of the tradenames and trademarks are ten years , customer relationships are ten years and non-compete agreements are three years , with a weighted average amortization period of approximately nine years .

The associated goodwill is deductible for tax purposes.

Great Wall Acquisition

On December 30, 2021, the Company executed an Asset Purchase Agreement with Great Wall Seafood Supply Inc., a Texas Corporation;

5 unchanged sentences

As such, the total acquisition price for all operating assets and inventory was approximately $ 68.2 million.

During the three months ended March 31, 2022, the Company paid $ 17.4 million to acquire the remaining saleable product inventory.

During the three months ended March 31, 2022, the Company paid the $ 17.4 million to acquire the remaining saleable product inventory.

The Company accounted for this transaction under ASC 805, Business Combinations, by applying the acquisition method of accounting and established a new basis of accounting on the date of acquisition.

1 unchanged sentence

The transaction costs for the acquisition were reflected in distribution, selling and administrative expenses in the condensed consolidated statements of income and comprehensive income (loss) and totaled $ 0.4 million for the six months ended June 30, 2022.

The transaction costs for the acquisition were reflected in distribution, selling and administrative expenses in the condensed consolidated statement of income and comprehensive income (loss) and totaled $ 1.3 million, $ 0.4 million for the three months ended March 31, 2022 and $ 0.9 million for the year ended December 31, 2021.

8 unchanged sentences

Total consideration $ 68,155

The Company recorded acquired intangible assets of $ 30.1 million, which were measured at fair value using Level 3 inputs.

These intangible assets include tradenames and trademarks of $ 10.5 million, customer relationships of $ 17.2 million and non-compete agreements of $ 2.4 million.

The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology using Level 3 inputs including a discount rate.

The Company recorded acquired intangible assets of $ 30.1 million, including tradenames and trademarks of $ 10.5 million, customer relationships of $ 17.2 million and non-compete agreements of $ 2.4 million.

The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology using Level 3 inputs including a

discount rate.

3 unchanged sentences

The associated goodwill is deductible for tax purposes.

See Note 8 - Goodwill and Acquired Intangible Assets for additional information on acquired intangibles in the Great Wall Acquisition.

Unaudited Supplemental Pro Forma Financial Information

The following table presents the Company’s unaudited pro forma results for the three and six months ended June 30, 2022, as if both the Great Wall Acquisition and Sealand Acquisition had been consummated on January 1, 2021.

The following table presents the Company’s unaudited pro forma results for the three months ended March 31, 2021, as if the Great Wall Acquisition had been consummated on January 1, 2021.

The unaudited pro forma financial information presented includes the effects of adjustments related to the amortization of acquired intangible assets and excludes synergies and other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees.

1 unchanged sentence

Accordingly, the unaudited pro forma information does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations.

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2022 2021 2022 2021

(In thousands) Three Months Ended March 31, 2022

Pro forma net revenue $ 199,791

1 unchanged sentence

Pro forma net income attributable to HF Group $ 1,078

Sealand Acquisition

Subsequent to March 31, 2022, on April 29, 2022, the Company completed the acquisition of substantially all of the operating assets of Sealand Food, Inc.

("Sealand") including equipment, machinery and vehicles.

The acquisition was completed to expand the Company's territory along the East Coast, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

The price for the purchased assets was $ 20.0 million paid in cash at closing.

The Company is in the process of finalizing its purchase accounting, which relates to the valuation of acquired inventory and intangible assets, which may impact the valuation of goodwill.

The Company accounted for this transaction under ASC 805, Business Combinations, by applying the acquisition method of accounting and established a new basis of accounting on the date of acquisition.

The assets acquired by the Company were measured at their estimated fair values as of the date of acquisition.

Preliminary Purchase Price Allocation

The Company has performed an allocation of the total consideration paid to acquire the assets and liabilities of Sealand, as set forth below:

(In thousands) Amount

Inventory $ 13,846

Property plant, and equipment 1,424

Right-of-use assets 127

Intangible assets 14,717

Total assets acquired 30,114

Obligations under operating leases 127

Total liabilities assumed 127

Net assets 29,987

Goodwill 4,861

Total consideration $ 34,848

The Company recorded acquired intangible assets of $ 14.7 million, which were measured at fair value using Level 3 inputs.

These intangible assets include tradenames and trademarks of $ 4.4 million, customer relationships of $ 8.9 million and non-compete agreements of $ 1.4 million.

The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology and Level 3 inputs including a discount rate.

The fair value of non-competition agreements was determined by applying the income approach and Level 3 inputs including a discount rate.

Discount rates used in determining fair values for customer relationships, tradenames and trademarks, and non-competition agreements ranged from 17.5% to 18.0%.

The associated goodwill is deductible for tax purposes.

NOTE 8 - GOODWILL AND ACQUIRED INTANGIBLE ASSETS

The changes in the carrying amount of goodwill are presented below:

(In thousands) Six Months Ended June 30, 2022

Balance at December 31, 2021 $ 80,257

Acquisition of Sealand Food, Inc.

Balance at June 30, 2022 $ 85,118

Goodwill was $ 80.3 million as of March 31, 2022 and December 31, 2021.

There was no change in the carrying amount of goodwill for the three months ended March 31, 2022.

Acquired Intangible Assets

The components of the intangible assets are presented below:

June 30, 2022 December 31, 2021

March 31, 2022 December 31, 2021

(In thousands) Gross

9 unchanged sentences

Total $ 219,137 $ ( 27,239 ) $ 191,898 $ 218,648 $ ( 23,596 ) $ 195,052

Amortization expense for intangible assets was $ 4.0 million and $ 2.7 million for the three months ended June 30, 2022 and June 30, 2021, respectively.

Amortization expense for intangible assets was $ 7.6 million and $ 5.4 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

During the three months ended June 30, 2022, the Company impaired its acquired developed technology and recognized impairment expense of $ 0.4 million in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive income.

Amortization expense for intangible assets was $ 3.6 million and $ 2.7 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

NOTE 9 - DERIVATIVE FINANCIAL INSTRUMENTS

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Hence, the fair value change on the aforementioned interest rate swap contracts are accounted for and recognized as a change in fair value of interest rate swap contracts in the unaudited condensed consolidated statements of income and comprehensive income (loss).

As of June 30, 2022, the Company determined that the fair value of the IRS contracts in an asset position was $ 0.3 million, which is included in other current assets in the unaudited condensed consolidated balance sheets.

As of March 31, 2022, the Company determined that the fair value of the IRS contracts in an asset position was $ 0.1 million, which is included in other current assets in the unaudited condensed consolidated balance sheets.

As of December 31, 2021, the Company determined that the fair value of the interest rate swap contracts in a liability position was $ 0.3 million, which is included in accrued expenses and other liabilities in the unaudited condensed consolidated balance sheets.

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Morgan Chase Bank (the “JPM Credit Agreement”).

The JPM Credit Agreement provided for a $ 100.0 million asset-secured revolving credit facility maturing on November 4, 2022, with an option to renew at the bank’s discretion.

On January 17, 2020, the Company and certain of its wholly-owned subsidiaries and affiliates of the Company as borrowers, and certain material subsidiaries of the Company as guarantors, entered into the Second Amended Credit Agreement ("Second Amended Credit Agreement").

The JPM Credit Agreement provides for a $ 100.0 million asset-secured revolving credit facility maturing on November 4, 2022, with an option to renew at the bank’s discretion.

On January 17, 2020, the Company and certain of its wholly-owned subsidiaries and affiliates of the Company as borrowers, and certain material subsidiaries of the Company as guarantors, entered into the Second Amended and Restated Credit Agreement (the "Second Amended Credit Agreement").

On December 31, 2021, the Company entered into the Consent, Waiver, Joinder and Amendment No.

3 to the Second Amended Credit Agreement with JP Morgan, as Administrative Agent, and certain lender parties thereto including Comerica Bank.

The Second Amended Credit Agreement, provided for (i) a $ 100.0 million asset-secured revolving credit facility maturing on November 4, 2022 (the “Revolving Facility”), and (ii) a mortgage-secured term loan of $ 75.6 million (the "Term Loan"), and (iii) amendment to the referenced interest rate from 1-month LIBOR to 1-month Secured Overnight Financing Rate (“SOFR”) plus a credit adjustment of 0.1 % (difference between LIBOR and SOFR plus 1.375 % per annum).

The Second Amended Credit Agreement, provided for (i) a $ 100.0 million asset-secured revolving credit facility maturing on November 4, 2022 (the “Revolving Facility”), (ii) a mortgage-secured term loan of $ 75.6 million (the "Term Loan"), and (iii) amendment to the referenced interest rate from 1-month LIBOR to 1-month Secured Overnight Financing Rate (“SOFR”) plus a credit adjustment of 0.1% (difference between LIBOR and SOFR plus 1.375% per annum).

The existing revolving credit facility balance under the Second Amended Credit Agreement, was rolled over to the Revolving Facility on December 30, 2021.

1 unchanged sentence

The Second Amended Credit Agreement, as amended, contains certain financial covenants, including, but not limited to, a fixed charge coverage ratio and effective tangible net worth.

On March 31, 2022, the Company amended the JPM Credit Agreement extending the Revolver Facility for five years with a maturity date of November 4, 2027.

On March 31, 2022, the Company amended the JPM Credit Agreement extending the Revolver Facility for five years .

The amendment provides for a $ 100.0 million asset-secured revolving credit facility with a 1-month SOFR plus a credit adjustment of 0.1 % plus 1.375 % per annum as well as an increase in the Term Loan from $ 69.0 million to $ 115.0 million with a 1-month SOFR plus a credit adjustment of 0.1 % plus 1.875 % per annum, (the "2022 Credit Agreement").

1 unchanged sentence

Additionally, $ 0.1 million of the unamortized financing fees related to the Revolving Facility has been deferred and will be amortized over the life of the Revolving Facility.

As of June 30, 2022, the Company was in compliance with its covenants.

Subsequent to June 30, 2022, the Company's lenders consented to the delivery of the Company's 2021 audited financial statements on or before January 31, 2023.

The outstanding principal balance on the line of credit as of June 30, 2022 was $ 60.0 million.

As of March 31, 2022, the Company had not received the Term Loan funds, as such, it did not record the $ 46.0 million increase on its unaudited condensed consolidated balance sheet.

As of March 31, 2022, the Company was in compliance with its covenants.

Subsequent to March 31, 2022, the Company's lenders consented to the delivery of the Company's 2021 audited financial statements on or before January 31, 2023.

The outstanding principal balance on the line of credit as of March 31, 2022 was $ 68.4 million.

Long-Term Debt

Long-term debt at June 30, 2022 and December 31, 2021 is as follows:

Long-term debt at March 31, 2022 and December 31, 2021 is as follows:

(in thousands)

Bank Name Maturity Interest Rate as of June 30, 2022 June 30, 2022 December 31, 2021

Bank Name Maturity Interest Rate as of March 31, 2022 March 31, 2022 December 31, 2021

Bank of America (a)

October 2022 - December 2029 3.73 % — 5.80 % $ 4,700 $ 5,134

May 2022 - December 2029 3.73 % — 5.80 % $ 4,906 $ 5,134

East West Bank (b)

1 unchanged sentence

First Horizon Bank (c)

Paid off in May 2022 — — 4,571

October 2027 3.85 % 4,519 4,571

Morgan Chase (d)

13 unchanged sentences

During the three months ended June 30, 2022, the Company sold the real property for approximately $ 7.2 million to Enson Seafood (a related party), recognized a gain of $ 1.5 million, which is included in other income in the unaudited condensed consolidated statements of income and comprehensive income, and used a portion of the proceeds to pay the $ 4.5 million loan outstanding with First Horizon Bank.

(d) Real estate term loan with a principal balance of $ 113.9 million as of June 30, 2022 and $ 69.9 million as of December 31, 2021 is secured by assets held by the Company and has a maturity date of January 2030.

Equipment term loan with a principal balance of $ 0.7 million as of June 30, 2022 and $ 1.0 million as of December 31, 2021 is secured by specific vehicles and equipment as defined in loan agreements.

Equipment term loans mature in February 2023 and December 2023.

Balloon payment for this debt is $ 3.1 million at maturity.

(d) Real estate term loan with a principal balance of $ 69.0 million as of March 31, 2022 and $ 69.8 million as of December 31, 2021 is secured by assets held by the Company and has a maturity date of January 2030.

Equipment term loan with a principal balance of $ 0.9 million as of March 31, 2022 and $ 1.0 million as of December 31, 2021 is secured by specific vehicles and equipment as defined in loan agreements.

(e) Secured by vehicles.

The terms of the various loan agreements related to long-term bank borrowings require the Company to comply with certain financial covenants, including, but not limited to, a fixed charge coverage ratio and effective tangible net worth.

As of June 30, 2022 and December 31, 2021, the Company was in compliance with its covenants.

Subsequent to June 30, 2022, the Company's lenders consented to the delivery of the Company's 2021 audited financial statements on or before January 31, 2023..

As of March 31, 2022 and December 31, 2021, the Company was in compliance with its covenants.

Subsequent to March 31, 2022, the Company's lenders consented to the delivery of the Company's 2021 audited financial statements on or before January 31, 2023.

NOTE 11 - EARNINGS PER SHARE

4 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 were 3,471 and 3,668 potential common shares related to total shareholder return performance-based restricted stock units that were excluded from the calculation of diluted EPS for the three and six

months ended June 30, 2022, respectively, because their effect would have been anti-dilutive.

There were no anti-dilutive potential common shares for the three and six months ended June 30, 2021 .

There were 14,381 potential common shares related to total shareholder return performance-based restricted stock units that were excluded from the calculation of diluted EPS for the three months ended March 31, 2022 because their effect would have been anti-dilutive.

There were no anti-dilutive potential common shares for the three months ended March 31, 2021 .

The following table sets forth the computation of basic and diluted EPS:

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except share and per share data) 2022 2021 2022 2021

Three Months Ended March 31,

(In thousands, except shares and per share data) 2022 2021

Net income attributable to HF Foods Group Inc.

12 unchanged sentences

The Company has no operations outside the U.S., as such, no foreign income tax was recorded.

For the three and six months ended June 30, 2022, the Company's effective income tax rate of 19.6 % and 22.4 %, respectively, differed from the federal statutory tax rate primarily as a result of state income taxes.

For the three and six months ended June 30, 2021, the Company's effective income tax rate of 29.9 % and 29.3 % differed from the federal statutory tax rate primarily as a result of state income taxes.

For the three months ended March 31, 2022, the Company's effective income tax rate of 26.0 % differed from the federal statutory tax rate primarily as a result of state income taxes.

For the three months ended March 31, 2021, the Company's effective income tax rate of 28.0 % differed from the federal statutory tax rate primarily as a result of state income taxes.

NOTE 13 - RELATED PARTY TRANSACTIONS

9 unchanged sentences

Revolution Industry and UGO, are also considered Unconsolidated VIEs as discussed further in Note 3 – Variable Interest Entities .

The related party transactions as of June 30, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021 are identified as follows:

The related party transactions as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 are identified as follows:

Related Party Sales and Purchases Transactions

1 unchanged sentence

Purchase - related parties

Below is a summary of purchases of goods and services from related parties recorded for the three and six months ended June 30, 2022 and 2021, respectively:

Three Months Ended June 30, Six Months Ended June 30,

Below is a summary of purchases of goods and services from related parties recorded for the three months ended March 31, 2022 and 2021, respectively:

Three Months Ended March 31,

(In thousands) Nature 2022 2021

4 unchanged sentences

(d) First Choice Seafood, Inc.

Trade 26 77 109 160

(e) Fujian RongFeng Plastic Co., Ltd.

Trade 398 800

(f) North Carolina Good Taste Noodle, Inc.

Trade 1,769 1,268 3,427 2,593

(g) Ocean Pacific Seafood Group Inc.

(f) Han Feng Information Technology (Jinhua) Inc.

(g) North Carolina Good Taste Noodle, Inc.

Trade 1,658 1,325

(h) Revolution Industry, LLC Trade — — — 259

(i) UGO USA Inc.

(h) Ocean Pacific Seafood Group Inc.

Trade 136 131

(i) Revolution Industry, LLC Trade — 259

(j) UGO USA Inc.

Other Trade 32 42

8 unchanged sentences

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

Ni owns an equity interest in this entity.

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

Ni owns an equity interest in this entity.

(h) Raymond Ni, one of Mr.

(i) Raymond Ni, one of Mr.

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

4 unchanged sentences

Ni owns an equity interest in this entity.

Services rendered by Hanfeng (Fujian) Information Technology Co.

relate to outsourced sales call center services.

Fees for services are based on a percentage of sales generated as defined in the agreement.

From time to time such services are subcontracted to Hanfeng Information Technologies (Jinhua), Inc.

Sales - related parties

Below is a summary of sales to related parties recorded for the three and six months ended June 30, 2022 and 2021, respectively:

Three Months Ended June 30, Six Months Ended June 30,

Below is a summary of sales to related parties recorded for the three months ended March 31, 2022 and 2021, respectively:

Three Months Ended March 31,

(In thousands) 2022 2021

1 unchanged sentence

(b) Asahi Food, Inc.

188 223 369 341

3 unchanged sentences

(formerly "Enson Group, LLC") — 27

(g) Enson Seafood GA, Inc.

(formerly “GA-GW Seafood, Inc.”) — 554 — 555

(h) First Choice Seafood Inc 9 8 18 82

(i) Fortune One Foods, Inc.

(g) First Choice Seafood Inc 10 75

(h) Fortune One Foods, Inc.

(i) Heng Feng Food Services, Inc.

(j) N&F Logistics, Inc.

Other — 73 — 177

Total $ 2,064 $ 2,390

1 unchanged sentence

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

This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr.

This equity interest was transferred to 3 Irrevocable Trusts for the benefit of Mr.

Zhang's children effective November 1, 2020.

1 unchanged sentence

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

This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr.

This equity interest was transferred to 3 Irrevocable Trusts for the benefit of Mr.

Zhang's children effective November 1, 2020.

3 unchanged sentences

Ni owns an equity interest in this entity.

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

1 unchanged sentence

Ni owns an equity interest in this entity.

Lease agreements - related parties

2 unchanged sentences

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

No rental income was recorded for the three and six months ended June 30, 2022 and for the three months ended June 30, 2021.

Rental income was $ 7,000 for the six months ended June 30, 2021 and is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

No rental income was recorded for the three months ended March 31, 2022.

Rental income was $ 7,000 for the three months ended March 31, 2021, which is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

The Company leased a facility to iUnited Services, LLC ("iUnited"), which has been determined to be a related party due to the equity ownership interest in iUnited of Mr.

2 unchanged sentences

The building and related land was sold to iUnited for $1.5 million and a gain of $0.8 million.

Rental income for the three and six months ended June 30, 2021 was $ 15,000 and $ 30,000 , respectively, which is included in other income in the consolidated statements of income and comprehensive income.

Rental income for the three months ended March 31, 2021 was $15,000, which is included in other income in the consolidated statements of income and comprehensive income.

The Company leased a production area to Revolution Industry, LLC under a month-to-month lease agreement.

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

No rental income was recorded for the three and six months ended June 30, 2022 and the three months ended June 30, 2021.

Rental income was $ 6,000 for the six months ended June 30, 2021 and is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

The Company leased a warehouse to Enson Seafood GA Inc.

No rental income was recorded for the three months ended March 31, 2022.

Rental income was $ 6,000 for the three months ended March 31, 2021, which is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

The Company leases a warehouse to Enson Seafood GA Inc.

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

During the three months ended June 30, 2022, the Company sold the warehouse to Enson Seafood GA Inc.

(see Note 10 - Debt for additional information).

Rental income for three months ended June 30, 2022 and 2021 was $ 120,000 and $ 120,000 , respectively, and is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

Rental income for the six months ended June 30, 2022 and 2021 was $ 200,000 and $ 240,000 , respectively, and is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

Rental income for the three months ended March 31, 2022 and 2021 was $ 80,000 and $ 120,000 , respectively, which is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

Subsequent to March 31, 2022, on May 18, 2022, the Company sold the warehouse to Enson Seafood GA Inc.

for approximately $ 7.2 million, recognized a gain of $ 1.5 million and used a portion of the proceeds to pay the outstanding balance of the Company's $ 4.5 million loan with First Horizon Bank.

In 2020, the Company renewed a warehouse lease from Yoan Chang Trading Inc.

1 unchanged sentence

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

Rent incurred was $ 72,000 and $ 77,000 for the three months ended June 30, 2022 and 2021, respectively, and is included in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive income.

Rent incurred to the related party was $ 144,000 and $ 155,000 for the six months ended June 30, 2022 and 2021, respectively, and is included in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive income.

Rent incurred was $ 72,000 and $ 77,000 for the three months ended March 31, 2022 and 2021, respectively, and is included in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive income.

Related Party Balances

Accounts receivable - related parties, net

Below is a summary of accounts receivable with related parties recorded as of June 30, 2022 and December 31, 2021, respectively:

(In thousands) June 30, 2022 December 31, 2021

Below is a summary of accounts receivable with related parties recorded as of March 31, 2022 and December 31, 2021, respectively:

(In thousands) March 31, 2022 December 31, 2021

(a) ABC Food Trading, LLC $ 404 $ 76

1 unchanged sentence

(d) Eagle Food Service, LLC — 16

(e) Enson Seafood GA, Inc.

(formerly “GA-GW Seafood, Inc.”) 5 24

(f) Fortune One Foods, Inc.

(g) Heng Feng Food Services, Inc.

(h) North Carolina Good Taste Noodle, Inc.

Total $ 918 $ 249

7 unchanged sentences

Zhang's children effective November 1, 2020.

(d) Tina Ni, one of Mr.

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

Ni owns an equity interest in this entity.

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

Ni owns an equity interest in this entity.

Jian Ming Ni, former Chief Financial Officer owns an 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 June 30, 2022 and December 31, 2021.

No allowance is deemed necessary as of March 31, 2022 and December 31, 2021.

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 June 30, 2022 and December 31, 2021, respectively:

(In thousands) June 30, 2022 December 31, 2021

Below is a summary of accounts payable with related parties recorded as of March 31, 2022 and December 31, 2021, respectively:

(In thousands) March 31, 2022 December 31, 2021

(a) Best Food Services, LLC $ 896 $ 699

(b) Eastern Fresh NJ, LLC 61 581

(d) Fujian RongFeng Plastic Co., Ltd 27 20

(e) North Carolina Good Taste Noodle, Inc.

Total $ 1,632 $ 1,941

4 unchanged sentences

Ni owns an equity interest in this entity.

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

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

1 unchanged sentence

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

There were no advances to related party suppliers recorded as of June 30, 2022 and December 31, 2021.

There were no advances to related party suppliers recorded as of March 31, 2022 and December 31, 2021.

Promissory note payable - related party

The Company issued a $ 7.0 million Unsecured Subordinated Promissory Note to BRGR (a related party via ownership by certain shareholders of the Company, and a former VIE through 2020) in January 2020 as part of the payment for the acquisition of BRGR.

The note was to mature in January 2030 and carried a fixed interest rate of 6 % per annum.

There was no requirement to make principal repayments until maturity.

During the three months ended June 30, 2022, the Company paid the remaining $ 4.5 million of the Unsecured Subordinated Promissory Note.

Interest payments paid were $ 62,000 and $ 97,000 for the three months ended June 30, 2022 and 2021, respectively.

Interest payments paid were $ 129,000 and $ 197,000 for the six months ended June 30, 2022 and 2021, respectively.

The note matures in January 2030 and carries a fixed interest rate of 6 % per annum.

There is no requirement to make principal repayments until maturity.

There is no prepayment penalty should the Company elect to prepay the principal prior to maturity, subject to meeting certain repayment provisions as defined in the JPM Credit Agreement.

As of March 31, 2022, the outstanding balance was $ 4.5 million and there was no accrued interest payable.

No principal payment was made for the three months ended March 31, 2022 and 2021.

Interest payments paid were $ 68,000 and $ 101,000 for the three months ended March 31, 2022 and 2021, respectively.

Subsequent to March 31, 2022, during the three months ended June 30, 2022, the Company paid the remaining $ 4.5 million of its related party promissory note payable.

NOTE 14 - STOCK-BASED COMPENSATION

1 unchanged sentence

2018 Omnibus Equity Incentive Plan (the “2018 Incentive Plan”), which reserves up to 3,000,000 shares of the Company's common stock for issuance of awards to employees, non-employee directors and consultants.

As of June 30, 2022, the Company had 353,439 time-based vesting restricted stock units (“RSUs”) outstanding, 119,396 performance-based restricted stock units (“PSUs”) outstanding, and 2,496,963 shares remaining available for future awards under the 2018 Incentive Plan.

For the three and six months ended June 30, 2022, stock-based compensation expense was $ 0.2 million and $ 0.5 million, respectively, and was included in distribution, selling and administrative expenses in the Company's unaudited condensed consolidated statements of income and comprehensive income.

No stock-based compensation expense was recognized for three and six months ended June 30, 2021.

As of June 30, 2022, there was $ 1.4 million of total unrecognized compensation cost related to all non-vested outstanding RSUs and PSUs outstanding under the 2018 Incentive Plan, with a weighted average remaining service period of 1.97 years.

As of March 31, 2022, the Company had 356,340 time-based vesting restricted stock units (“RSUs”) outstanding, 143,277 performance-based restricted stock units (“PSUs”) outstanding, and 2,500,383 shares remaining available for future awards under the 2018 Incentive Plan.

For the three months ended March 31, 2022, stock-based compensation expense was $ 0.3 million and was included in distribution, selling and administrative expenses in the Company's unaudited condensed consolidated statements of income and comprehensive income.

No stock-based compensation expense was recognized for three months ended March 31, 2021.

As of March 31, 2022, there was $ 1.7 million of total unrecognized compensation cost related to all non-vested outstanding RSUs and PSUs outstanding under the 2018 Incentive Plan, with a weighted average remaining service period of 2.16 years.

NOTE 15 - COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure.

In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated.

In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only

for matters in which losses are probable and can be reasonably estimated.

Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability.

19 unchanged sentences

The Company is working to implement those improvements.

See the Company's 2021 Annual Report for additional information on the findings of the Special Investigation Committee.

See the Company's 2021 Annual Report for additional information on

the findings of the Special Investigation Committee.

As with any SEC investigation, there is also the possibility of potential fines and penalties.

7 unchanged sentences

Under the terms of the 273 Lease Agreement and the Assignment, the Company has undertaken to construct, at its own expense, a building on the premises at a minimum cost of $ 2.5 million.

The Lease Amendment permits subletting of the premises, and the Company intends to sublease the newly constructed premises to defray the rental expense undertaken pursuant to its guaranty obligations.

Amendment permits subletting of the premises, and the Company intends to sublease the newly constructed premises to defray the rental expense undertaken pursuant to its guaranty obligations.

On January 17, 2022, the Company received notice that AnHeart had defaulted on its obligations as tenant under the lease for 275 Fifth Avenue.

5 unchanged sentences

The Company elected a policy to apply the discounted cash flow method to loss contingencies with more than 18 months of payments.

During the three months ended March 31, 2022, the Company recorded a lease guarantee liability of $ 5.9 million.

The Company determined the discounted value of the lease guarantee liability was $ 5.9 million as of March 31, 2022 using a discount rate of 4.55 % and is classified as Level 2 in the fair value hierarchy.

During the three months ended March 31, 2022, the Company recorded a one-time lease guarantee liability of $ 5.9 million, The Company determined the discounted value of the lease guarantee liability was $ 5.9 million as of March 31, 2022 using a discount rate of 4.55 % and is classified as Level 2 in the fair value hierarchy.

The current portion of the lease guarantee liability of $ 0.3 million is recorded in Accrued expenses and other liabilities on the condensed consolidated balance sheet.

Company's monthly rental payments, which commenced during the three months ended March 31, 2022, range from approximately $ 42,000 per month to $ 63,000 per month, with the final payment due in 2034.

The estimated future minimum lease payments as of June 30, 2022 are presented below:

The Company's monthly rental payments, which commenced during the three months ended March 31, 2022, range from approximately $ 42,000 per month to $ 63,000 per month, with the final payment due in 2034.

The estimated future minimum lease payments as of March 31, 2022 are presented below:

(In thousands) Amount

Year Ending December 31,

2022 (remaining six months) $ 254

2022 (remaining nine months) $ 381

Thereafter 5,116

2 unchanged sentences

NOTE 16 - SUBSEQUENT EVENTS

See Note 10 - Debt regarding the Company's waiver received related to the timing of the filing of its consolidated financial statements.

See Note 7 - Acquisitions , regarding the Sealand Acquisition, Note 10 - Debt , regarding the amendment of the Company's JPM Credit Agreement as well as a waiver, and Note 13 - Related Party Transactions , regarding the related party promissory note payable as well as the Company's related party sale of a warehouse for subsequent events.

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