What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2023-01-31 · 519 added, 1393 removed, 973 unchanged (66% of the section changed)

4 unchanged sentences

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm - Year Ended December 31, 2021 (BDO USA, LLP;

Report of Independent Registered Public Accounting Firm - Year Ended December 31, 2022 and 2021 (BDO USA, LLP;

Troy, Michigan;

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of HF Foods Group Inc.

(the “Company”) as of December 31, 2021, the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the 2020 and 2019 financial statements have been restated to correct errors.

We also have audited the adjustments described in Note 1 that were applied to restate the 2020 and 2019 consolidated financial statements to correct errors.

We have audited the accompanying consolidated balance sheets of HF Foods Group Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the two years then ended , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 31, 2023 expressed an adverse opinion thereon.

As discussed in Note 1 to the consolidated financial statements, the 2020 financial statements have been restated to correct errors.

We have also audited the adjustments described in Note 1 that were applied to restate the 2020 consolidated financial statements to correct errors.

In our opinion, such adjustments are appropriate and have been properly applied.

We were not engaged to audit, review, or apply any procedures to the 2020 and 2019 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2020 and 2019 consolidated financial statements taken as a whole.

We were not engaged to audit, review, or apply any procedures to the 2020 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express any opinion or any other form of assurance on the 2020 consolidated financial statements taken as a whole.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Consolidated Financial Statements - Impact of Control Environment and Information Technology General Controls

The completeness and accuracy of the consolidated financial statements, including the financial condition, results of operations and cash flows, is dependent on, in part, the Company’s ability to (i) design and maintain an effective control environment, including maintaining a sufficient complement of resources with an appropriate level of controls knowledge and expertise

commensurate with financial reporting requirements, (ii) design and maintain effective information technology general controls for certain information systems relevant to the preparation of the financial statements, including user access controls, program change management controls and computer operations controls, and (iii) journal entries being completely and accurately recorded to the appropriate accounts.

We identified a critical audit matter over the completeness and accuracy of the consolidated financial statements.

The ineffective control environment and the ineffective information technology general controls resulted in several material weaknesses.

Designing the appropriate procedures and evaluating audit evidence to ensure the completeness and accuracy of the consolidated financial statements, including higher risk areas, with an ineffective control environment and with ineffective information technology general controls, required especially challenging and subjective auditor judgment due to the increased extent of audit effort.

The primary procedures we performed to address this critical audit matter included:

• We applied significant auditor judgment to determine the nature and extent of procedures to be performed over material accounts and or disclosures, including higher risk areas such as revenue, receivables, inventory, and journal entries.

• We increased the number of selections to perform certain audit procedures and lowered the testing thresholds for investigating differences,

• We utilized source documents, including third party support for audit evidence rather than relying on system reports, and

• We evaluated the overall sufficiency of audit evidence obtained based on the procedures performed.

/s/ BDO USA, LLP

1 unchanged sentence

Troy, Michigan

January 31, 2023

March 31, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Opinion on the Financial Statements

We have audited, before the effects of the adjustments the Company identified during 2022 to restate the financial statements as described in Note 1, the accompanying consolidated balance sheet of HF Foods Group Inc.

and its subsidiaries (collectively, the “Company”) as of December 31, 2020, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”) (the 2020 financial statements before the effects of the adjustments the Company identified during 2022 to restate the financial statements as described in Note 1 are not presented herein).

In our opinion, except for the effects of the adjustments the Company identified during 2022 to restate the financial statements as described in Note 1, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

and its subsidiaries (collectively, the “Company”) for the year ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”) (the 2020 financial statements before the effects of the adjustments the Company identified during 2022 to restate the financial statements as described in Note 1 are not presented herein).

In our opinion, except for the effects of the adjustments the Company identified during 2022 to restate the financial statements as described in Note 1, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review or apply any procedures to the adjustments the Company identified during 2022 to restate the financial statements as described in Note 1, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

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/s/ Friedman LLP

We served as the Company’s auditor 2017 to 2021.

We have served as the Company’s auditor from 2017 through 2021.

New York, New York

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December 31, 2022 December 31, 2021

(As Restated)

CURRENT ASSETS:

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Inventories 120,291 102,690

Advances to suppliers - related parties — 197

Other current assets 5,559 4,613

Prepaid expenses and other current assets 8,937 5,559

TOTAL CURRENT ASSETS 197,916 159,571

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Deferred tax liabilities 34,443 39,455

Lease guarantee liability, net of current portion 5,472 —

TOTAL LIABILITIES 341,280 301,957

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SHAREHOLDERS’ EQUITY:

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

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

Common Stock, $ 0.0001 par value, 100,000,000 shares authorized, 53,813,777 shares issued and outstanding as of December 31, 2022 and 53,706,392 shares issued and outstanding as of December 31, 2021

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2022 2021 2020

(As Restated) (As Restated)

Net revenue - third parties $ 1,163,525 $ 787,829 $ 553,524

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INCOME (LOSS) FROM OPERATIONS 10,559 29,482 ( 343,799 )

Other income (expense):

Other expenses (income):

Interest expense 7,457 4,091 4,321

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Change in fair value of interest rate swap contracts ( 817 ) ( 1,425 ) 920

Total Other income (expenses), net ( 2,158 ) ( 4,145 ) ( 306 )

Lease guarantee expense 5,744 — —

Total Other expenses, net 10,555 2,158 4,145

INCOME (LOSS) BEFORE INCOME TAX PROVISION 4 27,324 ( 347,944 )

Income tax provision (benefit) 4,503 ( 4,725 ) 2,441

Income tax (benefit) provision ( 231 ) 4,503 ( 4,725 )

NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) 235 22,821 ( 343,219 )

net income attributable to noncontrolling interests 676 293 506

net (loss) income attributable to noncontrolling interests ( 225 ) 676 293

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

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Cash flows from operating activities:

(As Restated) (As Restated)

Net income (loss) $ 235 $ 22,821 $ ( 343,219 )

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Goodwill impairment loss — — 338,191

(Gain) loss from disposal of equipment ( 1,636 ) ( 140 ) 78

Change in allowance for doubtful accounts ( 433 ) 1,564 72

Gain from disposal of property and equipment ( 1,327 ) ( 1,636 ) ( 140 )

Provision for credit losses 82 ( 433 ) 1,564

Deferred tax benefit ( 5,012 ) ( 6,870 ) ( 5,916 )

Income from equity method investment ( 85 ) ( 81 ) ( 7 )

Change in fair value of interest rate swap contracts 817 ( 1,425 ) 920

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Non-cash lease expense 4,442 861 533

Lease guarantee expense 5,744 — —

Other non-cash expense (income) 156 ( 85 ) ( 81 )

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

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Advances to suppliers - related parties — 197 548

Other current assets ( 944 ) ( 204 ) ( 271 )

Prepaid expenses and other current assets ( 4,008 ) ( 944 ) ( 204 )

Other long-term assets ( 1,199 ) ( 1,337 ) ( 298 )

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Cash flows from investing activities:

Cash received from acquisition of B&R Global — — 7,018

Purchase of property and equipment ( 6,287 ) ( 2,205 ) ( 664 )

Proceeds from disposal of property and equipment 3,246 257 287

Cash received from long-term notes receivable — — 290

Payment made for notes receivable — — ( 109 )

Proceeds from long-term notes receivable to related parties — — 386

Payment made for long-term notes receivable to related parties — — ( 261 )

Proceeds from sale of property and equipment 7,794 3,246 257

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

Payment made for acquisition of Sealand ( 34,848 ) — —

Payment made for acquisition of Great Wall Group ( 17,445 ) ( 37,841 ) —

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Settlement of interest rate swap contracts — 718 —

Net cash (used in) provided by investing activities ( 41,082 ) ( 94,411 ) 2,775

Net cash used in investing activities ( 50,786 ) ( 41,082 ) ( 94,411 )

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

HF FOODS GROUP INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

2022 2021 2020

Cash flows from financing activities:

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Repayment of long-term debt ( 11,336 ) ( 6,599 ) ( 6,590 )

Payment of debt financing costs ( 544 ) —

Repayment of obligations under finance leases ( 2,626 ) ( 2,135 ) ( 1,840 )

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Cash distribution to shareholders ( 187 ) ( 338 ) ( 175 )

Net cash provided by (used in) financing activities 28,784 43,761 1,466

Net cash provided by financing activities 28,999 28,784 43,761

Net increase (decrease) in cash 9,497 5,211 ( 4,957 )

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Cash at end of the year $ 24,289 $ 14,792 $ 9,581

Supplemental disclosure of cash flow data:

Cash paid for interest $ 6,230 $ 3,177 $ 4,123

Cash paid for income taxes 8,655 9,527 804

Supplemental disclosure of non-cash investing and financing activities:

Right-of-use assets obtained in exchange for operating lease liabilities $ 6,815 $ 10,983 $ 339

Property acquired via a finance lease 1,272 8,947 1,375

Notes payable related to property and equipment purchases — 257 2,528

Intangible asset acquired in exchange for noncontrolling interests 566 — —

Common stock issued for consideration of acquisition of Great Wall Group — 14,541 —

Deferred consideration from Great Wall Acquisition — 17,330 —

Issuance of promissory note for the acquisition of B&R Realty Subsidiaries — — 7,000

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

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Shares Amount

Balance at 12/31/2018 (as previously reported) 22,167,486 $ 2 — $ — $ 22,920 $ 10,434 $ 33,356 $ 1,105 $ 34,461

Restatement impact — — — — — ( 325 ) ( 325 ) — ( 325 )

Balance at 12/31/2018 (as restated) 22,167,486 2 — — 22,920 10,109 33,031 1,105 34,136

Net income (as restated) — — — — — 4,974 4,974 506 5,480

Exercise of stock options 182,725 — — — — — — — —

Buyback of common stock from a shareholder in exchange for notes receivable — — ( 905,115 ) ( 12,038 ) — — ( 12,038 ) — ( 12,038 )

Acquisition of B&R Global by issuance of common stock 30,700,000 3 — — 576,697 — 576,700 2,941 579,641

Distribution to shareholders — — — — — — — ( 303 ) ( 303 )

Balance at 12/31/2019 (as restated) 53,050,211 5 ( 905,115 ) ( 12,038 ) 599,617 15,083 602,667 4,249 606,916

Net (loss) income (as restated) — — — — — ( 343,512 ) ( 343,512 ) 293 ( 343,219 )

Balance at December 31, 2019 53,050,211 $ 5 ( 905,115 ) $ ( 12,038 ) $ 599,617 $ 15,083 $ 602,667 $ 4,249 $ 606,916

Net (loss) income — — — — — ( 343,512 ) ( 343,512 ) 293 ( 343,219 )

Escrow shares transferred to and recorded as treasury stock — — ( 231,685 ) — — — — — —

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Distribution to shareholders — — — — — — — ( 175 ) ( 175 )

Balance at 12/31/2020 (as restated) 51,913,411 5 — — 587,579 ( 328,429 ) 259,155 4,367 263,522

Balance at December 31, 2020 51,913,411 5 — — 587,579 ( 328,429 ) 259,155 4,367 263,522

Net income — — — — 22,145 22,145 676 22,821

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Balance at December 31, 2021 53,706,392 5 — — 597,227 ( 306,284 ) 290,948 4,041 294,989

Cumulative effect of adoption of CECL (ASU 2016-13) — — — — — ( 690 ) ( 690 ) — ( 690 )

Balance at January 1, 2022 53,706,392 5 — — 597,227 ( 306,974 ) 290,258 4,041 294,299

Net income (loss) — — — — — 460 460 ( 225 ) 235

Capital contribution by shareholders — — — — — — — 806 806

Issuance of common stock pursuant to equity compensation plan 139,239 — — — — — — — —

Shares withheld for tax withholdings on vested awards ( 31,854 ) — — — ( 162 ) — ( 162 ) — ( 162 )

Distribution to shareholders — — — — — — — ( 186 ) ( 186 )

Stock-based compensation — — — — 1,257 — 1,257 — 1,257

Balance at December 31, 2022 53,813,777 $ 5 — $ — $ 598,322 $ ( 306,514 ) $ 291,813 $ 4,436 $ 296,249

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, BUSINESS DESCRIPTION AND RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business

Organization and General

HF Foods Group Inc.

and subsidiaries (collectively “HF Group”, or the “Company”) is an Asian foodservice distributor that markets and distributes fresh produce, frozen and dry food, and non-food products to primarily Asian restaurants and other foodservice customers throughout the United States.

and subsidiaries (collectively “HF Group”, or the “Company”) is an Asian foodservice distributor that markets and distributes fresh produce, seafood, frozen and dry food, and non-food products to primarily Asian restaurants and other foodservice customers throughout the United States.

The Company's business consists of one operating segment, which is also its one reportable segment:

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The acquisition was completed as part of the Company’s strategy to develop a national footprint through expansion into the Midwest, Southwest and Southern regions of the United States.

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 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.

See Note 8 - Acquisitions for additional information on recent acquisitions.

Independent Investigation Update

In March 2020, an analyst report suggested certain improprieties in the Company’s operations.

These allegations became the subject of two putative stockholder class action lawsuits which have subsequently been dismissed.

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

As a result of the investigation, the SIC determined certain factual findings.

Management evaluated the factual findings, as presented by the SIC, and analyzed them to determine which had impact on the historical financial statements, including disclosures, of the Company.

In addition to the independent investigation, the Securities and Exchange Commission (“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 Investigation Committee and the Company are cooperating with the SEC.

The SEC Investigation is still ongoing.

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

At this time, however, there has not been any demand made by the SEC nor is it possible to estimate the amount of any such fines and penalties, should they occur.

See Note 18 - Commitments and Contingencies for additional information.

Restatement of Previously Issued Consolidated Financial Statements

During 2022, the Company identified certain errors impacting the financial statements, including disclosures, for the years ended December 31, 2020 and 2019 and each interim quarterly period for 2021, 2020, and 2019 related to the identification of and accounting for operating and finance leases, the incorrect identification and disclosure of certain related party relationships including the identification of VIEs, the timing of revenue recognition for rental income received from a related party, the accounting for the self-insurance liability for automobile insurance beginning in 2020, classification errors in the financial statements, and an error in the calculation of earnings per share for 2020 and 2019.

In addition, certain errors were identified based on the factual findings of the Special Investigation Committee such as unrecorded executive compensation to a certain executive and immediate family members, and related party disclosures.

The Company analyzed the errors using Staff Accounting Bulletin (“SAB”) No.

As previously disclosed in Note 1 of the Company’s financial statements for the year ended December 31, 2021, the Company identified certain errors impacting the financial statements, including disclosures, which the company analyzed using Staff

Accounting Bulletin (“SAB”) No.

99, “Materiality” and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” and determined the errors were material.

Accordingly, the Company has restated herein the consolidated financial statements as of December 31, 2020 and for the years ended December 31, 2020 and 2019, and the related interim financial statements periods within the years ended December 31, 2021, 2020, and 2019 in accordance with Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections .

Any adjustments prior to 2019 are not quantitatively material, are consistent with the adjustments discussed within this Note and have been presented as an adjustment as of December 31, 2018 in the accompanying Statement of Changes in Stockholders’ Equity.

The nature of these error corrections is as follows:

Certain operating and finance leases were not properly identified and accounted for upon the adoption of ASC Topic 842 (“ASC 842”), Leases on January 1, 2019 and during the years ended December 31, 2020 and 2019 and adjustments have been made to correct these errors.

The errors primarily resulted in an understatement of property and equipment, right-of-use assets, and the current and long-term liabilities associated with operating and finance leases.

In addition, the errors resulted in an understatement in cash flows from operations and an overstatement in cash flows from financing activities within the respective consolidated statements of cash flows.

Accordingly, the Company restated the consolidated financial statements as of December 31, 2020 and for the years ended December 31, 2020 and 2019, and the related interim financial statements periods within the years ended December 31, 2021, 2020, and 2019 in accordance with Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections .

For the year ended December 31, 2020 the errors related to the identification of and accounting for operating and finance leases, the incorrect identification and disclosure of certain related party relationships including the identification of VIEs, the timing of revenue recognition for rental income received from a related party, the accounting for the self-insurance liability for automobile insurance, classification errors in the financial statements, and an error in the calculation of earnings per share.

In addition, certain errors were identified during an independent investigation by a Special Investigation Committee commissioned by the Company’s Board of Directors (see Note 17) such as unrecorded executive compensation to a certain executive and immediate family members, and related party disclosures.

For the year ended December 31, 2020 the nature of these error corrections is as follows:

Certain operating and finance leases were not properly identified and accounted for upon the adoption of ASC Topic 842 (“ASC 842”), Leases and adjustments have been made to correct these errors.

Four entities previously disclosed as related parties were determined not to be related parties.

The four related party entities that were reclassified in the financial statements from related party to third party for 2020 and 2019 were EMC Rowland, LLC;

The four related party entities that were reclassified in the financial statements from related party to third party for were EMC Rowland, LLC;

The Big Catch Alhambra, LLC;

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and Wokcano Carlsbad Partner LLP.

The Company identified an error related to the timing of revenue recognition for rental income received from UGO (a related party) during the years ended December 31, 2018, 2019, and 2020.

Rental income received from UGO, which was previously recognized in error, in full in 2020, was recognized in the appropriate accounting period as part of the error corrections.

The Company identified an error related to the timing of revenue recognition for rental income received from UGO (a related party).

Rental income received from UGO, which was previously recognized in error, was recognized in the appropriate accounting period as part of the error corrections.

Please refer to Note 14 - Related Party Transactions for additional information on the lease arrangement with UGO.

As a result of the findings from the independent investigation, the Company determined that certain payments made by the Company in prior years to related parties should now be accounted for in the Company's consolidated financial statements as executive compensation.

The Company determined that certain payments made by the Company in prior years to related parties should have been accounted for in the Company's consolidated financial statements as executive compensation.

The Company made payments for inventory to Revolution Industry, which were diverted to Revolution Automotive to make car lease payments for the benefit of Mr.

Ni and his family.

Amounts paid by Revolution Automotive for car lease payments for the years ended December 31, 2018, 2019 and 2020 were $ 1.7 million, $ 1.0 million, and $ 0.5 million, respectively.

The Company reclassified these amounts from cost of

revenue – third parties to distribution, selling, and administrative expense.

The Company also made payments to UGO for marketing services, which services were determined as part of the independent investigation to have not been received commensurate to the amounts paid.

Those payments amounted to $ 0.5 million, $ 0.4 million, $ 0.5 million and $ 0.1 million in the years ended December 31, 2018, 2019, 2020 and 2021, respectively.

The Company did not reclassify these payments in the historical consolidated financial statements because both marketing services and executive compensation are recorded within the distribution, selling, and administrative expense financial statement line.

Please refer to Note 14 - Related Party Transactions for further details on Revolution Automotive, Revolution Industry and UGO.

The Company has recorded an uncertain tax position liability associated with the reclassification of certain amounts as executive compensation as discussed further in j.

The Company had not previously recorded a liability (including incurred but not reported "IBNR") related to the self-insured portion of its automobile insurance policy, which started in April 2020.

The error resulted in an understatement of accrued expenses and other liabilities at December 31, 2020 and impacted quarterly periods, and has been corrected.

The Company determined certain staffing agencies were VIEs and should have been consolidated into the previously-filed financial statements.

As further disclosed in Note 3 - Variable Interest Entities, the result of the errors to the historical financial statements was primarily related to disclosure errors and did not result in significant changes to the consolidated balance sheets, or consolidated statements of operations and comprehensive income (loss), cash flows and shareholders’ equity.

There were certain misclassifications between accounts payable and accrued expenses and other liabilities on the consolidated balance sheets specific to the staffing agency VIEs.

See further discussion in Note 3 - Variable Interest Entities .

The Company had not previously recorded a liability (including incurred but not reported "IBNR") related to the self-insured portion of its automobile insurance policy.

The 2020 goodwill impairment loss, which was previously misclassified as other income (expense) in the consolidated statements of operations and comprehensive income (loss), was revised to be included in income (loss) from operations.

The gain/loss on sale of fixed assets, which was previously misclassified in other income (expense), net was revised to be included in distribution, selling and administrative expenses.

The earnings per share for 2019 was previously incorrectly computed at $ 0.22 per share in prior Form 10-K filings instead of at $ 0.20 per share based on the originally reported net income attributable to HF Foods Group, Inc.

As part of the error corrections being made, the resultant earnings per share for 2019 is $ 0.18 per share.

The loss per share for 2020 was previously incorrectly computed at $ 6.58 per share in prior Form 10-K filings and was corrected to $ 6.59 per share.

As part of the error corrections being made, the resultant earnings per share was corrected.

As a result of the executive compensation described in d.

above, the Company recorded an uncertain tax position liability to account for potential implications to previously filed tax returns.

The correction resulted in an increase of $ 0.8 million, $ 0.6 million, and $ 0.4 million in accrued expenses and other liabilities as of December 31, 2020, 2019, and 2018, respectively, compared to previously reported amounts.

The quarterly impacts of the uncertain tax position have also been corrected.

In the Company’s December 31, 2020 financial statements, the Company did not disclose NC Good Taste Noodle, Inc.

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still meets the definition of a related party.

The Company has corrected the classification of balances associated with NC Good Taste Noodle, Inc.

in the consolidated balance sheets, consolidated statements of cash flows and notes to consolidated financial statements in the affected annual and quarterly periods.

See Note 14 - Related Party Transactions for additional information

Certain capital contributions from a noncontrolling shareholder were incorrectly recorded as other payables were reclassified to noncontrolling interest.

The corresponding footnotes have been restated for the adjustments noted above.

The following tables summarize the effect of the restatements on each affected financial statement line item as of the dates as indicated, impacting the consolidated balance sheets.

The footnotes correspond to the error descriptions above:

Consolidated Balance Sheet

(In thousands) As Previously Reported Reclass Adjustments As Restated

December 31, 2020

Accounts receivable, net $ 24,852 — $ 5 (b)

( 7 ) (k) $ 24,850

Accounts receivable - related parties 1,267 — ( 5 ) (b)

Property and equipment, net 136,869 — 5,839 (a) 142,708

Operating lease right-of-use assets 932 — 525 (a) 1,457

Intangible assets, net 175,798 ( 175,798 ) — —

Customer relationships, net — 149,914 — 149,914

Trademarks and other intangibles, net — 25,884 — 25,884

Deferred tax assets 58 ( 58 ) — —

TOTAL ASSETS 484,285 ( 58 ) 6,364 490,591

Accounts payable 28,392 — 35 (b)

( 558 ) (k) 27,331

Accounts payable - related parties 1,783 — ( 35 ) (b)

558 (k) 2,306

Current portion of obligations under finance leases 287 — 1,719 (a) 2,006

Current portion of obligations under operating leases 308 — 162 (a) 470

Accrued expenses and other liabilities 6,178 994 391 (e)

753 (j) 8,854

Obligation under interest rate swap contracts 994 ( 994 ) — —

TOTAL CURRENT LIABILITIES 76,702 — 3,025 79,727

Obligations under finance leases, non-current 767 — 4,245 (a) 5,012

Obligations under operating leases, non-current 623 — 373 (a) 996

Deferred tax liabilities 46,383 ( 58 ) — 46,325

TOTAL LIABILITIES 219,484 ( 58 ) 7,643 227,069

Accumulated deficit ( 327,150 ) — ( 135 ) (a)

( 753 ) (j) ( 328,429 )

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.

260,434 — ( 1,279 ) 259,155

TOTAL SHAREHOLDERS' EQUITY 264,801 — ( 1,279 ) 263,522

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 484,285 ( 58 ) 6,364 490,591

Amounts presented in the "Reclass" column above represent reclassifications to conform the prior year financial statements to the current year presentation.

The following tables summarize the effect of the restatements on each affected financial statement line item for the periods ended as indicated, impacting the consolidated statements of operations and comprehensive income (loss).

The following table summarizes the effect of the restatements on each affected financial statement line item for the year ended December 31, 2020, impacting the consolidated statements of operations and comprehensive income (loss).

The footnotes correspond to the error descriptions above:

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Distribution, selling and administrative expenses 106,126 ( 476 ) (a)

( 140 ) (h) 106,355

Goodwill impairment loss — 338,191 (g) 338,191

INCOME (LOSS) FROM OPERATIONS ( 5,833 ) ( 337,966 ) ( 343,799 )

Interest expense ( 3,922 ) ( 399 ) (a) ( 4,321 )

Goodwill impairment loss ( 338,191 ) 338,191 (g) —

Other income 1,355 ( 119 ) (c)

( 140 ) (h) 1,096

Total other income (expense), net ( 341,678 ) 337,533 ( 4,145 )

INCOME (LOSS) BEFORE INCOME TAX ( 347,512 ) ( 432 ) ( 347,944 )

Income tax provision (benefit) ( 4,831 ) 106 (j) ( 4,725 )

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) ( 342,681 ) ( 538 ) ( 343,219 )

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

( 342,974 ) ( 538 ) ( 343,512 )

EARNINGS (LOSS) PER COMMON SHARE - BASIC ( 6.58 ) ( 0.01 ) ( 6.59 )

EARNINGS (LOSS) PER COMMON SHARE - DILUTED ( 6.58 ) ( 0.01 ) ( 6.59 )

Consolidated Statement of Operations and Comprehensive Income (Loss)

(In thousands, except per share data) As Previously Reported Reclass Adjustments As Restated

Year Ended December 31, 2019

Net revenue - third parties $ 368,810 — $ 61 (b) $ 368,871

Net revenue - related parties 19,352 — ( 61 ) (b) 19,291

Cost of revenue - third parties 306,371 — ( 1,040 ) (d) 305,331

TOTAL COST OF REVENUE 324,954 — ( 1,040 ) 323,914

GROSS PROFIT 63,208 — 1,040 64,248

Distribution, selling and administrative expenses 54,931 — 128 (a)

( 78 ) (h) 56,021

( 140 ) (g) 106,355

Goodwill impairment loss — 338,191 (f) 338,191

INCOME (LOSS) FROM OPERATIONS ( 5,833 ) ( 337,966 ) ( 343,799 )

Interest income 419 ( 419 ) — —

Interest expense ( 3,922 ) ( 399 ) (a) ( 4,321 )

Goodwill impairment loss ( 338,191 ) 338,191 (f) —

Other income 1,355 ( 119 ) (c)

( 78 ) (h) 1,441

( 140 ) (g) 1,096

Total other income (expense), net ( 341,678 ) 337,533 ( 4,145 )

INCOME (LOSS) BEFORE INCOME TAX ( 347,512 ) ( 432 ) ( 347,944 )

Income tax provision (benefit) 2,197 — 244 (j) 2,441

Income tax provision (benefit) ( 4,831 ) 106 (i) ( 4,725 )

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) ( 342,681 ) ( 538 ) ( 343,219 )

1 unchanged sentence

( 342,974 ) ( 538 ) ( 343,512 )

EARNINGS (LOSS) PER COMMON SHARE - BASIC 0.22 — ( 0.04 ) 0.18

EARNINGS (LOSS) PER COMMON SHARE - DILUTED 0.22 — ( 0.04 ) 0.18

Amounts presented in the "Reclass" column above represent reclassifications to conform the prior year financial statements to the current year presentation.

The following tables summarize the effect of the restatements on each category of cash flow for the periods ended as indicated, impacting the consolidated statements of cash flows:

EARNINGS (LOSS) PER COMMON SHARE - BASIC ( 6.58 ) ( 0.01 ) (h) ( 6.59 )

EARNINGS (LOSS) PER COMMON SHARE - DILUTED ( 6.58 ) ( 0.01 ) (h) ( 6.59 )

The following table summarizes the effect of the restatements on each category of cash flow for the year ended December 31, 2020, impacting the consolidated statements of cash flows:

Consolidated Statement of Cash Flows

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Net cash provided by financing activities 45,323 ( 1,562 ) (a) 43,761

Consolidated Statement of Cash Flows

(In thousands) As Previously Reported Adjustment As Restated

Year ended December 31, 2019

Net cash provided by operating activities $ 4,667 $ 141 (a) $ 4,808

Net cash provided by investing activities 2,775 — 2,775

Net cash provided by financing activities 1,607 ( 141 ) (a) 1,466

HF FOODS GROUP INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

The effect of the restatements on the consolidated statements of changes in shareholders’ equity for the year ended December 31, 2020 is as follows:

Common Stock Treasury Stock Additional

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Balance at 12/31/2020 (As Restated) 51,913,411 $ 5 — $ — $ 587,579 $ ( 328,429 ) $ 259,155 $ 4,367 $ 263,522

HF FOODS GROUP INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

Common Stock Treasury Stock Additional

Capital Retained

Earnings (Accumulated Deficit) Total

Shareholders’

Attributable to

Non-controlling

Interests Total

Shareholders’

(In thousands, except share data)

Shares Amount

As Previously Reported

Balance at 12/31/2018 22,167,486 $ 2 — $ — $ 22,920 $ 10,434 $ 33,356 $ 1,105 34,461

Net income — — — — — 5,390 5,390 506 5,896

Exercise of stock options 182,725 — — — — — — — —

Buyback of common stock from a shareholder in exchange for notes receivable — — ( 905,115 ) ( 12,038 ) — — ( 12,038 ) — ( 12,038 )

Acquisition of B&R Global by issuance of common stock 30,700,000 3 — — 576,697 — 576,700 2,941 579,641

Distribution to shareholders — — — — — — — ( 303 ) ( 303 )

Balance at 12/31/2019 53,050,211 $ 5 ( 905,115 ) $ ( 12,038 ) $ 599,617 $ 15,824 $ 603,408 $ 4,249 $ 607,657

Restatement Impacts

Balance at 12/31/2018 — — — — — ( 325 ) ( 325 ) — ( 325 )

Net (loss) income — — — — — ( 416 ) ( 416 ) — ( 416 )

Exercise of stock options — — — — — — — — —

Buyback of common stock from a shareholder in exchange for notes receivable — — — — — — — — —

Acquisition of B&R Global by issuance of common stock — — — — — — — — —

Distribution to shareholders — — — — — — — — —

Balance at 12/31/2019 — $ — — $ — $ — $ ( 741 ) $ ( 741 ) $ — $ ( 741 )

Balance at 12/31/2018 (As Restated) 22,167,486 $ 2 — $ — $ 22,920 10,109 33,031 $ 1,105 34,136

Net income (as restated) — — — — — 4,974 4,974 506 5,480

Exercise of stock options 182,725 — — — — — — — —

Buyback of common stock from a shareholder in exchange for notes receivable — — ( 905,115 ) ( 12,038 ) — — ( 12,038 ) — ( 12,038 )

Acquisition of B&R Global by issuance of common stock 30,700,000 3 — — 576,697 — 576,700 2,941 579,641

Distribution to shareholders — — — — — — — ( 303 ) ( 303 )

Balance at 12/31/2019 (As Restated) 53,050,211 $ 5 ( 905,115 ) $ ( 12,038 ) $ 599,617 $ 15,083 $ 602,667 $ 4,249 $ 606,916

Note 2 - Summary of Significant Accounting Policies

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The accompanying consolidated financial statements have been prepared in accordance with GAAP.

The consolidated financial statements include the financial statements of HF Group, its subsidiaries and FUSO Trucking LLC ("FUSO") and the Staffing Agencies, which the Company has determined to be VIEs that requires consolidation.

The consolidated financial statements include the financial statements of HF Group, its subsidiaries and FUSO Trucking LLC ("FUSO") and the Staffing Agencies (through December 31, 2021), which the Company has determined to be VIEs that requires consolidation.

All inter-company balances and transactions have been eliminated upon consolidation.

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The Company evaluates each of its interests in an entity to determine whether or not the investee is a VIE and, if so, whether the Company is the primary beneficiary of such VIE.

In determining whether the Company is the primary beneficiary, the Company considers if the Company (1) has power to direct the activities that most significantly affect the economic performance of the VIE, and (2) receives the economic benefits of the VIE that could be significant to the VIE.

In determining whether the Company is the primary beneficiary, the Company considers if the Company (1) has power to direct the activities that most significantly affect the economic performance of the VIE, and (2) has the obligation to absorb losses or the right to receive the economic benefits of the VIE that could be potentially significant to the VIE.

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

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GAAP requires that noncontrolling interests in subsidiaries and affiliates be reported in the equity section of the Company’s consolidated balance sheets.

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

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

On May 28, 2021, the Company purchased the remaining 33.33 % noncontrolling equity interests in Kirnland Food Distribution, Inc.

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($ in thousands) Ownership of

noncontrolling interests as of December 31, 2021 December 31, 2021 December 31, 2020

Kirnland — % $ — $ 1,385

noncontrolling interests at December 31, 2022

December 31, 2022 December 31, 2021

HF Foods Industrial, LLC ("HFFI") 45.00 % $ 204 $ 462

3 unchanged sentences

Ocean West Food Services, LLC 32.50 % 1,986 1,763

Syncglobal Inc.

Total $ 4,436 $ 4,041

2 unchanged sentences

Actual results could differ from those estimates.

Significant accounting estimates reflected in the Company’s consolidated financial statements include, but are not limited to, allowance for doubtful accounts, inventory reserves, useful lives of property and equipment, lease assumptions, impairment of long-lived assets, impairment of long-term investments, impairment of goodwill, the purchase price allocation and fair value of assets and liabilities acquired with respect to business combinations, realization of deferred tax assets, uncertain income tax positions, the liability for self-insurance and stock-based compensation.

Significant accounting estimates reflected in the Company’s consolidated financial statements include, but are not limited to, allowance for expected credit losses, inventory reserves, useful lives of property and equipment, lease assumptions, impairment of long-lived assets, impairment of long-term investments, impairment of goodwill, the purchase price allocation and fair value of assets and liabilities acquired with respect to business combinations, realization of deferred tax assets, uncertain income tax positions, the liability for self-insurance and stock-based compensation.

Cash and Cash Equivalents

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Accounts receivable represent amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest.

Receivables are presented net of the allowance for doubtful accounts in the accompanying consolidated balance sheets.

The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for doubtful accounts based on a combination of factors.

When the Company is aware of a customer’s inability to meet its financial obligation, a specific allowance for doubtful accounts is recorded, reducing the receivable to the net amount the Company reasonably expects to collect.

In addition, allowances are recorded for all other receivables based on historic collection trends, write-offs and the aging of receivables.

Receivables are presented net of the allowance for expected credit losses in the accompanying consolidated balance sheets.

The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for expected credit losses based on a combination of factors.

The Company maintains an allowance for expected credit losses based on historic collection trends, write-offs and the aging of receivables.

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

As of December 31, 2021 and 2020, allowances for doubtful accounts were $ 0.8 million and $ 0.9 million, respectively.

As of December 31, 2022 and 2021, allowances for expected credit losses were $ 1.4 million and $ 0.8 million, respectively.

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

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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 noncontrolling 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.

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.

9 unchanged sentences

The Company tests goodwill for impairment at least annually, as of December 31, or whenever events or changes in circumstances indicate that goodwill might be impaired.

The Company reviews the carrying value of goodwill whenever events or changes in circumstances indicate that such carrying values may not be recoverable and annually for goodwill and indefinite lived intangible assets as required by ASC Topic 350 (“ASC 350”), Intangibles — Goodwill and Other .

The Company's policy is to test goodwill for impairment annually in the fourth quarter, or more frequently if certain triggering events or circumstances indicate it could be impaired.

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.

This guidance provides the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

1 unchanged sentence

If the quantitative analysis indicates the carrying value of a reporting unit exceeds its fair value, the Company measures any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

As of December 31, 2021, the Company has one reporting unit.

As of December 31, 2022 and 2021, the Company has one reporting unit.

See Note 9 - Goodwill and Acquired Intangible Assets for additional information.

Intangible Assets

Determining the fair value of a reporting unit requires the application of judgment and involves the use of significant estimates and assumptions including, projections of future cash flows, which include forecasted revenue, discount rate, and other factors which can be affected by changes in business climate, economic conditions, the competitive environment and other factors.

The Company also considers the use of market approaches, such as the comparable public company analysis and comparable acquisitions analysis, to estimate the fair value of the reporting unit.

The Company bases these fair value estimates on assumptions management believes to be reasonable but which are unpredictable and inherently uncertain.

A change in underlying assumptions would cause a change in the results of the tests and, as such, could cause fair value to be less than the carrying amounts and result in an impairment of goodwill in the future.

Additionally, if actual results are not consistent with the estimates and assumptions or if there are significant changes to the Company’s planned strategy, it may cause the fair value of the reporting unit to be less than its carrying amount and result in additional impairments of goodwill in the future.

The Company corroborates the reasonableness of the total fair value of the reporting unit by assessing the implied control premium based on the Company’s market capitalization.

The Company’s market capitalization is calculated using the relevant shares outstanding and stock price of the Company’s publicly traded shares.

In the event of a goodwill impairment, the Company would be required to record an impairment, which would impact earnings and reduce the carrying amounts of goodwill on the consolidated balance sheet.

Intangible Assets, net

Intangible assets are amortized on a straight-line basis over their estimated useful lives.

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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 or asset group exceeds their fair value.

The Company impaired its acquired developed technology and recognized impairment expense of $ 0.4 million in distribution, selling and administrative expenses in the consolidated statements of operations during the year ended December 31, 2022 .

The Company did no t record any impairment loss on its long-lived assets during the years ended December 31, 2021 and 2020.

6 unchanged sentences

The reserves consist of specific reserves for all known claims and an estimate for claims incurred but not reported, and losses arising from known claims ultimately settling in excess of insurance coverage using loss development factors based upon industry data and past experience.

In determining the liability, the Company specifically reviews all known claims and records a liability based upon the Company’s best estimate of the amount to be paid.

In determining the liability, the Company specifically reviews all known claims and records a liability based upon

the Company’s best estimate of the amount to be paid.

In making the estimate, the Company considers the amount and validity of the claim, as well as the Company’s past experience with similar claims.

10 unchanged sentences

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

For the years ended December 31, 2021, 2020 and 2019, 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:

($ in thousands) Year Ended December 31, 2021

Asian Specialty $ 236,489 29 %

Commodity 49,728 6 %

Fresh Produce 103,168 13 %

Meat and Poultry 214,504 27 %

Packaging and Other 69,187 9 %

Seafood 123,808 16 %

Total $ 796,884 100 %

Due to system constraints prior to the year ended December 31, 2021, the Company did not present net revenue by principal product categories.

Cost of Revenue

18 unchanged sentences

The Company accounts for leases following ASC 842, Leases ("ASC 842").

As of December 31, 2021, the balances for operating lease right-of-use ("ROU") assets and liabilities were $ 11.7 million and $ 11.7 million, respectively.

As of December 31, 2020, the balances for operating lease ROU assets and liabilities were $ 1.5 million and $ 1.5 million, respectively.

See Note 12 - Leases for additional information.

The Company determines if an arrangement is a lease at inception and also considers classification of leases as operating or finance.

3 unchanged sentences

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred.

The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

6 unchanged sentences

The Company has also elected to combine lease and non-lease components when measuring lease liabilities for vehicle and equipment leases.

Fair Value of Financial Instruments

The Company follows the provisions of ASC Topic 820 ("ASC 820"), Fair Value Measurements and Disclosures .

ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

• Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

• Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

• Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions about what assumptions market participants would use in pricing the asset or liability based on the best available information.

Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized at the end of the reporting period in which the transfer occurs.

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

The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, advances to suppliers, other current assets, accounts payable, checks issued not presented for payment and accrued expenses and other liabilities approximate their fair value based on the short-term maturity of these instruments.

The carrying value of the variable rate debt approximates its fair value because of the variability of interest rates associated with these instruments and the consistency in market conditions since the loans were entered into.

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 December 31, 2021, the carrying value of the fixed rate debt 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 $ 15.0 million of fixed rate debt, $ 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 11 - Long-Term Debt and Note 15 - Related Party Transactions for additional information regarding the Company's debt.

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.

Derivative Financial Instruments

4 unchanged sentences

The Company is exposed to credit loss in the event of nonperformance by the counterparty.

Supplemental Cash Flow Information

Year Ended December 31,

(In thousands) 2021 2020 2019

(As Restated) (As Restated)

Supplemental disclosure of cash flow data:

Cash paid for interest $ 3,177 $ 4,124 $ 1,521

Cash paid for income taxes 9,527 804 2,677

Supplemental disclosure of non-cash investing and financing activities:

Right-of-use assets obtained in exchange for operating lease liabilities $ 10,983 $ 339 $ 19,065

Property acquired via a finance lease 8,947 1,376 6,287

Notes payable related to property and equipment purchases 257 2,529 1,080

Notes receivable sold to shareholder in exchange of common stock — — 12,038

Common stock issued for consideration of acquisition of B&R Global — — 576,697

Common stock issued for consideration of acquisition of Great Wall Group 14,541 — —

Deferred consideration from Great Wall Acquisition 17,330 — —

Issuance of promissory note for the acquisition of B&R Realty Subsidiaries — 7,000 —

Concentrations and Credit Risk

1 unchanged sentence

The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

Concentration risk

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

No single customer accounted for 10% or more of the Company's consolidated net revenue for the years ended December 31, 2021, 2020 and 2019.

The Company maintains cash balances with banks which at times exceed federally insured limits.

The Company has not experienced any losses in such accounts

Segment Reporting

3 unchanged sentences

In 2021, former co-CEO Zhou Min Ni resigned, and Xiao Mou Zhang assumed the role of sole CEO and sole Chief Operating Decision Maker ("CODM").

The Company reassessed how the CODM makes operational decisions and assesses performance and concluded it has one operating and reporting segment.

Management, including the CODM, reviews operating results and makes resource allocations on a consolidated basis and thus the Company has concluded it has one operating and reportable segment.

Previously the Company had two reportable segments.

Management has revised its segment disclosure for earlier periods accordingly.

The CODM, reviews operating

results and makes resource allocations on a consolidated basis and thus the Company has concluded it has one operating and reportable segment.

Recent Accounting Pronouncements

5 unchanged sentences

For emerging growth companies, the effective date has been extended to fiscal years beginning after December 15, 2022.

The Company will

adopt this ASU within the annual reporting period ending as of December 31, 2022.

The Company is currently assessing the impact of adopting this standard, but based upon its preliminary assessment, does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

The Company adopted this ASU within the annual reporting period ending as of December 31, 2022.

The adoption of this guidance resulted in an adjustment to retained earnings of $ 0.7 million as of January 1, 2022 as evidenced in the Company's consolidated statements of changes in shareholders’ equity.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform.

These amendments are not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022 with an effective date of January 1, 2022, because as of December 31, 2022 the Company will no longer be an emerging growth company.

ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , deferring the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The Company adopted ASU 2020-04 during 2021.

The ASU has not and is currently not expected to have a material impact on the Company's consolidated financial statements.

The ASU has not had a material impact on the Company's consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

5 unchanged sentences

Note 3 - Variable Interest Entities

The Company has five VIEs for which the Company is not the primary beneficiary and therefore does not consolidate, and 14 VIEs for which the Company is the primary beneficiary and consolidates.

The Company has VIEs for which the Company is not the primary beneficiary and therefore does not consolidate, and VIEs for which the Company is the primary beneficiary and consolidates.

The VIEs are summarized as follows:

• Unconsolidated VIEs (collectively "Unconsolidated VIEs"):

• Revolution Industry, LLC (“Revolution Industry”) – Supplier of goods (until March 2021)

• Revolution Automotive – Acquirer of luxury vehicles (until September 2019)

• UGO USA, Inc.

(“UGO”) – Supplier of online goods, customer, and lessee (until April 2021)

• AnHeart, Inc.

• Consolidated VIEs (collectively "Consolidated VIEs"):

• 13 staffing agencies (collectively, the “Staffing Agencies”) – Suppliers of staffing services:

• FUSO Trucking LLC (“FUSO”)

• 13 staffing agencies (collectively, the “Staffing Agencies”) – Suppliers of staffing services through 2021:

◦ Anshun, Inc.

6 unchanged sentences

(until December 2020)

• Unconsolidated VIEs (collectively "Unconsolidated VIEs"):

• Revolution Industry, LLC (“Revolution Industry”) – Supplier of goods (until March 2021)

• UGO USA, Inc.

(“UGO”) – Supplier of online goods, customer, and lessee (until April 2021)

• BRGR (until January 2020)

• AnHeart, Inc.

Consolidated VIEs

1 unchanged sentence

The entity lacks sufficient equity to finance its activities without additional subordinated financial support from the Company, and the Company has the power to direct the VIEs’ activities.

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

In addition, the Company receives 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 operations and comprehensive income (loss) and statements of cash flows are immaterial.

3 unchanged sentences

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

The Company has determined it is the primary beneficiary for the Staffing Agencies as it controlled how and when the labor force would be utilized.

The Company consolidates the Staffing Agencies, recognizing compensation expense within distribution, selling, and administrative expenses in the consolidated statements of operations and comprehensive income (loss), and the related accrued expenses in the consolidated balance sheets.

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

The Company consolidated the Staffing Agencies, recognizing compensation expense within distribution, selling, and administrative expenses in the consolidated statements of operations and comprehensive income (loss), and the related accrued expenses in the consolidated balance sheets.

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

As of December 31, 2021, the Company no longer has involvement with any of the Staffing Agencies.

As of December 31, 2021, the Company no longer had involvement with any of the Staffing Agencies and therefore was no longer considered a VIE and was no longer consolidated.

Unconsolidated VIEs

See Note 12 - Leases for additional information on AnHeart.

Revolution Industry, Revolution Automotive and UGO

Revolution Industry was established to produce egg roll mix for the Company and to create and provide funding to Revolution Automotive.

Revolution Automotive was set up to acquire luxury vehicles for the benefit of the former Co-CEO (Mr.

Ni) and his son.

Revolution Industry and UGO

Revolution Industry was established to produce egg roll mix for the Company.

UGO was originally designed to be an online marketplace for various Asian goods.

Revolution Industry, Revolution Automotive and UGO were thinly capitalized and were not able to finance their activities without additional subordinated support.

Revolution Industry and UGO were thinly capitalized and were not able to finance their activities without additional subordinated support.

The former Co-CEO's (Mr.

Ni) son, as sole equity holder of Revolution Industry and Revolution Automotive, had unilateral control over the ongoing activities of Revolution Industry and Revolution Automotive and significantly benefited from their operations.

Therefore, the Company is not the primary beneficiary for Revolution Industry and Revolution Automotive.

Ni) son, as sole equity holder of Revolution Industry, had unilateral control over the ongoing activities of Revolution Industry and significantly benefited from their operations.

Therefore, the Company was not the primary beneficiary for Revolution Industry.

The former Co-CEO (Mr.

Ni) and certain family members, as equity holders of UGO, had unilateral control over the ongoing activities of UGO and significantly benefited from its operations.

Therefore, the Company is not the primary beneficiary for UGO.

Ni) and his niece, as equity holders, had unilateral control over the ongoing activities of UGO and significantly benefited from its operations.

Therefore, the Company was not the primary beneficiary for UGO.

Revolution Industry and UGO are also related parties and were generally the Company’s suppliers or customers and the Company did not have other involvement with these entities.

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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.

Related party transactions with Revolution Industry and UGO are disclosed in Note 14 - Related Party Transactions.

Below is a summary of purchases of goods and services from the unconsolidated VIEs and related parties:

Year Ended December 31,

(In thousands) 2021 2020 2019

Revolution Industry $ 190 $ 2,362 $ 2,823

UGO 212 644 724

Total Unconsolidated VIEs $ 402 $ 3,006 $ 3,547

The Company recognized the following activity with UGO:

Year Ended December 31,

(In thousands) 2021 2020 2019

Sales $ — $ 66 $ 75

Other income 7 42 43

Total - UGO $ 7 $ 108 $ 118

The Company determined BRGR to be a VIE.

BRGR was established to hold real estate for rent primarily for the Company and BRGR was financed primarily through this rental income and proceeds from the real estate loan for which the Company was guarantor.

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On January 17, 2020, the Company acquired 100 % equity membership interests of certain real estate subsidiaries of BRGR, as discussed in Note 8 - Acquisitions .

The Company also entered into the Second Amended Credit Agreement, as discussed in Note 10 - Line of Credit , which removed BRGR as a guarantor of its revolving credit facility and as a borrower under its real estate term loans.

Related party transactions with BRGR related parties is disclosed in Note 15 - Related Party Transactions.

For the period from January 1, 2020 through January 17, 2020 and the period from November 4, 2019 through December 31, 2019, the Company recorded rent expense of $ 0.2 million and $ 0.8 million, respectively, related to its lease agreements with the realty subsidiaries of BRGR, which is included in distribution, selling, and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

The Company also entered into the Second Amended Credit Agreement, as discussed in Note 11 - Debt , which removed BRGR as a guarantor of its revolving credit facility and as a borrower under its real estate term loans.

Related party transactions with BRGR are disclosed in Note 14 - Related Party Transactions .

For the period from January 1, 2020 through January 17, 2020, the Company recorded rent expense of $ 0.2 million related to its lease agreements with the realty subsidiaries of BRGR, which is included in distribution, selling, and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

As of December 31, 2019, the Company was a guarantor of BRGR and its subsidiaries’ mortgage-secured real estate term loan, which had an unpaid principal balance of $ 53.3 million.

As of January 17, 2020, the Company had no remaining involvement with BRGR.

As of January 17, 2020, the Company had no remaining involvement with BRGR and therefore is no longer considered a VIE.

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

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The Company has determined that AnHeart is 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.

However, the Company concluded it is 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.

Please refer to Note 7 - Leases for additional information regarding the Company's maximum exposure to loss to AnHeart.

The Company did not have any sales to or rental income from any of the other VIEs during the three years ended December 31, 2022.

NOTE 4 - ACCOUNTS RECEIVABLE, NET

Note 4 - Revenue

For the years ended December 31, 2022, 2021 and 2020, 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:

Year Ended December 31,

($ in thousands) 2022 2021

Seafood $ 354,220 30 % $ 123,808 16 %

Asian Specialty 299,215 26 % 236,489 29 %

Meat and Poultry 238,276 20 % 214,504 27 %

Fresh Produce 126,560 11 % 103,168 13 %

Packaging and Other 84,489 7 % 69,187 9 %

Commodity 67,707 6 % 49,728 6 %

Total $ 1,170,467 100 % $ 796,884 100 %

Due to system constraints prior to the year ended December 31, 2021, the Company did not present net revenue by principal product categories.

Note 5 - Balance Sheet Components

Accounts receivable, net consisted of the following:

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

(As Restated)

Accounts receivable $ 45,628 $ 37,121

allowance for doubtful accounts ( 840 ) ( 909 )

allowance for expected credit losses ( 1,442 ) ( 840 )

Accounts receivable, net $ 44,186 $ 36,281

Movement of allowance for doubtful accounts was as follows:

Movement of allowance for expected credit losses was as follows:

Year Ended December 31,

(In thousands) 2022 2021 2020

(As Restated) (As Restated)

Beginning balance $ 840 $ 909 $ 624

Increase (decrease) in provision for doubtful accounts ( 433 ) 1,338 ( 5 )

Recovery/(write off) 364 ( 1,053 ) ( 29 )

Adjustment for adoption of the new CECL standard (Note 2) 690 — —

Increase (decrease) in provision for expected credit losses 82 ( 433 ) 1,338

Bad debt recovery (write-offs) ( 170 ) 364 ( 1,053 )

Ending balance $ 1,442 $ 840 $ 909

NOTE 5 - LONG-TERM INVESTMENTS

Long-term investments consisted of the following:

($ in thousands) Ownership as of December 31,

2021 December 31, 2021 December 31, 2020

Asahi Food, Inc.

("Asahi") 49 % $ 662 $ 577

Tamron Akuatik Produk Industri ("Tamron") 12 % 1,800 1,800

Total $ 2,462 $ 2,377

The investment in Tamron is accounted for using the measurement alternative under ASC 321, which is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments, if any.

The investment in Asahi 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.

There was no impairment during the years ended December 31, 2021, 2020 and 2019 for these investments.

NOTE 6 - PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

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

(As Restated)

Automobiles $ 34,891 $ 31,577

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Depreciation expense was $ 9.2 million, $ 8.1 million and $ 8.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Long-term investments consisted of the following:

($ in thousands) Ownership as of December 31,

2022 December 31, 2022 December 31, 2021

Asahi Food, Inc.

("Asahi") 49 % $ 879 $ 662

Tamron Akuatik Produk Industri ("Tamron") 12 % 1,800 1,800

Total long-term investments $ 2,679 $ 2,462

The investment in Asahi 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.

There was no impairment during the years ended December 31, 2022, 2021 and 2020 for these investments.

Accrued expenses and other liabilities consisted of the following:

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

Accrued compensation $ 6,798 $ 5,038

Accrued professional fees 3,866 349

Accrued income taxes — 1,908

Accrued interest and fees 1,082 205

Self-insurance liability 1,286 1,008

Accrued other 6,616 3,630

Total accrued expenses and other liabilities $ 19,648 $ 12,138

Note 6 - Fair Value Measurements

The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the dates indicated:

December 31, 2022 December 31, 2021

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs

(In thousands)

Derivative instruments $ — $ 530 $ — $ 530 $ — $ — $ — $ —

Derivative instruments $ — $ — $ — $ — $ — $ 287 $ — $ 287

The Company follows the provisions of ASC Topic 820 ("ASC 820"), Fair Value Measurements and Disclosures .

ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

• Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized at the end of the reporting period in which the transfer occurs.

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

Carrying Value and Estimated Fair Value of Outstanding Debt - The following table presents the carrying value and estimated fair value of the Company’s outstanding debt as described in Note 11 - Debt of the Notes to the Consolidated Financial Statements, including the current portion, as of the dates indicated:

December 31, 2022 December 31, 2021

Carrying Value Fair Value Level Carrying Value Fair Value Level

($ in millions)

Fixed rate debt:

Promissory note payable to related party $ — $ — $ 4.5 $ 3.4 Level 3

Bank of America 1.9 1.6 Level 3 2.7 2.4 Level 3

East West Bank 2.4 1.8 Level 3 2.5 2.0 Level 3

First Horizon Bank — — 4.5 3.6 Level 3

Other finance institutions 0.2 0.2 Level 3 0.8 0.8 Level 3

Variable rate debt:

JPMorgan 111.4 111.4 Level 2 70.8 70.8 Level 2

Bank of America 2.3 2.3 Level 2 2.5 2.5 Level 2

East West Bank 3.5 3.5 Level 2 3.5 3.5 Level 2

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.

Please refer to Note 11 - Debt and Note 14 - Related Party Transactions for additional information regarding the Company's debt.

Note 7 - Leases

The Company leases office space, warehouses and vacant land 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 2051.

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

Operating and finance lease assets and lease liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term.

As of December 31, 2022, the balances for operating lease right-of-use ("ROU") assets and liabilities were $ 14.2 million and $ 14.3 million, respectively.

As of December 31, 2021, the balances for operating lease ROU assets and liabilities were $ 11.7 million and $ 11.7 million, respectively.

Operating lease expense is recognized on a straight-line basis over the lease term.

For finance leases, the Company also recognizes finance lease assets and finance lease liabilities at inception, with lease expense recognized as interest expense and amortization of the lease payment.

Variable lease costs were insignificant in the years ended December 31, 2022, 2021 and 2020.

Operating Leases

The components of operating lease expense were as follows:

Year Ended December 31,

($ in thousands) 2022 2021 2020

Operating lease cost $ 4,045 $ 967 $ 785

Short-term lease cost $ 1,037 $ 1,699 $ 1,424

Weighted average remaining lease term (months) 47 56 40

Weighted average discount rate 3.8 % 3.9 % 5.6 %

Year Ended December 31,

(In thousands) 2022 2021 2020

Operating cash flows from operating leases $ 4,005 $ 822 $ 799

Finance Leases

The components of lease expense were as follows:

Year Ended December 31,

(In thousands) 2022 2021 2020

Finance leases cost:

Amortization of ROU assets $ 2,808 $ 2,416 $ 1,978

Interest on lease liabilities 787 820 492

Total finance leases cost $ 3,595 $ 3,236 $ 2,470

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

Year Ended December 31,

(In thousands) 2022 2021 2020

Operating cash flows from finance leases $ 670 $ 701 $ 492

Supplemental balance sheet information related to finance leases was as follows:

($ in thousands) December 31, 2022 December 31, 2021

Property and equipment, at cost $ 20,339 $ 18,412

Accumulated depreciation ( 7,615 ) ( 5,127 )

Property and equipment, net $ 12,724 $ 13,285

Weighted average remaining lease term (months) 215 215

Weighted average discount rate 5.7 % 5.8 %

Maturities of lease liabilities are as follows:

Operating Leases

(In thousands) Related Party (1)

Third Party Total Finance

Year Ended December 31,

2023 $ 312 $ 3,828 $ 4,140 $ 2,844

2024 321 3,444 3,765 2,010

2025 331 3,343 3,674 1,399

2026 — 3,207 3,207 1,018

2027 — 545 545 752

Thereafter — — — 16,839

Total lease payments 964 14,367 15,331 24,862

Imputed interest ( 52 ) ( 1,012 ) ( 1,064 ) ( 11,167 )

Total $ 912 $ 13,355 $ 14,267 $ 13,695

_______________

(1) See Note 14 - Related Party Transactions

As discussed in Note 3 - Variable Interest Entities , the Company provided a guarantee for two separate leases for two properties

located in Manhattan, New York, at 273 Fifth Avenue and 275 Fifth Avenue, for 30 years and 15 years, respectively.

On February 10, 2021, 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, pursuant to which it assumed the lease of the premises at 273 Fifth Avenue (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 Lease Amendment were negotiated in light of the Company’s guarantee obligations as guarantor under the Lease Agreement.

The Company agreed to observe all the covenants and conditions of the Lease Agreement, as amended, including the payment of all rents due.

Under the terms of the 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.

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

On February 7, 2022, the Company undertook its guaranty obligations by assuming responsibility for payment of monthly rent and other tenant obligations, including past due rent as well as property tax obligations beginning with the January 2022 rent due.

On February 25, 2022, the Company instituted a legal action to pursue legal remedies against AnHeart and Minsheng.

In March 2022, the Company agreed to stay litigation against AnHeart in exchange for AnHeart’s payment of certain back rent from January to April 2022 and its continued partial payment of monthly rent.

While the case remains pending in New York, the Company is not actively litigating the claim.

In accordance with ASC 460, Guarantees , the Company has determined that its maximum exposure resulting from the 275 Fifth Avenue lease guarantee includes future minimum lease payments plus potential additional payments to satisfy maintenance, property tax and insurance requirements under the leases with a remaining term of approximately 11 years.

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

AnHeart is obligated to pay all costs associated with the properties, including taxes, insurance, utilities, maintenance and repairs.

As of December 31, 2022, the Company had a lease guarantee liability of $ 5.8 million.

The Company determined the discounted value of the lease guarantee liability 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 consolidated balance sheet.

The Company's monthly rental payments 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 December 31, 2022 are presented below:

(In thousands) Amount

Year Ended December 31,

Thereafter 4,478

Imputed interest ( 1,706 )

Total minimum lease payments $ 5,760

Note 8 - Acquisitions

Acquisition of B&R Global

On 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.

The aggregate fair value of the consideration paid by HF Group in the Business Combination was $ 576.7 million based on the closing share price of the Company’s common stock at the date of Closing.

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 quoted market prices, discounted cash flow, and estimates made by management.

Acquisition of Sealand

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 finalized its purchase accounting as of December 31, 2022.

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 $ 0.7 million and were reflected in distribution, selling and administrative expenses in the consolidated statement of operations and comprehensive income for the year ended December 31, 2022.

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 .

Purchase Price Allocation

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

The total consideration paid to acquire the assets and liabilities of Sealand, as set forth below:

(In thousands) Amount

Accounts receivable, net 30,935

Accounts receivable - related parties, net 3,394

Inventories, net 56,452

Other current assets 2,333

Other current assets - related parties 498

Advances to suppliers, net 98

Property and equipment, net 11,043

Deposit – related parties 591

Long-term investments 2,289

Inventory $ 13,846

Property plant, and equipment 1,424

Right-of-use assets 127

TANGIBLE ASSETS ACQUIRED 132,723

Line of credit 35,568

Accounts payable 24,884

Accounts payable - related parties 1,528

Bank overdraft 12,082

Accrued expenses 779

Other payables 186

Other payables – related party 733

Customer deposits 39

Long-term debt 3,284

Lease liabilities 17,792

Deferred tax liabilities arising from acquired intangible assets 51,414

TANGIBLE LIABILITIES ASSUMED 148,289

NET TANGIBLE LIABILITIES ASSUMED ( 15,566 )

Identifiable intangible assets 188,503

Goodwill 406,703

INTANGIBLE ASSETS ACQUIRED 595,206

Noncontrolling interests 2,941

Total consideration $ 576,699

The Company recorded acquired intangible assets of $ 188.5 million, which were valued at fair value using Level 3 inputs.

These intangible assets include tradenames valued at $ 29.3 million and customer relationships valued at $ 159.2 million.

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

Unaudited Supplemental Pro Forma Financial Information

The following table presents the Company’s unaudited pro forma results for the year ended December 31, 2019, as if the B&R Global Acquisition had occurred on January 1, 2019.

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

Statutory rates were used to calculate income taxes.

(In thousands, except per share data) Year Ended December 31, 2019

Pro forma net revenue $ 828,046

Pro forma net income $ 6,800 (1)

Pro forma net income attributable to HF Group $ 5,662 (1)

Pro forma earnings per common share - basic and diluted $ 0.11

Pro forma weighted average shares - basic and diluted 53,293,566

(1) Includes intangibles asset amortization expense of $ 10.9 million for the year ended December 31, 2019.

Acquisition of Real Estate Companies

On January 17, 2020, the Company acquired 100 % equity membership interest in nine subsidiaries of BRGR, which owned warehouse facilities that were being leased to B&R Global for its operations in California, Arizona, Utah, Colorado, Washington, and Montana (the "Realty Acquisition").

Then Co-CEO (and current CEO) of the Company, Xiao Mou Zhang ("Mr.

Zhang"), managed and owned an 8.91 % interest in BRGR.

The total purchase price of the transaction was $ 101.3 million for which financing was provided by JPMorgan Chase Bank, N.A.

("JPMorgan"), as Administrative Agent, and certain lender parties hereto, including Comerica Bank under an Amended and Restated Credit Agreement ("Credit Agreement").

The terms of which are set forth below, and the lender parties thereto relied upon the appraisals in determining to provide such financing.

Based in part on the foregoing, the special transactions committee, composed of the Company’s independent directors, reviewed and approved the transaction and the related financing on behalf of HF Group’s board.

Consideration for the acquisition was funded by (1) $ 75.6 million in mortgage-backed term loans financed under the Second Amended Credit Agreement (see Note 11 - Long-Term Debt for additional information), (2) issuance by B&R Global of a $ 7.0 million Unsecured Subordinated Promissory Note to BRGR maturing on January 17, 2030, and (3) 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 and predecessor financing arrangements.

The Company noted that the majority of the assets acquired was concentrated in a group of similar assets, land and buildings, for the same purpose of warehousing and distribution.

As such, the Realty Acquisition was deemed as an asset acquisition under ASC 805-10-55, and the total purchase price was allocated on a relative fair value basis to the net assets acquired.

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

(In thousands) Amount

Automobile 34

Buildings 53,564

Intangible assets 14,717

Total assets acquired 30,114

Accounts payable and accrued expenses 1,367

Obligations under operating leases 127

Total liabilities assumed 127

Net assets acquired $ 101,270

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.

Acquisition of Great Wall Group

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

Great Wall Restaurant Supplier Inc., an Ohio Corporation, and First Mart Inc., an Illinois Corporation (collectively the “Great Wall Group”) to purchase substantially all of the operating assets of the Great Wall Group’s seafood and restaurant products sales, marketing, and distribution businesses (the “Great Wall Acquisition”).

On December 30, 2021, the Company executed an Asset Purchase Agreement with Great Wall Group to purchase substantially all of the operating assets of the Great Wall Group’s seafood and restaurant products sales, marketing, and distribution businesses.

The acquisition was completed as part of the Company’s strategy to develop a national footprint through expansion into the Midwest, Southwest and Southern regions of the United States.

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

The Company accounted for these transactions 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 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.

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Since the Great Wall Acquisition occurred on December 30, 2021, the amounts of revenue and earnings of the Great Wall Group included in the Company’s consolidated statement of operations and comprehensive income (loss) from the acquisition date to December 31, 2021 were immaterial.

Due to the New Year's Eve holiday, there were no revenue generating operations on December 31, 2021.

Unaudited Supplemental Pro Forma Financial Information

The following table presents the Company’s unaudited pro forma results for the years ended December 31, 2021 and 2020, respectively, as if the Great Wall Acquisition had been consummated on January 1, 2020.

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

The following table presents the Company’s unaudited pro forma results for the years ended December 31, 2022 and 2021, respectively, as if the Great Wall Acquisition and the Sealand 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 other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees.

Statutory rates were used to calculate income taxes.

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Pro forma net income attributable to HF Group $ 35 $ 33,724

Pro forma earnings (loss) per common share - basic $ 0.56 $ ( 6.42 )

Pro forma earnings (loss) per common share - diluted $ 0.56 $ ( 6.42 )

Pro forma (loss) earnings per common share - basic $ — $ 0.65

Pro forma (loss) earnings per common share - diluted $ — $ 0.65

Pro forma weighted average shares - basic 53,757,199 53,706,392

Pro forma weighted average shares - diluted 53,757,199 53,809,020

Sealand Acquisition

Subsequent to December 31, 2021, 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.

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 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.

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.

Preliminary Purchase Price Allocation

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

The revenue and operating income from Sealand from the date of acquisition through December 31, 2022 was $ 55.6 million and $ 0.7 million, respectively, and were included in the consolidated statements of operations and comprehensive income (loss).

Acquisition of Real Estate Companies

Then Co-CEO (and current CEO) of the Company, Xiao Mou Zhang ("Mr.

Zhang"), managed and owned an 8.91 % interest in BRGR.

The total purchase price of the transaction was $ 101.3 million for which financing was provided by JPMorgan Chase Bank, N.A.

("JPMorgan"), as Administrative Agent, and certain lender parties hereto, including Comerica Bank under an Amended and Restated Credit Agreement ("Credit Agreement").

The terms of which are set forth below, and the lender parties thereto relied upon the appraisals in determining to provide such financing.

Consideration for the acquisition was funded by (1) $ 75.6 million in mortgage-backed term loans financed under the Second Amended Credit Agreement (see Note 11 - Debt for additional information), (2) issuance by B&R Global of a $ 7.0 million Unsecured Subordinated Promissory Note to BRGR maturing on January 17, 2030, and (3) 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 and predecessor financing arrangements.

The majority of the assets acquired was concentrated in a group of similar assets, land and buildings, for the same purpose of warehousing and distribution.

As such, the Realty Acquisition was deemed as an asset acquisition under ASC 805-10-55, and the total purchase price was allocated on a relative fair value basis to the net assets acquired.

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

(In thousands) Amount

Inventory $ 13,846

Property plant, and equipment 1,424

Right-of-use assets 127

Intangible assets 14,717

Automobile 34

Prepaid expenses 39

Buildings 53,564

Total assets acquired 102,637

Obligations under operating leases 127

Accounts payable and accrued expenses 1,367

Total liabilities assumed 1,367

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 associated goodwill is deductible for tax purposes.

Net assets acquired $ 101,270

Note 9 - Goodwill and Acquired Intangible Assets

2 unchanged sentences

Balance at December 31, 2020 $ 68,512

Impairment loss ( 338,191 )

Balance at December 31, 2020 68,512

Acquisition of Great Wall Group 11,745

Balance at December 31, 2021 80,257

The Company recorded approximately $ 406.7 million of goodwill in 2019 resulting from the completion of the business combination with B&R Global and approximately $ 11.7 million of goodwill resulting from the completion of the business combination with the Great Wall Group in 2021.

The Company's policy is to test goodwill for impairment annually in the fourth quarter, or more frequently if certain triggering events or circumstances indicate it could be impaired.

In addition, the fair value of the goodwill is sensitive to the changes in the assumptions used in the projected cash flows, which include forecasted revenues and perpetual growth rates, among others, all of which require significant judgment by management.

The Company has used recent historical performance, current forecasted financial information, and broad-based industry and economic statistics as a basis to estimate the key assumptions utilized in the discounted cash flow model.

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.

Acquisition of Sealand Food, Inc.

Balance at December 31, 2022 $ 85,118

Accumulated impairment for goodwill is $ 338.2 million as of both December 31, 2022 and 2021.

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.

10 unchanged sentences

Continued uncertainty about the removal or perpetuation of these restrictions and levels of consumer spending cause ongoing volatility.

Due to structural changes at the Company during 2021, there is only one reporting unit at December 31, 2021.

The Company performed a qualitative goodwill impairment assessment and concluded no impairment was required to be recorded during the year ended December 31, 2021.

No impairment was recorded during the year ended December 31, 2019.

Due to structural changes at the Company during 2021, there is only one aggregated reporting unit at December 31, 2022 and 2021.

Due to the sustained decline in the Company’s stock price during 2022, the Company performed a quantitative goodwill impairment assessment.

The fair value was determined using an average of the discounted cash flow approach, comparable public company analysis, and comparable acquisitions analysis.

The fair value of the reporting unit exceeded the carrying value, and therefore the Company concluded no impairment was required to be recorded during the year ended December 31, 2022.

For the year ended December 31, 2021, the Company performed a qualitative goodwill impairment assessment and concluded no impairment was required to be recorded during the year ended December 31, 2021.

Acquired Intangible Assets

In connection with the Great Wall Acquisition, HF Group acquired $ 30.1 million of intangible assets, primarily representing a non-competition agreement, tradenames and customer relationships, which have an estimated amortization period of approximately 3 years, 10 years, and 10 years, respectively.

In connection with the Sealand acquisition, the Company acquired $ 14.7 million of intangible assets, primarily representing tradenames and trademarks of $ 4.4 million, customer relationships of $ 8.9 million and non-compete agreements of $ 1.4 million.

The associated goodwill is deductible for tax purposes.

In connection with the Great Wall Group acquisition, HF Group acquired $ 30.1 million of intangible assets, primarily representing a non-competition agreement, tradenames and customer relationships, which have an estimated amortization period of approximately 3 years, 10 years, and 10 years, respectively.

In connection with the acquisition of B&R Global, HF Group acquired $ 188.5 million of intangible assets, primarily representing tradenames and customer relationships which have an estimated amortization period of 10 and 20 years, respectively.

7 unchanged sentences

Non-competition agreement $ 3,892 $ ( 1,132 ) $ 2,760 $ 2,407 $ — $ 2,407

Tradenames 39,833 ( 6,349 ) 33,484 29,303 ( 3,419 ) 25,884

Trademarks 44,256 ( 10,673 ) 33,583 39,833 ( 6,349 ) 33,484

Customer relationships 185,266 ( 27,518 ) 157,748 176,408 ( 17,247 ) 159,161

Total $ 233,414 $ ( 39,323 ) $ 194,091 $ 218,648 $ ( 23,596 ) $ 195,052

The Company evaluated possible triggering events that would indicate long-lived asset impairment assessment and concluded no impairment was required during the year ended December 31, 2021 .

The Company evaluated possible triggering events that would indicate long-lived asset impairment assessment.

There were no triggering events identified for the remaining intangible assets at December 31, 2022.

No impairment was recorded for the years ended December 31, 2021 and 2020.

7 unchanged sentences

Note 10 - Derivative Financial Instruments

The Company utilizes interest rate swaps ("IRS") for the sole purpose of mitigating interest rate fluctuation risk associated with floating rate debt instruments (as defined in Note 10 - Line of Credit and Note 11 - Long-Term Debt ).

Derivative Instruments

The Company utilizes interest rate swaps ("IRS") for the sole purpose of mitigating interest rate fluctuation risk associated with floating rate debt instruments (as defined in Note 11 - Debt ).

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

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The term loan was contracted at USD 1-month LIBOR plus 2.15 % per annum, but was fixed at 4.25 % per annum resulting from the corresponding BOA IRS contract.

On December 19, 2021, the Company entered into the Second Amendment to Loan Agreement, which pegged the mortgage term loan to Secured Overnight Financing Rate ("SOFR") + 2.5 % .

On December 19, 2021, the Company entered into the Second Amendment to Loan

Agreement, which pegged the mortgage term loan to Secured Overnight Financing Rate ("SOFR") + 2.5 % .

The BOA IRS was modified accordingly to fix the SOFR based loan to approximately 4.50 %.

4 unchanged sentences

The Company recorded a gain of approximately $ 0.7 million during the year ended December 31, 2021.

The Company evaluated the above mentioned IRS contracts currently in place and did not designate those as cash flow hedges.

Hence, the fair value change on the aforementioned IRS contracts are accounted for and recognized as a change in fair value of IRS contracts in the consolidated statements of operations and comprehensive income (loss).

As of December 31, 2021 and December 31, 2020, the Company has determined that the fair value of the interest rate swap obligations was $ 0.3 million and $ 1.0 million, respectively, which is included in accrued expenses and other liabilities on the consolidated balance sheets.

The Company evaluated the aforementioned IRS contracts currently in place and did not designate those as cash flow hedges.

Hence, the fair value change on these IRS contracts are accounted for and recognized as a change in fair value of IRS contracts in the consolidated statements of operations and comprehensive income (loss).

As of December 31, 2022 and 2021, the Company determined that the fair value of the IRS contracts were $ 0.5 million in an asset position and $ 0.3 million in a liability position, respectively, which is included in other long-term assets and accrued expenses and other liabilities , respectively, on the consolidated balance sheets.

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.

The IRS are classified as Level 2 liabilities.

NOTE 10 - LINE OF CREDIT

On November 4, 2019, the Company entered into a credit agreement with JPMorgan Chase Bank, NA.

(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.

The revolving credit facility carried a floating interest rate that was pegged to the 1-month London Inter-bank Offered Rate ("LIBOR") plus 1.375 % per annum and was collateralized by all assets of the Company and was also guaranteed by certain subsidiaries of the Company.

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

On January 17, 2020, the Company and certain of the 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.

On December 30, 2021, the Company entered into the Consent, Waiver, Joinder and Amendment No.

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

The Second Amended Credit Agreement, as amended, provides for (i) a $ 100.0 million asset-secured revolving credit facility maturing on November 4, 2022 (the “Revolving Facility”), (ii) mortgage-secured term loan of $ 75.6 million, (described in Note 11 - Long-Term Debt) and (iii) amendment in 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.

On the same day, the Company utilized an additional $ 33.3 million drawdown from the Revolving Facility to fund the Great Wall Acquisition.

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.

The outstanding principal balance on the line of credit as of December 31, 2021 was $ 55.3 million.

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

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

Subsequent to December 31, 2021, on March 31, 2022, the Company amended the JPM Credit Agreement extending the Revolver Facility for 5 years, with a maturity date of November 4, 2027.

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.

NOTE 11 - LONG-TERM DEBT

The inputs used to determine the fair value of the IRS are classified as Level 2 on the fair value hierarchy.

Note 11 - Debt

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

($ in thousands)

Bank Name Maturity Interest Rate at December 31, 2021 December 31,

Bank Name Maturity Interest Rate at December 31, 2022 December 31, 2022 December 31, 2021

Bank of America (a)

February 2022 - December 2029 3.73 % ‑ 5.80 % $ 5,134 $ 5,905

BMO Harris Bank N.A.

April 2022 - January 2024 5.96 % ‑ 5.99 % 115 280

East West Bank (c)

March 2023 - December 2029 3.73 % - 5.80 %

$ 4,315 $ 5,134

East West Bank (b)

August 2027 - September 2029 4.25 % - 4.40 %

First Horizon Bank (d)

October 2027 3.85 % 4,571 4,773

Morgan Chase (e)

First Horizon Bank (c)

Paid off in May 2022 3.85 %

Morgan Chase (d)

February 2023 - January 2030 6.10 % - 6.22 %

Peoples United Bank (b)

December 2022 - January 2023 7.44 % ‑ 7.53 % 387 725

Other finance institutions (b)

July 2022 - March 2024 3.90 % ‑ 18.37 % 335 477

Total debt 87,368 93,650

111,714 70,866

Other finance institutions (e)

April 2023 - March 2024 5.99 % - 6.14 %

Total debt, principal amount 122,011 87,402

Debt issuance costs ( 302 ) ( 34 )

Total debt, carrying value 121,709 87,368

Current portion ( 6,266 ) ( 5,557 )

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_______________

(a) Loan balance consists of real estate term loan, equipment term loans, and vehicle term loans.

Collateral is provided by one real property owned by R&N Charlotte, LLC ("RNCH"), specific equipment and vehicles owned by HFFI, RNCH, and B&B Trucking Services, Inc..

On December 19, 2021, RNCH entered into the Second Amendment to Loan Agreement.

(a) Loan balance consists of real estate term loan, equipment term loans, and vehicle term loans, collateralized by one real property and specific equipment and vehicles.

The real estate term is pegged to TERM SOFR + 2.5 %.

(b) Secured by vehicles.

(c) Real estate term loans with East West Bank are collateralized by four real properties owned by R&N Holdings, LLC (“R&N Holdings”), a wholly-owned subsidiary of the Company, and NSF.

The loan to R&N Holdings is guaranteed by four wholly-owned subsidiaries of the Company, Han Feng, Inc.

(“Han Feng”), Truse Trucking, Inc.

(“TT”), Morning First Delivery, Inc.

(“MFD”), and R&N Lexington, L.L.C.

(“R&N Lexington”), a wholly-owned subsidiary of the Company.

The loan to R&N Lexington is guaranteed by four wholly-owned subsidiaries of the Company, Han Feng, TT, MFD, and R&N Holdings.

The NSF loans are guaranteed by the Company.

The R&N Holdings and R&N Lexington loans are also guaranteed by Mr.

Ni and spouse.

(b) Real estate term loans with East West Bank are collateralized by four real properties.

Balloon payments of $ 1.8 million and $ 2.9 million are due at maturity in 2027 and 2029, respectively.

(d) Guaranteed by Han Feng and the Company and also secured by a real property owned by HG Realty, LLC ("HG").

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

(e) Real estate term loan with a principal balance of $ 69.8 million as of December 31, 2021, and a maturity date of January 17, 2030 is secured by assets held by nine subsidiaries of the Company.

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

During the year ended December 31, 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 consolidated statements of operations and comprehensive income (loss), 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 $ 111.4 million as of December 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 $ 0.3 million as of December 31, 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.

(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 December 31, 2022, the Company was in compliance with its covenants.

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

Subsequent to December 31, 2021, on March 31, 2022, the Company amended the JPM Credit Agreement extending the Real Estate Term Loan for 5 years.

The amendment provides for a $ 115.0 million Real Estate Term Loan with a 1-month SOFR plus a credit adjustment of 0.1 % plus 1.875 % per annum.

On March 31, 2022, the Company amended the JPM Credit Agreement extending the Real Estate Term Loan for five years .

The amendment provides for an increase in the Real Estate 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 future maturities of long-term debt as of December 31, 2022 are as follows:

3 unchanged sentences

Total $ 121,709

NOTE 12 - LEASES

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

Operating and finance lease assets and lease liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term.

Operating lease expense is recognized on a straight-line basis over the lease term.

Variable lease costs were insignificant in the years ended December 31, 2021, 2020 and 2019.

Operating Leases

The components of lease expense were as follows:

Year Ended December 31,

($ in thousands) 2021 2020 2019

(As Restated) (As Restated)

Operating lease cost $ 967 $ 785 $ 1,287

Short-term lease cost $ 1,699 $ 1,424 $ 325

Weighted Average Remaining Lease Term (Months)

Operating leases 56 40 52

Weighted Average Discount Rate

Operating leases 3.9 % 5.6 % 3.4 %

Year Ended December 31,

(In thousands) 2021 2020 2019

(As Restated) (As Restated)

Operating cash flows from operating leases $ 822 $ 799 $ 1,332

Finance Leases

The components of lease expense were as follows:

Year Ended December 31,

(In thousands) 2021 2020 2019

Finance leases cost:

(As Restated) (As Restated)

Amortization of ROU assets $ 2,416 $ 1,978 $ 560

Interest on lease liabilities 820 492 196

Total finance leases cost $ 3,236 $ 2,470 $ 756

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

Year Ended December 31,

(In thousands) 2021 2020 2019

(As Restated) (As Restated)

Operating cash flows from finance leases $ 701 $ 492 $ 196

Supplemental balance sheet information related to leases was as follows:

($ in thousands) December 31, 2021 December 31, 2020

Finance leases (As Restated)

Property and equipment, at cost $ 18,412 $ 9,540

Accumulated depreciation ( 5,127 ) ( 2,739 )

Property and equipment, net $ 13,285 $ 6,801

Weighted Average Remaining Lease Term (Months)

Finance leases 215 45

Weighted Average Discount Rate

Finance leases 5.8 % 6.5 %

Maturities of lease liabilities were as follows:

Operating Leases

(In thousands) Related Party Third Party Total Finance

Year Ending December 31,

2022 $ 303 $ 2,827 $ 3,130 $ 3,031

2023 312 2,621 2,933 2,457

2024 321 2,300 2,621 1,714

2025 331 2,207 2,538 1,080

2026 — 2,070 2,070 739

Thereafter — — — 17,230

Total Lease Payments 1,267 12,025 13,292 26,251

Imputed Interest ( 90 ) ( 1,469 ) ( 1,559 ) ( 12,301 )

Total $ 1,177 $ 10,556 $ 11,733 $ 13,950

On December 14, 2021, the Company signed an office lease in City of Industry, California effective January 1, 2022 consisting of approximately 5,700 square feet and payments totaling $ 0.2 million per year with a term of five years .

On July 2, 2018, AnHeart, a former wholly-owned subsidiary of the Company, entered into two separate leases for two properties located in Manhattan, New York, at 273 Fifth Avenue and 275 Fifth Avenue, for 30 years and 15 years, respectively.

AnHeart is obligated to pay all costs associated with the properties, including taxes, insurance, utilities, maintenance and repairs.

The Company provided a corporate guaranty for all rent and related costs of the leases, including costs associated with the planned construction of a two-story structure at 273 Fifth Avenue and rehabilitation of the building at 275 Fifth Avenue.

The Company originally entered into the leases with the purpose of expanding its product lines to Chinese herbal supplements, and to utilize the sites to develop into a central location for such products.

The Company subsequently decided to cease this business expansion in early 2019.

On February 23, 2019, the Company executed an agreement to divest all of its ownership interest in AnHeart, however, the divestment did not release the Company’s guaranty of AnHeart’s obligations or liabilities under the original lease agreements.

Under the terms of the sale of AnHeart stock, and in consideration of the Company’s ongoing guaranty of AnHeart’s performance of the lease obligations, AnHeart granted to the Company a security interest in all AnHeart assets, together with a covenant that the Company will be assigned the leases to be exercised if AnHeart defaults on the original lease agreements.

In addition, AnHeart tendered an unconditional guaranty of all AnHeart liabilities arising from the leases, in favor of the Company, executed by Minsheng Pharmaceutical Group Company, Ltd.

(“Minsheng”), a Chinese manufacturer and distributor of herbal medicines.

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 Lease Amendment were negotiated in light of the Company’s guarantee obligations as guarantor under the Lease Agreement.

The Company agreed to observe all the covenants and conditions of the Lease Agreement, as amended, including the payment of all rents due.

Under the terms of the 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.

Subsequent to December 31, 2021, on January 17, 2022, the Company received notice that AnHeart had defaulted on its obligations as tenant under the lease for 275 Fifth Avenue.

On February 25, 2022, the Company instituted a legal action to pursue legal remedies against AnHeart and Minsheng.

In accordance with ASC 460, Guarantees , the Company has determined that its maximum exposure resulting from the 275 Fifth Avenue lease guarantee includes approximately $ 8.0 million of future minimum lease payments plus potential additional payments to satisfy maintenance, property tax and insurance requirements under the leases with a remaining term of approximately 12 years .

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

Subsequent to December 31, 2021, the Company recorded a one-time lease guarantee expense and liability of $ 5.9 million using a discount rate of 4.55 %.

Credit Facility

On November 4, 2019, the Company entered into a credit agreement with JPMorgan Chase Bank, NA.

(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 December 30, 2021, the Company entered into the Consent, Waiver, Joinder and Amendment No.

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

The Second Amended Credit Agreement, as amended, provided for (i) a $ 100.0 million asset-secured revolving credit facility maturing on November 4, 2022 (the “Revolving Facility”), (ii) mortgage-secured term loan of $ 75.6 million, (the “Term Loan”), and (iii) amendment in 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.

On the same day, the Company utilized an additional $ 33.3 million drawdown from the Revolving Facility to fund the Great Wall Acquisition.

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.

The amendment provides for a $ 100.0 million asset-secured revolving credit facility with a one-month SOFR plus a credit adjustment of 0.1 % plus 1.375 % per annum.

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

During the year ended December 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 December 31, 2022 was $ 53.1 million.

Note 12 - Earnings (Loss) 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 21,288 potential common shares related to total shareholder return performance-based restricted stock units that were excluded from the calculation of diluted EPS for the year ended December 31, 2021 because their effect would have been anti-dilutive.

There were no anti-dilutive potential common shares for the years ended December 31, 2020 and 2019 .

There were 44,260 and no potential common shares related to performance-based restricted stock units that were excluded from the calculation of diluted EPS for the year ended December 31, 2022 and 2021 because their effect would have been anti-dilutive.

There were 62,026 and no anti-dilutive potential common shares for the year ended December 31, 2022 and 2021, respectively, related to restricted stock units .

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

1 unchanged sentence

($ in thousands, except share and per share data) 2022 2021 2020

(As Restated) (As Restated)

Net income (loss) attributable to HF Foods Group Inc.

7 unchanged sentences

Note 13 - Income Taxes

The provision for income taxes of the Company for the years ended December 31, 2021, 2020 and 2019 consists of the following:

The provision (benefit) for income taxes of the Company for the years ended December 31, 2022, 2021 and 2020 consists of the following:

Year Ended December 31,

(In thousands) 2022 2021 2020

(As Restated) (As Restated)

Federal $ 3,620 $ 9,044 $ 1,245

6 unchanged sentences

( 5,012 ) ( 6,870 ) ( 5,916 )

Total provision (benefit) for income taxes $ 4,503 $ ( 4,725 ) $ 2,441

Total (benefit) provision for income taxes $ ( 231 ) $ 4,503 $ ( 4,725 )

The Company's effective income tax rates for the years ended December 31, 2022, 2021 and 2020 were ( 5,148.7 )%, 16.6 % and 1.4 %, respectively.

9 unchanged sentences

Deferred tax assets:

(As Restated)

Allowance for doubtful accounts $ 202 $ 443

Allowance for expected credit losses $ 301 $ 202

Inventories 1,185 644

Federal net operating loss — 102

State net operating loss 38 161

Equity compensation 467 132

Compensation related accruals 1,031 638

Guarantee liability 1,528 —

Fair value change in interest rate swap contracts — 67

7 unchanged sentences

Equity investments ( 649 ) ( 149 )

Fair value change in interest rate swap contracts ( 150 ) —

Total deferred tax liabilities ( 45,850 ) ( 47,388 )

3 unchanged sentences

2022 2021 2020

(As Restated) (As Restated)

Federal statutory tax rate (21%) 21.0 % 21.0 % 21.0 %

1 unchanged sentence

Impact of goodwill impairment loss – permanent difference — % — % ( 20.5 ) %

U.S permanent difference 1.9 % — % — %

Rate difference due to change in state filing method ( 13.7 ) % — % — %

FIN 48 liability 0.6 % — % 3.6 %

U.S permanent differences 207.1 % 1.9 % — %

Noncontrolling interest 3,164.6 % — % — %

Rate change ( 2,566.3 ) % ( 13.7 ) % — %

Uncertain tax positions ( 10,573.0 ) % 0.6 % — %

Other 634.7 % 1.0 % 0.2 %

Effective tax rate 16.6 % 1.4 % 30.8 %

Income tax (benefit) provision ( 5,148.7 ) % 16.6 % 1.4 %

The Company has no federal net operating loss ("NOL") carryovers and $ 0.8 million state NOL carryovers as of December 31, 2022.

Approximately $ 0.2 million of state NOL carryovers will expire in 2033, and $ 0.1 million of state NOL carryovers will expire in 2040, and $ 1.5 million state NOL carryovers will expire in 2041.

The rest of the state NOL carryovers can be carried forward indefinitely.

The Company has approximately $ 1.5 million of California NOL carryovers generated in prior years.

Due to California’s suspension of NOL carryover deduction for certain taxpayers, the Company cannot deduct NOL carryover in this period.

State NOL carryovers can be carried forward indefinitely.

Approximately $ 2.0 million of total state NOL carryovers were utilized in the year ended December 31, 2022.

Unrecognized Tax Benefits

Year Ended December 31,

2021 2020 2019

(As Restated) (As Restated)

(In thousands) 2022 2021 2020

Total unrecognized tax benefits on January 1, $ 752 $ 752 $ 646

Decrease related to positions taken on items from prior years ( 402 ) — —

Increase related to positions taken on items from prior years — — —

Increase related to positions taken in the current year — — 106

Settlement of uncertain positions with tax authorities — — —

Total unrecognized tax benefits on December 31, $ 350 $ 752 $ 752

1 unchanged sentence

The total amount of unrecognized tax benefits that would affect the effective tax rate if recognized is $ 0.4 million, $ 0.8 million and $ 0.8 million as of December 31, 2022, 2021 and 2020, respectively.

Interest and penalty related to unrecognized tax benefits are reported in income tax expense, in the amount of $ 0.2 million as of December 31, 2021.

Due to the statute of limitations expiring, the unrecognized tax liability for the tax year ended December 31, 2018 was reversed, which was recorded in income tax (benefit) provision on the consolidated financial statements, in the amounts of $ 0.4 million as of December 31, 2022.

As of December 31, 2022 and 2021, the Company had accrued penalties of $ 50,000 and $ 93,000 , respectively and accrued interest of $ 34,000 and $ 62,000 , respectively.

During the year ended December 31, 2022, the Company reversed accrued penalties and accrued interest of $ 43,000 and $ 28,000 , respectively.

The Company recognized the reversal of interest accrued related to unrecognized tax benefits and penalties as income tax benefit.

The Company is subject to taxation in the United States and various states.

9 unchanged sentences

Ni is a principal holder of the Company's securities.

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

North Carolina Good Taste Noodle, Inc.

("NC Noodle") is a related party due to Mr.

Jian Ming Ni's, a former Chief Financial Officer of the Company, continued ownership interest in NC Noodle.

Revolution Industry, UGO and BRGR were also considered Unconsolidated VIEs as discussed further in Note 3 - Variable Interest Entities.

The related party transactions as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 are identified as follows:

Related Party Sales and Purchases Transactions

Purchases - related parties

Related Party Sales, Purchases, and Lease Agreements

Below is a summary of purchases of goods and services from related parties recorded for the years ended December 31, 2022 2021, and 2020, respectively:

1 unchanged sentence

(In thousands) Nature 2022 2021 2020

(As Restated) (As Restated)

(a) Allstate Trading Company, Inc.

5 unchanged sentences

(formerly as Enson Group, LLC) Trade — 128 143

(a) Enson Seafood GA, Inc.

(formerly “GA-GW Seafood, Inc.”) Trade — — 182

(d) First Choice Seafood, Inc.

27 unchanged sentences

Ni disposed of his equity interest on September 29, 2020.

Purchases for the year ended December 31, 2021 were $ 0.6 million.

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

11 unchanged sentences

Anthony Zhang, one of Mr.

Zhang's family member, owns an equity interest in this entity.

Zhang's family members, owns an equity interest in this entity.

Services rendered by Hanfeng (Fujian) Information Technology Co.

2 unchanged sentences

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 years ended December 31, 2022, 2021 and 2020, respectively:

1 unchanged sentence

(In thousands) 2022 2021 2020

(As Restated) (As Restated)

(a) ABC Food Trading, LLC $ 3,949 $ 2,642 $ 1,871

(b) Asahi 704 465 71

(b) Asahi Food, Inc.

9 unchanged sentences

(e) Heng Feng Food Services, Inc.

163 669 1,602

(e) N&F Logistics, Inc.

531 1,027 2,365

Others — 13 116

12 unchanged sentences

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

Lease Agreements - Related Parties

Lease Agreements

The Company leases various facilities to related parties.

The Company leased a facility to NC Noodle under an operating lease agreement expiring in 2024.

Rental income for the years ended December 31, 2021, 2020 and 2019 was $ 42,000 , $ 46,000 and $ 46,000 , respectively, which is included in other income in the consolidated statements of operations and comprehensive income (loss).

The lease agreement was terminated in connection with the sale of the facility on November 3, 2021.

The building and related land was sold to NC Noodle for $ 0.8 million and a gain of $ 0.5 million.

Rental income for the years ended December 31, 2021 and 2020 was $ 42,000 and $ 46,000 , respectively, which is included in other income in the consolidated statements of operations and comprehensive income (loss).

The Company leased a facility to UGO USA Inc.

3 unchanged sentences

Jian Ming Ni, the Company's former Chief Financial Officer.

Rental income for the years ended December 31, 2021 and 2020 was $ 50,000 and $ 25,000 , respectively, which is included in other income in the consolidated statements of operations and comprehensive income (loss).

The lease agreement was terminated in connection with the sale of the facility on November 3, 2021.

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

The Company leased a warehouse to Enson Seafood GA Inc.

1 unchanged sentence

Rental income for the years ended December 31, 2022, 2021 and 2020 was $ 0.2 million, $ 0.5 million and $ 0.5 million, respectively, which is included in other income in the consolidated statements of operations and comprehensive income (loss).

Subsequent to December 31, 2021, on May 18, 2022, the Company sold the

warehouse to Enson Seafood GA Inc., a related party, 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.

On May 18, 2022, the Company sold the warehouse to Enson Seafood GA Inc., a

related party, 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.

The Company leased a production area to Revolution Industry, LLC under a $ 3,000 month-to-month lease agreement.

Rental income recorded for the years ended December 31, 2021, 2020 and 2019 was $ 6,000 , $ 39,000 and $ 33,000 , respectively, which is included in other income in the consolidated statements of operations and comprehensive income (loss).

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

Rental income recorded for the years ended December 31, 2021 and 2020 was $ 6,000 and $ 39,000 , which is included in other income in the consolidated statements of operations and comprehensive income (loss).

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

2 unchanged sentences

Rent incurred related to the BRGR related parties from January 1, 2020 to January 16, 2020 was $ 188,000 , which is included in other income in the consolidated statements of operations and comprehensive income (loss).

Rent incurred to the BRGR related parties was $ 0.8 million for the year ended on December 31, 2019.

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

under an operating lease agreement expired on December 31, 2020.

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

Rent incurred was $ 310,000 , $ 120,000 and $ 120,000 for the years ended December 31, 2021, 2020 and 2019, respectively, which is included in Distribution, selling and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

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

Rent incurred was $ 0.3 million, $ 0.3 million and $ 0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, which is included in Distribution, selling and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

Related Party Balances

2 unchanged sentences

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

(As Restated)

(a) ABC Food Trading, LLC $ — $ 76

(b) Asahi 72 69

(b) Asahi Food, Inc.

3 unchanged sentences

(d) Heng Feng Food Services, Inc.

(d) N&F Logistics, Inc.

(f) North Carolina Good Taste Noodle, Inc.

10 unchanged sentences

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 December 31, 2021 and December 31, 2020.

The Company has reserved for 80 % of the accounts receivable for Enson Seafood GA, Inc, all other accounts receivable from these related parties are current and considered fully collectible.

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

Accounts Payable - Related Parties

2 unchanged sentences

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

(As Restated)

(a) Best Food Services, LLC $ 729 $ 699

1 unchanged sentence

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

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

(b) Heng Feng Food Services, Inc.

(e) North Carolina Good Taste Noodle, Inc.

(b) UGO USA, Inc.

(d) North Carolina Good Taste Noodle, Inc.

Total $ 1,529 $ 1,941

5 unchanged sentences

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

Ni previously owned an equity interest in this entity.

Ni disposed of his equity interest on September 29, 2020.

Accounts payable as of December 31, 2021 was $ 0.2 million.

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

Advances to suppliers - related parties

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 December 31, 2021 and December 31, 2020, respectively:

(In thousands) December 31, 2021 December 31, 2020

(a) Ocean Pacific Seafood Group, Inc.

(b) Revolution Industry, LLC — 190

Total $ — $ 197

_______________

Ni owns an equity interest in this entity.

(b) Raymond Ni, one of Mr.

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

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

Han Feng has acquired substantially all of the operating and held for use assets for $ 0.3 million plus the original wholesale purchase value of all verified, useable cabbage and egg roll mix inventory of RIL.

Advances due from Revolution at the time of transaction were an offset to the purchase price paid 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

3 unchanged sentences

The Promissory Note has no requirement to make principal repayments until maturity and there is no prepayment penalty should the Company elect to prepay the principal, in part or in full, prior to maturity, subject to meeting certain repayment provisions as defined in the JPM Credit Agreement.

As of December 31, 2021 and 2020, the outstanding balance was $ 4.5 million and $ 7.0 million, respectively, and there was no accrued interest payable.

During the year ended December 31, 2022, the Company paid the remaining $ 4.5 million principal balance of this related party promissory note payable.

As of December 31, 2022 and 2021, the outstanding balance was nil and $ 4.5 million, respectively, and there was no accrued interest payable.

Principal and interest payments were $ 4.6 million and $ 2.9 million for the years ended December 31, 2022 and 2021, respectively.

Subsequent to December 31, 2021, during the three months ended June 30, 2022, the Company paid the remaining $ 4.5 million of its related party promissory note payable.

Notes Receivable - Related Parties and Other

20 unchanged sentences

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

Ni determined and agreed that the 250-day VWAP immediately preceding September 30, 2020 was $ 10.59 , and consequently, 69,719 of the Escrow Shares were transferred to and recorded as treasury stock by the Company, and the remaining 20,163 Escrow Shares were returned to Mr.

Ni determined and agreed that the 250-day VWAP immediately preceding September 30, 2020 was $ 10.59 , and consequently, 69,719 of the

Escrow Shares were transferred to and recorded as treasury stock by the Company, and the remaining 20,163 Escrow Shares were returned to Mr.

Following this event, the balance due from Feilong to the Company was considered fully settled.

6 unchanged sentences

The Company began issuing awards under the 2018 Incentive Plan in February 2021.

As of December 31, 2021, the Company had 352,920 time-based vesting restricted stock units (“RSUs”) outstanding, 143,278 performance-based restricted stock units (“PSUs”) outstanding, and 2,503,802 shares remaining available for future awards under the 2018 Incentive Plan.

As of December 31, 2022, the Company had 598,325 time-based vesting restricted stock units (“RSUs”) unvested, 382,662 performance-based restricted stock units (“PSUs”) unvested, 162,510 shares of common stock vested and 1,856,503 shares remaining available for future awards under the 2018 Incentive Plan.

RSUs granted to employees vest over time based on continued service (vesting over a period between one to three years in equal installments).

PSUs granted to employees vest based on (i) the attainment of certain financial metrics, as defined by the Company's compensation committee (“Financial PSUs”) and (ii) total shareholder return of the Company’s common stock (“TSR PSUs”).

Both types of PSUs vest over three equal installments beginning from April 1, 2022 to April 1, 2024 based on the performance metrics established for each year and also require continued service for vesting.

PSUs granted to employees vest based on (i) the attainment of certain financial metrics, as defined by the Company's compensation committee (“Financial PSUs”) and (ii) for the 2021 grants, total shareholder return of the Company’s common stock (“TSR PSUs”).

Both types of PSUs vest over three years in equal installments based on the performance metrics established for each year and also require continued service for vesting.

A summary of RSU and PSU activity for the year ended December 31, 2022 is as follows:

3 unchanged sentences

Forfeited ( 36,322 ) 6.42

Vested ( 142,659 ) 6.09

Unvested RSUs at December 31, 2022 598,325 5.39

3 unchanged sentences

Forfeited ( 44,028 ) 5.72

Vested ( 19,851 ) 7.39

Unvested PSUs at December 31, 2022 382,662 4.95

3 unchanged sentences

The fair value of the TSR PSUs are determined using a Monte Carlo simulation model.

The assumptions used to estimate the fair value of the TSR PSUs granted during the year ended December 31, 2021 and valued under the Monte Carlo simulation model were as follows:

No TSR PSUs were granted during the year ended December 31, 2022.

The assumptions used to estimate the fair value of the TSR PSUs granted during the years ended December 31, 2021 and valued under the Monte Carlo simulation model were as follows:

2021 PSU Grants

4 unchanged sentences

62.08 % - 65.74 %

(1) Expected volatility is based on a 50/50 blending of (i) the average historical volatility of a select group of industry peers with a look-back period equal to the expected term, and (ii) the historical volatility of the Company with a look-back period of 1.17 years, the time from the valuation date to the date six months after the completion of the merger with B&R Global, using daily stock prices.

_______________

(1) Expected volatility is based on a 50/50 blending of (i) the average historical volatility of a select group of industry peers with a look-back period equal to the expected term, and (ii) the historical volatility of the Company with a look-back period of 0.75 years - 1.17 years, the time from the valuation date to the date six months after the completion of the merger with B&R Global, using daily stock prices.

The expected volatility of peer companies was 54.96 % – 63.45 %.

5 unchanged sentences

Stock-based compensation expense is included in distribution, selling and administrative expenses in the Company's consolidated statements of operations and comprehensive income (loss).

The components of stock-based compensation expense for the year ended December 31, 2021 were as follows:

(In thousands) Year Ended December 31, 2021

The components of stock-based compensation expense for the years ended December 31, 2022 and 2021 were as follows:

Year Ended December 31,

(In thousands) 2022 2021

Stock-based compensation (RSUs) expense $ 897 $ 405

2 unchanged sentences

Tax benefit of stock-based compensation expense $ 366 $ 132

For the years ended December 31, 2020 and 2019 there was no stock-based compensation expense.

For the year ended December 31, 2020, there was no stock-based compensation expense.

As of December 31, 2022, there was $ 4.2 million of total unrecognized compensation cost related to all non-vested outstanding RSUs and PSUs outstanding under 2018 Incentive Plan, with a weighted average remaining service period of 2.8 years.

6 unchanged sentences

401(k) Plan participants vest in matching contributions received from the Company at the rate of 20 % per year for each full year of service starting from their second year of service, such that the participants become 100 % vested after six years of service.

For the years ended December 31, 2021 and 2020, the Company expensed $ 240,000 and $ 25,000 , respectively.

There was no 401(k) plan implemented in 2019.

For the years ended December 31, 2022, 2021 and 2020, the Company expensed $ 432,000 , $ 240,000 and $ 25,000 , respectively, and were recorded in distribution, selling and administrative expenses.

Note 17 - Commitments and Contingencies

4 unchanged sentences

If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material.

The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available.

Adverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against us that could adversely affect our ability to conduct our business.

There also exists the possibility of a material adverse effect on our financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

As previously disclosed, in March 2020, an analyst report suggested certain improprieties in the Company’s operations.

directors and officers violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements (the “Class Actions”).

After the second putative stockholder class action was filed, the Class Actions were consolidated.

On January 19, 2021, the Company and the director and officer defendants filed a Motion to Dismiss the consolidated Class Actions.

On August 25, 2021, the Court granted the Motion to Dismiss with leave to amend the complaint.

The Plaintiff elected not to amend his complaint, and the Court entered Judgment in favor of the Company and the director and officer defendants on September 20, 2021.

The Court’s decision was not appealed, and the Class Actions are now closed.

The Company was likewise named a nominal defendant and certain of the Company's current and former directors and officers were named as defendants in a shareholder derivative lawsuit filed on June 15, 2020, in the United States District Court for the Central District of California.

The complaint made similar allegations as the Class Actions and alleged violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.

A second virtually identical shareholder derivative lawsuit was filed on August 21, 2020 in the United States District Court for the District of Delaware.

On November 19, 2020, the District Court for the District of Delaware transferred the second-filed derivative lawsuit to the District Court for the Central District of California.

The shareholder derivative lawsuits were stayed pending the deadline to file a notice of appeal in the Class Actions.

On November 5, 2021, the first of the two shareholder derivative lawsuits was dismissed voluntarily without prejudice by the plaintiff.

On November 23, 2021, the second shareholder derivative lawsuit was dismissed by the Court on the basis of the parties’ stipulation of voluntary dismissal without prejudice.

In response to the allegations in the March 2020 analyst report, the Company's Board of Directors appointed the Special Investigation Committee to conduct an internal independent investigation with the assistance of counsel.

On May 20, 2022, the Board of Directors of HF Group received a letter from a purported stockholder, James Bishop (the “Bishop Demand”).

The Company continuously assesses the potential liability related to its pending litigation and revises its estimates when additional information becomes available.

Adverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against the Company that could adversely affect its ability to conduct its business.

There also exists the possibility of a material adverse effect on the Company’s financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

As previously disclosed, in March 2020, an analyst report suggested certain improprieties in the Company’s operations, and in response to those allegations, the Company’s Board of Directors appointed a Special Committee of Independent Directors (the “Special Investigation Committee”) to conduct an internal independent investigation with the assistance of counsel.

These allegations became the subject of two putative stockholder class actions filed on or after March 29, 2020 in the United States District Court for the Central District of California generally alleging the Company and certain of its current and former directors and officers violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements (the “Class Actions”).

These Class Actions have since been dismissed and are now closed.

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 Investigation Committee and the Company are cooperating with the SEC.

On May 20, 2022, the Board of Directors of HF Group received a letter from a stockholder, James Bishop (the “Bishop Demand”).

The Bishop Demand alleges that certain current and former officers and directors of HF Group engaged in misconduct and breached their fiduciary duties, and demands that HF Group investigate the allegations and, if warranted, assert claims against those current or former officers and directors.

Many of the allegations contained in the Bishop Demand were the subject of a shareholder derivative action that Bishop filed in August 2020 (the “Bishop Derivative Action”).

On November 24, 2021, after the United States District Court for the Central District of California dismissed with prejudice a related securities class action, captioned Mendoza v.

HF Foods Group Inc.

2:20-cv-02929 (C.D.

Cal.), the Bishop Derivative Action was voluntarily dismissed without prejudice.

Many of the allegations contained in the Bishop Demand were the subject of the Class Actions.

On June 30, 2022, the Board of Directors of HF Group resolved to form a special committee (the “Special Litigation Committee”) comprised of independent directors and advised by counsel to analyze and evaluate the allegations in the Bishop Demand in order to determine whether the Company should assert any claims against the current or former officers and directors.

2 unchanged sentences

On December 20, 2022, Bishop and the Company filed a stipulation to extend the stay of the Delaware Action for an additional 60 days, which the court granted on December 21, 2022.

On March 15, 2023, the Court of Chancery entered an order approving a joint stipulation submitted by Bishop and HF Foods to stay the case for an additional 60 days.

The Special Litigation Committee is in the process of analyzing and evaluating the claims alleged in the Bishop Demand and Delaware Action, and has not determined whether any claims should be asserted or the probability of recovery for such claims.

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 Investigation Committee and the Company are cooperating with the SEC.

While the SEC investigation is ongoing, the Special Investigation Committee has made certain factual findings based on evidence adduced during the investigation and made recommendations to management regarding improvements to Company operations and structure, including but not limited to its dealings with related parties.

While the SEC investigation is ongoing, the Special Investigation Committee has made certain factual findings based on evidence adduced during its investigation, and made recommendations to management regarding improvements to Company operations and structure, including but not limited to its dealings with related parties.

The Company is working to implement those improvements.

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

1 unchanged sentence

Note 18 - Subsequent Events

See Note 7 - Acquisitions , regarding the Sealand Acquisition, Note 12 - Leases , regarding the Company's guarantee for the lease agreement for 275 Fifth Avenue, Note 10 - Line of Credit and Note 11 - Long-Term Debt , regarding the amendment of the Company's JPM Credit Agreement, effective March 31, 2022, and Note 15 - Related Party Transactions , regarding the related party promissory note payable as well as the Company's sale of a warehouse that was leased to a related party for subsequent events.

NOTE 20 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The tables below present unaudited quarterly financial information and the footnotes correspond to the error descriptions in Note 1 - Organization, Business Description and Restatement of Previously Issued Consolidated Financial Statements, except for the following:

The Company identified an error related to the timing and amount of stock-based compensation for restricted stock awards issued during 2021, impacting the quarterly periods within 2021.

During the preparation of the September 30, 2021 financial statements, the Company identified errors in its accounting for the January 21, 2021 lease described in Note 12 – Leases as the 273 Lease Agreement.

In its original accounting, the Company concluded that the lease was an operating lease and used an incorrect discount rate to calculate the right-of-use asset and obligations under operating lease liabilities balances.

The Company subsequently changed the discount rate on the lease and reclassified the lease as a finance lease, as the present value of the future cash flows associated with the lease exceeded substantially all of the fair value of the property.

The Company has adjusted the balances associated with the lease from operating lease right-of-use asset to property and equipment, net and from obligations under operating lease liabilities to obligations under finance leases in the quarterly financial statements for March 31, 2021 and June 30, 2021.

The following tables summarize the effect of the restatements on each affected financial statement line item as of the dates as indicated, impacting the unaudited condensed consolidated balance sheets.

Condensed Consolidated Balance Sheet

(In thousands) As Previously Reported Reclass Adjustments As Restated

March 31, 2021

Property and equipment, net $ 136,044 $ — $ 5,932 (a)

7,793 (n) $ 149,769

Operating lease right-of-use assets 15,993 — 353 (a)

( 13,676 ) (n) 2,670

TOTAL ASSETS 500,798 — 402 501,200

Accounts payable 36,504 — ( 520 ) (k) 35,984

Accounts payable - related parties 1,473 — 520 (k) 1,993

Current portion of obligations under finance leases 277 — 1,852 (a) 2,129

Current portion of obligations under operating leases 637 — 62 (a)

( 7 ) (n) 692

Accrued expenses and other liabilities 7,362 281 545 (e)

791 (j) 8,979

Obligation under interest rate swap contracts 281 ( 281 ) —

TOTAL CURRENT LIABILITIES 79,253 — 3,243 82,496

Obligations under finance leases, non-current 704 — 4,210 (a)

7,854 (n) 12,768

Obligations under operating leases, non-current 15,460 — 303 (a)

( 13,764 ) (n) 1,999

TOTAL LIABILITIES 234,247 1,846 236,093

Accumulated deficit ( 325,627 ) — ( 142 ) (a)

34 (n) ( 327,071 )

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.

261,957 — ( 1,444 ) 260,513

TOTAL SHAREHOLDERS' EQUITY 266,551 — ( 1,444 ) 265,107

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 500,798 — 402 501,200

Condensed Consolidated Balance Sheet

(In thousands) As Previously Reported Reclass Adjustments As Restated

June 30, 2021

Property and equipment, net $ 134,756 $ — $ 5,514 (a)

7,728 (n) 147,998

Operating lease right-of-use assets 16,326 — 487 (a)

( 13,583 ) (n) 3,230

TOTAL ASSETS 507,221 — 146 507,367

Accounts payable 41,669 — ( 408 ) (k) 41,261

Accounts payable - related parties 1,957 — 408 (k) 2,365

Current portion of obligations under finance leases 273 — 1,868 (a) 2,141

Current portion of obligations under operating leases 610 — 179 (a)

( 31 ) (n) 758

Accrued expenses and other liabilities 5,123 393 700 (e)

830 (j) 7,046

Obligation under interest rate swap contracts 393 ( 393 ) — —

TOTAL CURRENT LIABILITIES 89,959 — 3,546 93,505

Obligations under finance leases, non-current 631 — 3,839 (a)

7,887 (n) 12,357

Obligations under operating leases, non-current 15,931 — 252 (a)

( 13,745 ) (n) 2,438

TOTAL LIABILITIES 242,242 — 1,779 244,021

Accumulated deficit ( 322,031 ) — ( 137 ) (a)

34 (n) ( 323,664 )

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.

261,697 — ( 1,633 ) 260,064

TOTAL SHAREHOLDERS' EQUITY 264,979 — ( 1,633 ) 263,346

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 507,221 — 146 507,367

Condensed Consolidated Balance Sheet

(In thousands) As Previously Reported Reclass Adjustments As Restated

September 30, 2021

Property and equipment, net $ 141,740 $ — $ 5,197 (a) $ 146,937

Operating lease right-of-use assets 2,551 — 459 (a) 3,010

TOTAL ASSETS 514,502 — 5,656 520,158

Accounts payable 42,044 — ( 450 ) (k)

( 180 ) (l) 41,414

Accounts payable - related parties 2,500 — 450 (k) 2,950

Current portion of obligations under finance leases 270 — 1,879 (a) 2,149

Current portion of obligations under operating leases 687 — 112 (a) 799

Accrued expenses and other liabilities 3,841 341 854 (e)

869 (j) 5,905

Obligation under interest rate swap contracts 341 ( 341 ) — —

TOTAL CURRENT LIABILITIES 97,803 — 3,534 101,337

Obligations under finance leases, non-current 8,449 — 3,482 (a) 11,931

Obligations under operating leases, non-current 2,011 — 222 (a) 2,233

TOTAL LIABILITIES 241,170 — 7,238 248,408

Additional paid-in capital 583,929 — 169 (m) 584,098

Accumulated deficit ( 314,179 ) — ( 39 ) (a)

( 169 ) (m) ( 316,110 )

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.

269,755 — ( 1,762 ) 267,993

Noncontrolling interest 3,577 180 (l) 3,757

TOTAL SHAREHOLDERS' EQUITY 273,332 — ( 1,582 ) 271,750

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 514,502 — 5,656 520,158

Condensed Consolidated Balance Sheet

(In thousands) As Previously Reported Adjustments As Restated

March 31, 2020

Property and equipment, net $ 139,941 $ 6,208 (a) $ 146,149

Operating lease right-of-use assets 884 626 (a) 1,510

TOTAL ASSETS 521,412 6,834 528,246

Accounts payable 32,456 ( 375 ) (f) 32,081

Current portion of obligations under finance leases 288 1,518 (a) 1,806

Current portion of obligations under operating leases 333 181 (a) 514

Accrued expenses and other liabilities 2,960 98 (e)

673 (j) 4,106

TOTAL CURRENT LIABILITIES 103,507 2,470 105,977

Obligations under finance leases, non-current 980 4,881 (a) 5,861

Obligations under operating leases, non-current 550 480 (a) 1,030

TOTAL LIABILITIES 253,567 7,831 261,398

Accumulated deficit ( 324,060 ) ( 226 ) (a)

( 98 ) (j) ( 325,057 )

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.

263,524 ( 997 ) 262,527

TOTAL SHAREHOLDERS' EQUITY 267,845 ( 997 ) 266,848

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 521,412 6,834 528,246

Condensed Consolidated Balance Sheet

(In thousands) As Previously Reported Reclass Adjustments As Restated

June 30, 2020

Property and equipment, net $ 139,273 $ — $ 6,159 (a) $ 145,432

Operating lease right-of-use assets 785 — 592 (a) 1,377

TOTAL ASSETS 496,278 — 6,751 503,029

Accounts payable 30,373 — ( 639 ) (f) 29,734

Current portion of obligations under finance leases 293 — 1,604 (a) 1,897

Current portion of obligations under operating leases 300 — 178 (a) 478

Accrued expenses and other liabilities 3,530 1,337 195 (e)

699 (j) 6,400

Obligation under interest rate swap contracts 1,337 ( 1,337 ) — —

TOTAL CURRENT LIABILITIES 85,565 — 2,676 88,241

Obligations under finance leases, non-current 904 — 4,712 (a) 5,616

Obligations under operating leases, non-current 486 — 439 (a) 925

TOTAL LIABILITIES 232,747 — 7,827 240,574

Accumulated deficit ( 328,119 ) — ( 182 ) (a)

( 699 ) (j) ( 329,195 )

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.

259,465 — ( 1,077 ) 258,388

TOTAL SHAREHOLDERS' EQUITY 263,531 — ( 1,077 ) 262,454

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 496,278 — 6,751 503,029

Condensed Consolidated Balance Sheet

(In thousands) As Previously Reported Reclass Adjustments As Restated

September 30, 2020

Property and equipment, net $ 138,107 $ — $ 5,798 (a) $ 143,905

Operating lease right-of-use assets 694 — 554 (a) 1,248

TOTAL ASSETS 489,889 — 6,352 496,241

Accounts payable 33,685 — ( 658 ) (f) 33,027

Current portion of obligations under finance leases 293 — 1,629 (a) 1,922

Current portion of obligations under operating leases 264 — 175 (a) 439

Accrued expenses and other liabilities 5,212 1,357 293 (e)

726 (j) 8,246

Obligation under interest rate swap contracts 1,357 ( 1,357 ) — —

TOTAL CURRENT LIABILITIES 81,974 — 2,823 84,797

Obligations under finance leases, non-current 833 — 4,295 (a) 5,128

Obligations under operating leases, non-current 430 — 399 (a) 829

TOTAL LIABILITIES 226,754 — 7,517 234,271

Accumulated deficit ( 328,743 ) — ( 146 ) (a)

( 726 ) (j) ( 329,908 )

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.

258,841 — ( 1,165 ) 257,676

TOTAL SHAREHOLDERS' EQUITY 263,134 — ( 1,165 ) 261,969

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 489,889 — 6,352 496,241

Restated amounts are computed independently each quarter;

therefore, the sum of the quarterly amounts may not equal the total amount for the respective year due to rounding .

(In thousands) Condensed Consolidated Statement of Income and Comprehensive Income (Loss)

Three Months Ended March 31, 2021 As Previously Reported Adjustments As Restated

Distribution, selling and administrative expenses $ 28,127 $ ( 81 ) (a)

( 107 ) (n) 28,089

INCOME (LOSS) FROM OPERATIONS 1,302 38 1,340

Interest expense ( 742 ) ( 88 ) (a)

( 72 ) (n) ( 902 )

Other income 440 ( 4 ) (h) 436

Total other income (expense), net 1,129 ( 164 ) 965

INCOME (LOSS) BEFORE INCOME TAX 2,431 ( 126 ) 2,305

Income tax provision (benefit) 607 39 (j) 646

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 1,823 ( 165 ) 1,658

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

1,523 ( 165 ) 1,358

(In thousands) Condensed Consolidated Statement of Income and Comprehensive Income (Loss)

Three Months Ended June 30, 2021 As Previously Reported Adjustments As Restated

Distribution, selling and administrative expenses $ 29,904 $ ( 109 ) (a)

( 114 ) (n) $ 29,790

INCOME (LOSS) FROM OPERATIONS 5,230 114 5,344

Interest expense ( 709 ) ( 105 ) (a)

( 114 ) (n) ( 928 )

Other income 473 ( 45 ) (e) 428

Total other income (expense), net ( 348 ) ( 264 ) ( 612 )

INCOME (LOSS) BEFORE INCOME TAX 4,882 ( 150 ) 4,732

Income tax provision (benefit) 1,377 39 (j) 1,416

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 3,505 ( 189 ) 3,316

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

3,596 ( 189 ) 3,407

(In thousands, except per share data) Condensed Consolidated Statement of Income and Comprehensive Income (Loss)

Six Months Ended June 30, 2021 As Previously Reported Adjustments As Restated

Distribution, selling and administrative expenses $ 58,030 $ ( 191 ) (a)

( 220 ) (n) $ 57,879

INCOME (LOSS) FROM OPERATIONS 6,532 151 6,683

Interest expense ( 1,451 ) ( 193 ) (a)

( 186 ) (n) ( 1,830 )

Other income 913 ( 49 ) (h) 864

Total other income (expense), net 781 ( 428 ) 353

INCOME (LOSS) BEFORE INCOME TAX 7,313 ( 277 ) 7,036

Income tax provision (benefit) 1,984 78 (j) 2,062

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 5,329 ( 355 ) 4,974

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

5,120 ( 355 ) 4,765

EARNINGS (LOSS) PER COMMON SHARE - BASIC $ 0.10 $ ( 0.01 ) $ 0.09

EARNINGS (LOSS) PER COMMON SHARE - DILUTED $ 0.10 $ ( 0.01 ) $ 0.09

(In thousands) Condensed Consolidated Statement of Income and Comprehensive Income (Loss)

Three Months Ended September 30, 2021 As Previously Reported Adjustments As Restated

Distribution, selling and administrative expenses $ 30,972 $ ( 262 ) (a)

169 (m) $ 31,048

INCOME (LOSS) FROM OPERATIONS 10,940 ( 76 ) 10,864

Interest expense ( 704 ) ( 198 ) (a) ( 902 )

Other income 558 15 (h) 573

Total other income (expense), net ( 94 ) ( 183 ) ( 277 )

INCOME (LOSS) BEFORE INCOME TAX 10,846 ( 259 ) 10,587

Income tax provision (benefit) 2,637 39 (j) 2,676

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 8,209 ( 298 ) 7,911

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

7,852 ( 298 ) 7,554

(In thousands, except per share data) Condensed Consolidated Statement of Income and Comprehensive Income (Loss)

Nine Months Ended September 30, 2021 As Previously Reported Adjustments As Restated

Distribution, selling and administrative expenses $ 89,001 $ ( 673 ) (a)

169 (m) $ 88,927

INCOME (LOSS) FROM OPERATIONS 17,473 74 17,547

Interest expense ( 2,156 ) ( 576 ) (a) ( 2,732 )

Other income 1,470 ( 33 ) (h) 1,437

Total other income (expense), net 685 ( 609 ) 76

INCOME (LOSS) BEFORE INCOME TAX 18,159 ( 536 ) 17,623

Income tax provision (benefit) 4,622 116 (j) 4,738

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 13,537 ( 652 ) 12,885

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

12,971 ( 652 ) 12,319

EARNINGS (LOSS) PER COMMON SHARE - BASIC $ 0.25 $ ( 0.01 ) $ 0.24

EARNINGS (LOSS) PER COMMON SHARE - DILUTED $ 0.25 $ ( 0.01 ) $ 0.24

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Three months ended March 31, 2020 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 141,904 $ ( 262 ) (d) $ 141,642

TOTAL COST OF REVENUE 146,828 ( 262 ) 146,566

GROSS PROFIT 28,975 262 29,237

Distribution, selling and administrative expenses 29,407 ( 90 ) (a)

( 20 ) (h) 29,657

Goodwill impairment loss — 338,191 (g) 338,191

INCOME (LOSS) FROM OPERATIONS ( 432 ) ( 338,179 ) ( 338,611 )

Goodwill impairment loss ( 338,191 ) 338,191 (g) —

Interest expense ( 1,952 ) ( 103 ) (a) ( 2,055 )

Other income 406 ( 20 ) (h)

( 119 ) (c) 267

Total other income (expense), net ( 339,737 ) 337,949 ( 1,788 )

INCOME (LOSS) BEFORE INCOME TAX ( 340,169 ) ( 230 ) ( 340,399 )

Income tax provision (benefit) ( 482 ) 26 (j) ( 456 )

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) ( 339,687 ) ( 256 ) ( 339,943 )

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

( 339,884 ) ( 256 ) ( 340,140 )

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Three months ended June 30, 2020 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 80,707 $ ( 192 ) (d) $ 80,515

TOTAL COST OF REVENUE 83,947 ( 192 ) 83,755

GROSS PROFIT 20,613 192 20,805

Distribution, selling and administrative expenses 25,093 ( 146 ) (a)

( 20 ) (h) 25,217

INCOME (LOSS) FROM OPERATIONS ( 4,480 ) 68 ( 4,412 )

Interest expense ( 325 ) ( 102 ) (a) ( 427 )

Other income 265 ( 20 ) (h) 245

Total other income (expense), net ( 1,324 ) ( 122 ) ( 1,446 )

INCOME (LOSS) BEFORE INCOME TAX ( 5,804 ) ( 54 ) ( 5,858 )

Income tax provision (benefit) ( 1,489 ) 26 (j) ( 1,463 )

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) ( 4,314 ) ( 80 ) ( 4,394 )

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

( 4,059 ) ( 80 ) ( 4,139 )

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Six months ended June 30, 2020 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 222,611 $ ( 454 ) (d) $ 222,157

TOTAL COST OF REVENUE 230,776 ( 454 ) 230,322

GROSS PROFIT 49,588 454 50,042

Distribution, selling and administrative expenses 54,500 ( 236 ) (a)

( 40 ) (h) 54,874

Goodwill impairment loss — 338,191 (g) 338,191

INCOME (LOSS) FROM OPERATIONS ( 4,912 ) ( 338,111 ) ( 343,023 )

Interest expense ( 2,277 ) ( 205 ) (a) ( 2,482 )

Goodwill impairment loss ( 338,191 ) 338,191 (g) —

Other income 670 ( 40 ) (h) 630

Total other income (expense), net ( 341,061 ) 337,946 ( 3,115 )

INCOME (LOSS) BEFORE INCOME TAX ( 345,974 ) ( 165 ) ( 346,139 )

Income tax provision (benefit) ( 1,972 ) 52 (j) ( 1,920 )

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) ( 344,002 ) ( 217 ) ( 344,219 )

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

( 343,944 ) ( 217 ) ( 344,161 )

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Three months ended September 30, 2020 As Previously Reported Adjustments As Restated

Distribution, selling and administrative expenses $ 25,050 $ ( 135 ) (a)

( 4 ) (h) $ 25,009

INCOME (LOSS) FROM OPERATIONS 113 41 154

Interest expense ( 841 ) ( 99 ) (a) ( 940 )

Other income 270 ( 4 ) (h) 266

Total other income (expense), net ( 591 ) ( 103 ) ( 694 )

INCOME (LOSS) BEFORE INCOME TAX ( 478 ) ( 62 ) ( 540 )

Income tax provision (benefit) ( 81 ) 26 (j) ( 55 )

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) ( 397 ) ( 88 ) ( 485 )

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

( 624 ) ( 88 ) ( 712 )

(In thousands, except per share data) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Nine months ended September 30, 2020 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 335,147 $ ( 454 ) (d) $ 334,693

TOTAL COST OF REVENUE 345,531 ( 454 ) 345,077

GROSS PROFIT 74,751 454 75,205

Distribution, selling and administrative expenses 79,550 ( 371 ) (a)

( 44 ) (h) 79,883

Goodwill impairment loss — 338,191 (g) 338,191

INCOME (LOSS) FROM OPERATIONS ( 4,799 ) ( 338,070 ) ( 342,869 )

Interest expense ( 3,118 ) ( 304 ) (a) ( 3,422 )

Goodwill impairment loss ( 338,191 ) 338,191 (g) —

Other income 940 ( 44 ) (h) 896

Total other income (expense), net ( 341,653 ) 337,843 ( 3,810 )

INCOME (LOSS) BEFORE INCOME TAX ( 346,450 ) ( 227 ) ( 346,677 )

Income tax provision (benefit) ( 2,053 ) 78 (j) ( 1,975 )

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) ( 344,399 ) ( 305 ) ( 344,704 )

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

( 344,568 ) ( 305 ) ( 344,873 )

EARNINGS (LOSS) PER COMMON SHARE - BASIC $ ( 6.61 ) $ ( 0.01 ) $ ( 6.62 )

EARNINGS (LOSS) PER COMMON SHARE - DILUTED $ ( 6.61 ) $ ( 0.01 ) $ ( 6.62 )

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Three months ended March 31, 2019 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 57,725 $ ( 242 ) (d) $ 57,483

TOTAL COST OF REVENUE 62,094 ( 242 ) 61,852

GROSS PROFIT 12,707 242 12,949

Distribution, selling and administrative expenses 10,365 493 (a)

( 40 ) (h) 11,060

INCOME (LOSS) FROM OPERATIONS 2,342 ( 453 ) 1,889

Interest expenses ( 337 ) ( 1 ) (a) ( 338 )

Other income 285 ( 40 ) (h) 245

Total other income (expense), net 100 ( 41 ) 59

INCOME (LOSS) BEFORE INCOME TAX 2,442 ( 494 ) 1,948

Income tax provision (benefit) 648 61 (j) 709

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 1,794 ( 555 ) 1,239

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

1,673 ( 555 ) 1,118

EARNINGS (LOSS) PER COMMON SHARE - BASIC 0.08 ( 0.03 ) 0.05

EARNINGS (LOSS) PER COMMON SHARE - DILUTED 0.08 ( 0.03 ) 0.05

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Three months ended June 30, 2019 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 58,310 $ ( 291 ) (d) $ 58,019

TOTAL COST OF REVENUE 62,206 ( 291 ) 61,915

GROSS PROFIT 12,512 291 12,803

Distribution, selling and administrative expenses 11,094 ( 74 ) (a)

( 1 ) (h) 11,310

INCOME (LOSS) FROM OPERATIONS 1,418 75 1,493

Interest expenses ( 388 ) ( 5 ) (a) ( 393 )

Other income 339 ( 1 ) (h) 338

Total other income (expense), net 104 ( 6 ) 98

INCOME (LOSS) BEFORE INCOME TAX 1,522 69 1,591

Income tax provision (benefit) 461 61 (j) 522

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 1,061 8 1,069

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

1,023 8 1,031

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Six months ended June 30, 2019 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 116,036 $ ( 533 ) (d) $ 115,503

TOTAL COST OF REVENUE 124,300 ( 533 ) 123,767

GROSS PROFIT 25,219 533 25,752

Distribution, selling and administrative expenses 21,459 419 (a)

( 41 ) (h) 22,370

INCOME (LOSS) FROM OPERATIONS 3,760 ( 378 ) 3,382

Interest expenses ( 725 ) ( 6 ) (a) ( 731 )

Other income 624 ( 41 ) (h) 583

Total other income (expense), net 203 ( 47 ) 156

INCOME (LOSS) BEFORE INCOME TAX 3,963 ( 425 ) 3,538

Income tax provision (benefit) 1,108 122 (j) 1,230

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 2,855 ( 547 ) 2,308

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

2,696 ( 547 ) 2,149

EARNINGS (LOSS) PER COMMON SHARE - BASIC 0.12 ( 0.02 ) 0.10

EARNINGS (LOSS) PER COMMON SHARE - DILUTED 0.12 ( 0.02 ) 0.10

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)

Three months ended September 30, 2019 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 58,598 $ ( 253 ) (d) $ 58,345

TOTAL COST OF REVENUE 63,506 ( 253 ) 63,253

GROSS PROFIT 12,193 253 12,446

Distribution, selling and administrative expenses 9,970 ( 106 ) (a)

( 28 ) (h) 10,089

INCOME (LOSS) FROM OPERATIONS 2,223 134 2,357

Interest expenses ( 482 ) ( 7 ) (a) ( 489 )

Other income 282 ( 28 ) (h) 254

Total other income (expense), net ( 86 ) ( 35 ) ( 121 )

INCOME (LOSS) BEFORE INCOME TAX 2,137 99 2,236

Income tax provision (benefit) 607 61 (j) 668

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 1,529 39 1,568

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

1,348 39 1,387

(In thousands) Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) (Unaudited)

Nine months ended September 30, 2019 As Previously Reported Adjustments As Restated

Cost of revenue - third parties $ 174,634 $ ( 786 ) (d) $ 173,848

TOTAL COST OF REVENUE 187,807 ( 786 ) 187,021

GROSS PROFIT 37,412 786 38,198

Distribution, selling and administrative expenses 31,429 313 (a)

( 69 ) (h) 32,459

INCOME (LOSS) FROM OPERATIONS 5,983 ( 244 ) 5,739

Interest expenses ( 1,206 ) ( 13 ) (a) ( 1,219 )

Other income 905 ( 69 ) (h) 836

Total other income (expense), net 118 ( 82 ) 36

INCOME (LOSS) BEFORE INCOME TAX 6,101 ( 326 ) 5,775

Income tax provision (benefit) 1,716 183 (j) 1,899

NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS) 4,385 ( 509 ) 3,876

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

4,045 ( 509 ) 3,536

EARNINGS (LOSS) PER COMMON SHARE - BASIC 0.18 ( 0.02 ) 0.16

EARNINGS (LOSS) PER COMMON SHARE - DILUTED 0.18 ( 0.02 ) 0.16

The following tables summarize the effect of the restatements on each affected financial statement line item for the periods ended as indicated, impacting the condensed consolidated statements of cash flows.

Restated amounts are computed independently each quarter;

therefore, the sum of the quarterly amounts may not equal the total amount for the respective year due to rounding.

(In thousands) Condensed Consolidated Statement of Cash Flows

Three Months Ended March 31, 2021 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 10,568 $ 435 (a) $ 11,003

Net cash used in investing activities ( 440 ) — ( 440 )

Net cash used in financing activities ( 8,454 ) ( 435 ) (a) ( 8,889 )

(In thousands) Condensed Consolidated Statement of Cash Flows

Six Months Ended June 30, 2021 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 13,270 $ 889 (a) $ 14,159

Net cash used in investing activities ( 5,595 ) — ( 5,595 )

Net cash used in financing activities ( 3,831 ) ( 889 ) (a) ( 4,720 )

(In thousands) Condensed Consolidated Statement of Cash Flows

Nine Months Ended September 30, 2021 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 10,158 $ 1,175 (a) $ 11,333

Net cash used in investing activities ( 6,444 ) — ( 6,444 )

Net cash provided by financing activities 2,248 ( 1,175 ) (a) 1,073

(In thousands) Condensed Consolidated Statement of Cash Flows

Three Months Ended March 31, 2020 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 18,628 $ 315 (a) $ 18,943

Net cash used in investing activities ( 94,073 ) — ( 94,073 )

Net cash provided by financing activities 73,598 ( 315 ) (a) 73,283

(In thousands) Condensed Consolidated Statement of Cash Flows

Six Months Ended June 30, 2020 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 32,418 $ 756 (a) $ 33,174

Net cash used in investing activities ( 94,123 ) — ( 94,123 )

Net cash provided by financing activities 55,732 ( 756 ) (a) 54,976

(In thousands) Condensed Consolidated Statement of Cash Flows

Nine Months Ended September 30, 2020 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 44,311 $ 1,148 (a) $ 45,459

Net cash used in investing activities ( 94,254 ) — ( 94,254 )

Net cash provided by financing activities 44,585 ( 1,148 ) (a) 43,437

(In thousands) Condensed Consolidated Statement of Cash Flows

Three Months Ended March 31, 2019 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 2,521 $ ( 111 ) (a) $ 2,410

Net cash used in investing activities ( 1,380 ) — ( 1,380 )

Net cash provided by financing activities 267 111 (a) 378

(In thousands) Condensed Consolidated Statement of Cash Flows

Six Months Ended June 30, 2019 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 2,070 $ ( 103 ) (a) $ 1,967

Net cash used in investing activities ( 4,744 ) — ( 4,744 )

Net cash provided by financing activities 4,157 103 (a) 4,260

(In thousands) Condensed Consolidated Statement of Cash Flows

Nine Months Ended September 30, 2019 As Previously Reported Adjustment As Restated

Net cash provided by operating activities $ 443 $ ( 92 ) (a) $ 351

Net cash used in investing activities ( 4,799 ) — ( 4,799 )

Net cash provided by financing activities 5,670 92 (a) 5,762

Restated amounts are computed independently each quarter;

therefore, the sum of the quarterly amounts may not equal the total amount for the respective year due to rounding.

Common Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount

As Previously Reported

Balance at January 1, 2021 51,913,411 $ 5 $ 587,579 $ ( 327,150 ) $ 260,434 $ 4,367 $ 264,801

Net income — — — 1,523 1,523 300 1,823

Distribution to shareholders — — — — — ( 73 ) ( 73 )

Balance at March 31, 2021 51,913,411 5 587,579 ( 325,627 ) 261,957 4,594 266,551

Restatement Impacts

Balance at January 1, 2021 — — — ( 1,279 ) ( 1,279 ) — ( 1,279 )

Net (loss) income — — — ( 165 ) ( 165 ) — ( 165 )

Distribution to shareholders — — — — — — —

Balance at March 31, 2021 — — — ( 1,444 ) ( 1,444 ) — ( 1,444 )

Balance at January 1, 2021 (as restated) 51,913,411 5 587,579 ( 328,429 ) 259,155 4,367 263,522

Net income (as restated) — — — 1,358 1,358 300 1,658

Distribution to shareholders — — — — — ( 73 ) ( 73 )

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

Common Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount

As Previously Reported

Balance at March 31, 2021 51,913,411 $ 5 $ 587,579 $ ( 325,627 ) $ 261,957 $ 4,594 $ 266,551

Net (loss) income — — — 3,596 3,596 ( 91 ) 3,505

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 ( 322,031 ) 261,697 3,282 264,979

Restatement Impacts

Balance at March 31, 2021 — — — ( 1,444 ) ( 1,444 ) — ( 1,444 )

Net (loss) income — — — ( 189 ) ( 189 ) — ( 189 )

Acquisition of noncontrolling interest — — — — — — —

Distribution to shareholders — — — — — — —

Balance at June 30, 2021 — — — ( 1,633 ) ( 1,633 ) — ( 1,633 )

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

Net (loss) income (as restated) — — — 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 (as restated) 51,913,411 $ 5 $ 583,723 $ ( 323,664 ) $ 260,064 $ 3,282 $ 263,346

Common Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount

As Previously Reported

Balance at June 30, 2021 51,913,411 $ 5 $ 583,723 $ ( 322,031 ) $ 261,697 $ 3,282 $ 264,979

Net income — — — 7,852 7,852 357 8,209

Distribution to shareholders — — — — — ( 62 ) ( 62 )

Stock-based compensation — — 206 — 206 — 206

Balance at September 30, 2021 51,913,411 5 583,929 ( 314,179 ) 269,755 3,577 273,332

Restatement Impacts

Balance at June 30, 2021 — — — ( 1,633 ) ( 1,633 ) — ( 1,633 )

Net (loss) income — — — ( 298 ) ( 298 ) — ( 298 )

Distribution to shareholders — — — — — 180 180

Stock-based compensation — — 169 — 169 — 169

Balance at September 30, 2021 — — 169 ( 1,931 ) ( 1,762 ) 180 ( 1,582 )

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

Net income (as restated) — — — 7,554 7,554 357 7,911

Distribution to shareholders — — — — — 118 118

Stock-based compensation — — 375 — 375 — 375

Balance at September 30, 2021 (as restated) 51,913,411 $ 5 $ 584,098 $ ( 316,110 ) $ 267,993 $ 3,757 $ 271,750

Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount Number of

Shares Amount

As Previously Reported

Balance at January 1, 2020 53,050,211 $ 5 ( 905,115 ) $ ( 12,038 ) $ 599,617 $ 15,824 $ 603,408 $ 4,249 $ 607,657

Net (loss) income — — — — — ( 339,884 ) ( 339,884 ) 197 ( 339,687 )

Distribution to shareholders — — — — — — — ( 125 ) ( 125 )

Balance at March 31, 2020 53,050,211 5 ( 905,115 ) ( 12,038 ) 599,617 ( 324,060 ) 263,524 4,321 267,845

Restatement Impacts

Balance at January 1, 2020 — — — — — ( 741 ) ( 741 ) — ( 741 )

Net income (loss) — — — — — ( 256 ) ( 256 ) — ( 256 )

Distribution to shareholders — — — — — — — — —

Balance at March 31, 2020 — — — — — — ( 997 ) ( 997 ) — ( 997 )

Balance at January 1, 2020 (as restated) 53,050,211 5 ( 905,115 ) ( 12,038 ) 599,617 15,083 602,667 4,249 606,916

Net (loss) income — — — — — ( 340,140 ) ( 340,140 ) 197 ( 339,943 )

Distribution to shareholders — — — — — — — ( 125 ) ( 125 )

Balance at March 31, 2020 (as restated) 53,050,211 $ 5 ( 905,115 ) — $ ( 12,038 ) — $ 599,617 $ ( 325,057 ) $ 262,527 $ 4,321 $ 266,848

Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount Number of

Shares Amount

As Previously Reported

Balance at March 31, 2020 53,050,211 $ 5 ( 905,115 ) $ ( 12,038 ) $ 599,617 $ ( 324,060 ) $ 263,524 $ 4,321 $ 267,845

Net loss — — — — — ( 4,059 ) ( 4,059 ) ( 255 ) ( 4,314 )

Distribution to shareholders — — — — — — — — —

Balance at June 30, 2020 53,050,211 5 ( 905,115 ) ( 12,038 ) 599,617 ( 328,119 ) 259,465 4,066 263,531

Restatement Impacts

Balance at March 31, 2020 — — — — — ( 997 ) ( 997 ) — ( 997 )

Net (loss) income — — — — — ( 80 ) ( 80 ) — ( 80 )

Distribution to shareholders — — — — — — — — —

Balance at June 30, 2020 — — — — — ( 1,077 ) ( 1,077 ) — ( 1,077 )

Balance at March 31, 2020 (as restated) 53,050,211 5 ( 905,115 ) ( 12,038 ) 599,617 ( 325,057 ) 262,527 4,321 266,848

Net loss (as restated) — — — — — ( 4,139 ) ( 4,139 ) ( 255 ) ( 4,394 )

Distribution to shareholders — — — — — — — — —

Balance at June 30, 2020 (as restated) 53,050,211 $ 5 ( 905,115 ) $ ( 12,038 ) $ 599,617 $ ( 329,196 ) $ 258,388 $ 4,066 $ 262,454

Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount Number of

Shares Amount

As Previously Reported

Balance at June 30, 2020 53,050,211 $ 5 ( 905,115 ) $ ( 12,038 ) $ 599,617 $ ( 328,119 ) $ 259,465 $ 4,066 $ 263,531

Net (loss) income — — — — — ( 624 ) ( 624 ) 227 ( 397 )

Distribution to shareholders — — — — — — — — —

Balance at September 30, 2020 53,050,211 5 ( 905,115 ) ( 12,038 ) 599,617 ( 328,743 ) 258,841 4,293 263,134

Restatement Impacts

Balance at June 30, 2020 — — — — — ( 1,077 ) ( 1,077 ) — ( 1,077 )

Net (loss) income — — — — — ( 88 ) ( 88 ) — ( 88 )

Distribution to shareholders — — — — — — — — —

Balance at September 30, 2020 — — — — — ( 1,165 ) ( 1,165 ) — ( 1,165 )

Balance at June 30, 2020 (as restated) 53,050,211 5 ( 905,115 ) ( 12,038 ) 599,617 ( 329,196 ) 258,388 4,066 262,454

Net (loss) income — — — — — ( 712 ) ( 712 ) 227 ( 485 )

Distribution to shareholders — — — — — — — — —

Balance at September 30, 2020 (as restated) 53,050,211 $ 5 ( 905,115 ) $ ( 12,038 ) $ 599,617 $ ( 329,908 ) $ 257,676 $ 4,293 $ 261,969

Common Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount

As Previously Reported

Balance at January 1, 2019 22,167,486 $ 2 $ 22,921 $ 10,434 $ 33,357 $ 1,104 $ 34,461

Net income — — — 1,673 1,673 121 1,794

Distribution to shareholders — — — — — — —

Balance at March 31, 2019 22,167,486 2 22,921 12,107 35,030 1,225 36,255

Restatement Impacts

Balance at January 1, 2019 — — — ( 325 ) ( 325 ) — ( 325 )

Net (loss) income — — — ( 555 ) ( 555 ) — ( 555 )

Distribution to shareholders — — — — — — —

Balance at March 31, 2019 — — — ( 880 ) ( 880 ) — ( 880 )

Balance at January 1, 2019 (as restated) 22,167,486 2 22,921 10,109 33,032 1,104 34,136

Net income — — — 1,118 1,118 121 1,239

Distribution to shareholders — — — — — — —

Balance at March 31, 2019 (as restated) 22,167,486 $ 2 $ 22,921 $ 11,227 $ 34,150 $ 1,225 $ 35,375

Common Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount

As Previously Reported

Balance at March 31, 2019 22,167,486 $ 2 $ 22,921 $ 12,107 $ 35,030 $ 1,225 $ 36,255

Net income — — — 1,023 1,023 38 1,061

Distribution to shareholders — — — — — ( 90 ) ( 90 )

Balance at June 30, 2019 22,167,486 2 22,921 13,130 36,053 1,173 37,226

Restatement Impacts

Balance at March 31, 2019 — — — ( 880 ) ( 880 ) — ( 880 )

Net (loss) income — — — 8 8 — 8

Distribution to shareholders — — — — — — —

Balance at June 30, 2019 — — — ( 872 ) ( 872 ) — ( 872 )

Balance at March 31, 2019 (as restated) 22,167,486 2 22,921 11,227 34,150 1,225 35,375

Net income — — — 1,031 1,031 38 1,069

Distribution to shareholders — — — — — ( 90 ) ( 90 )

Balance at June 30, 2019 (as restated) 22,167,486 $ 2 $ 22,921 $ 12,258 $ 35,181 $ 1,173 $ 36,354

Common Stock Treasury Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’

Equity Attributable

to HF Foods Group Inc.

Noncontrolling

Interests Total

Shareholders’

(In thousands, except share data) Number of

Shares Amount Number of

Shares Amount

As Previously Reported

Balance at June 30, 2019 22,167,486 $ 2 — $ — $ 22,921 $ 13,130 $ 36,053 $ 1,173 $ 37,226

Net income — — — — — 1,348 1,348 181 1,529

Exercise of stock options 182,725 — — — — — — — —

Treasury stock — — ( 905,115 ) ( 12,038 ) ( 12,038 ) — ( 24,076 ) — ( 24,076 )

Distribution to shareholders — — — — — — — ( 90 ) ( 90 )

Balance at September 30, 2019 22,350,211 2 ( 905,115 ) ( 12,038 ) 10,883 14,478 13,325 1,264 14,589

Restatement Impacts

Balance at June 30, 2019 — — — — — ( 872 ) ( 872 ) — ( 872 )

Net (loss) income — — — — — 39 39 — 39

Exercise of stock options — — — — — — — — —

Treasury stock — — — — — — — — —

Distribution to shareholders — — — — — — — — —

Balance at September 30, 2019 — — — — — ( 833 ) ( 833 ) — ( 833 )

Balance at June 30, 2019 (as restated) 22,167,486 2 — — 22,921 12,258 35,181 1,173 36,354

Net income — — — — — 1,387 1,387 181 1,568

Exercise of stock options 182,725 — — — — — — — —

Treasury stock — — ( 905,115 ) ( 12,038 ) ( 12,038 ) — ( 24,076 ) — ( 24,076 )

Distribution to shareholders — — — — — — — ( 90 ) ( 90 )

Balance at September 30, 2019 (as restated) 22,350,211 $ 2 ( 905,115 ) — $ ( 12,038 ) — $ 10,883 $ 13,645 $ 12,492 $ 1,264 $ 13,756

The Company entered into an amortizing interest rate swap agreement, with an initial notional amount of $ 120.0 million, intended to hedge against future interest rate increases of certain long-term debt obligations of the Company.

The interest rate swap became effective March 1, 2023 and continues through March 2028.

Pursuant to the agreement, the Company will pay the swap counterparty a fixed rate of 4.11 % in exchange for floating payments based on CME Term SOFR.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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-K

Item 8. Financial Statements and Supplementary Data