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Item 9A. Controls and Procedures

2023-03-31 compared with 2023-01-31 · 82 added, 539 removed, 209 unchanged (75% of the section changed)

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Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal controls over financial reporting for the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.

Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

1 unchanged sentence

Also, projections of any evaluation of the effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2021, our management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “ Internal Control - Integrated Framework” , issued by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission in 2013.

In connection with our review and the audit of our consolidated financial statements for the year ended December 31, 2020, we identified two material weaknesses that were reported previously, which continue to exist as of December 31, 2021.

In addition, there were other material weaknesses identified during 2021 that exist as of December 31, 2021.

As of December 31, 2022, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “ Internal Control - Integrated Framework” , issued by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission in 2013.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2020 and 2021, we identified material weaknesses that were reported previously, which continue to exist as of December 31, 2022.

We did not maintain appropriately designed entity-level controls impacting the (1) control environment, (2) risk assessment procedures, (3) control activities, (4) information and communication, and (5) monitoring activities to prevent or detect material misstatements to the financial statements and assess whether the components of internal control were present and functioning properly.

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• Information Technology (IT) General Controls – We did not design and maintain effective information technology general controls over logical access and program change management for key IT systems.

Specifically, access to certain key IT systems was not restricted between business and IT administration access privileges, resulting in

improper segregation of duties for certain business processes.

Specifically, access to certain key IT systems was not restricted between business and IT administration access privileges, resulting in improper segregation of duties for certain business processes.

Additionally, management did not design effective controls to protect data security and maintain business sustainability.

• As a result of the material weakness related to IT general controls, we did not properly design or maintain effective controls over the relevance and quality of internal data used in the financial reporting process.

• We did not properly design or maintain effective controls over complex accounting, significant management estimates, and new accounting pronouncements, including but not limited to leases, related parties and variable interest entities.

• We did not properly design or maintain effective controls over complex accounting, significant management estimates, and new accounting pronouncements, including but not limited to business combinations, impairment of long-lived assets, goodwill impairment, leases and income taxes.

• We did not properly design or maintain effective controls over the financial reporting process to enable timely reporting of complete and accurate financial information.

Specifically, we did not design and implement review controls with a sufficient precision to prevent or detect a material misstatement, and did not consistently perform independent reviews of journal entries or consistently retain adequate supporting documentation for financial statement balances and the related footnote disclosures.

Specifically, we did not design and implement review controls with a sufficient precision to prevent or detect a material misstatement, did not consistently perform independent reviews of journal entries or consistently retain adequate supporting documentation for financial statement balances and the related footnote disclosures.

As it relates to monitoring activities:

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In addition, until remediation steps have been completed and operated for a sufficient period of time, and subsequent evaluation of their effectiveness is completed, the material weaknesses identified and described above will continue to exist.

Our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls over financial reporting, and will not be required to do so for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act.

Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal controls over financial reporting for the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting, apart from the material weaknesses discussed previously.

Our independent registered public accounting firm, BDO USA, LLP, has issued an audit report on our internal control over financial reporting as of December 31, 2022, which is included herein.

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

HF Foods Group Inc.

Las Vegas, Nevada

Opinion on Internal Control over Financial Reporting

We have audited HF Foods Group Inc’s (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 (the “COSO criteria”) In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as “the financial statements”) and our report dated March 31, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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

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

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

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

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in the accompanying Management’s Report on Internal Control Over Financial Reporting:

The Company did not maintain appropriately designed entity-level controls impacting the (1) control environment, (2) risk assessment procedures, (3) control activities, (4) information and communication, and (5) monitoring activities to prevent or detect material misstatements to the financial statements and assess whether the components of internal control were present and functioning properly.

These deficiencies were primarily attributed to an insufficient number of qualified resources to support and provide proper oversight and accountability over the performance of controls.

Additionally, the Company did not have adequate selection and development of effective control activities, resulting in the following additional material weaknesses:

• Information Technology (IT) General Controls – The Company did not design and maintain effective information technology general controls over logical access and program change management for key IT systems.

Specifically, access to certain key IT systems was not restricted between business and IT administration access privileges, resulting in improper segregation of duties for certain business processes.

Additionally, management did not design effective controls to protect data security and maintain business sustainability.

• As a result of the material weakness related to IT general controls, the Company did not properly design or maintain effective controls over the relevance and quality of internal data used in the financial reporting process and in the operation of business process control activities.

• The Company did not properly design or maintain effective controls over complex accounting, significant management estimates, and new accounting pronouncements, including but not limited to business combinations, impairment of long-lived assets, goodwill impairment, leases, and income taxes.

• The Company did not properly design or maintain effective controls over the financial reporting process to enable timely reporting of complete and accurate financial information.

Specifically, the Company did not design and implement review controls with a sufficient precision to prevent or detect a material misstatement, did not consistently perform independent reviews of journal entries, or consistently retain adequate supporting documentation for financial statement balances and the related footnote disclosures.

As it relates to monitoring activities:

• The Company did not adequately perform timely and ongoing evaluations to ascertain whether components of internal control are present and functioning.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 financial statements, and this report does not affect our report dated March 31, 2023 on those financial statements.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Troy, Michigan

March 31, 2023

OTHER INFORMATION.

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Executive Officers

Name Age Position

Xiao Mou Zhang 50 Chief Executive Officer

Xi Lin 34 Chief Operating Officer

Carlos Rodriguez 49 Chief Financial Officer

Christine Chang 40 General Counsel and Chief Compliance Officer

Xiao Mou Zhang (aka Peter Zhang) has served as Co-Chief Executive Officer and director since November 4, 2019 following the merger between the Company and B&R Global Holdings Inc.

("B&R Global"), and was promoted to sole Chief Executive Officer on February 23, 2021.

From 2014 until the merger, he served as Chairman of the Board and a Director of B&R Global that was co-founded by Mr.

Zhang and his partners, to consolidate the shareholdings of various operating entities across the Pacific and Mountain States regions.

Zhang has well over 20 years of experience in the food distribution industry with extensive experience in sales, marketing, financing, acquisitions, inventory, logistics and distribution.

Zhang’s leadership, B&R Global established a large supplier network and maintained long-term relationships with many major suppliers stemming from business relationships that were built up over the years.

A large purchase volume and a centralized procurement process also allowed B&R Global favorable negotiating power with vendors that source high quality products at lower prices than many competitors.

Xi Lin (aka Felix Lin) has served as Chief Operating Officer since May 1, 2022.

Lin also previously served as an independent director of the Company from November 2019 to April 2022.

Lin has worked in a number of positions at Blue Bird Corporation since 2011 until his resignation on April 1, 2022.

Prior to his resignation, he was Vice President of Human Resource and External Affairs, with responsibility for human resources, government relations, training and strategic relationships.

He also held various other positions within Blue Bird Corporation in the Operations Management Department from 2015 to 2016, the Finance and Accounting Department in 2011 and from 2013 to 2015, and the Business Development Department in 2012.

Lin received his B.A.

in Accounting and Finance from the Eugene Stetson School of Business and Economics in Georgia, a Master’s degree in Accountancy from the J.

Whitney Bunting College of Business in Georgia, and a Master’s degree in Business Administration from the University of North Carolina at Chapel Hill.

Carlos Rodriguez joined the Company as Chief Financial Officer on August 1, 2022.

Rodriguez brings more than 25 years of finance and accounting experience across various industries, including technology, entertainment, restaurants, and life science.

Most recently, Mr.

Rodriguez served as Chief Accounting Officer and Vice President Corporate Finance for Generate Life Sciences, Inc., a $300 million high growth company.

In that role, he led the Accounting, Finance, Financial Reporting, Treasury/Cash Management, Strategic and Financial Planning, M&A Due Diligence, and other financial responsibilities.

Prior to Generate Life Sciences, Mr.

Rodriguez served as Vice President of Accounting and Corporate Finance for California Pizza Kitchen, Inc.

Rodriguez holds a Bachelor’s degree in Accounting and a Master’s of Business Administration degree from the University of Southern California and is also a Certified Public Accountant in the State of California.

Christine Chang has served as General Counsel and Chief Compliance Officer since September 8, 2021.

Chang previously served as Vice President - Legal Affairs, Labor Relations and Litigation for Boyd Gaming Corp.

From 2014 through August, 2020, she served in various capacities as Corporate Counsel, Litigation, Senior Corporate Counsel, Litigation, and Vice President and Chief Counsel, Litigation, for Caesars Entertainment, Inc.

Chang also served as an associate at the law firm of Dentons LLP, from 2008 to 2013.

Chang holds a Bachelor of Arts in Rhetoric from the University of California and a Juris Doctorate from Columbia University.

Name Age Position

Libby 56 Independent Director and Chairman of the Board

Xiao Mou Zhang* 50 Director, Chief Executive Officer

Valerie Chase 40 Independent Director

Hong Wang 63 Independent Director

Prudence Kuai 67 Independent Director

*Information regarding Mr.

Zhang is set forth above under Part III.

Item 10 "Executive Officers".

Libby has served as a director since July 1, 2020, and was elected Chairman of the Board on February 22, 2021.

Libby held numerous positions of increasing responsibility within the leadership of Sysco Corp.

from 2007 through 2019, most recently Executive Vice President - Administration and Corporate Secretary.

Prior to his career with Sysco, he served as President, COFRA North America, and Vice President - Legal, for Good Energies, Inc., investment advisors to private equity and venture capital funds owned by COFRA Holding A.G., a Swiss international conglomerate.

Libby began his career in 1991 as a corporate associate with Arnall Golden Gregory, LLP, a full-service law firm in Atlanta.

In 1995, he joined Liuski International, Inc., a computer distribution and manufacturing company, as General Counsel, Vice President - Human Resources and Secretary.

In 1988, he received his Bachelor of Arts degree in International Relations from the University of Virginia in Charlottesville and, in 1991, he earned a J.D.

degree from Emory University School of Law in Atlanta.

Valerie Chase has served as a director since December 15, 2021.

Most recently, from May, 2018 to September, 2021, Ms.

Chase served as the Vice President, Chief Accounting Officer and Controller of Magnolia Oil & Gas Corporation, a Houston based, publicly traded oil & gas exploration and production company.

From February, 2010 to May 2018, Ms.

Chase served in roles of increasing responsibility with Apache Corporation, a Houston-based, publicly traded oil & gas exploration and production company, culminating in her role as the manager of accounting policy and financial controls.

Chase’s experience also includes four years with Ernst & Young LLP, achieving senior auditor capacity, from September, 2005 to November, 2009.

Chase holds a Bachelor of Economics degree and a Master of Accounting degree from the University of Michigan in Ann Arbor and is also a Certified Public Accountant in the State of Texas.

Hong Wang has served as a director of HF Group since December, 2019.

Wang was previously a member of the Board of Directors of the Company from August 22, 2018 through November 1, 2019.

Wang has served as a Professor of Management Information Systems at North Carolina A&T State University since 2005 and a Visiting Professor at Yunnan University of Finance and Economics in China since June, 2012, Dalian Maritime University in China since June, 2012, and Henan Polytechnic University in China since June, 2015.

Wang has over 30 years of university teaching experience and has taught Management Sciences, Operations Research, Optimization, Business Environment, Management Concepts, Strategic Management, and Engineering Economy, in addition to various Information Systems courses at both graduate and undergraduate levels.

Wang is active in professional and community services.

He has served in multiple cities in the US for several terms as President of local Chinese Associations, on various boards, as a principal of Chinese schools, as session chair of academic conferences, and as a journal referee.

He also helped several Chinese universities to establish international programs in collaboration with U.S.

universities.

Wang received his Ph.D.

in Management Information Systems/Decision Sciences from Ohio State University.

Prudence Kuai has served as a director since January 2023.

Kuai has most recently served as Chief Information Officer for Akumin/Alliance Imaging Company, a position which she held from July 2018 to February 2022.

Prior to this, Ms.

Kuai served as Chief Information Officer for Florida Blue from July 2012 to May 2015.

Kuai also sits on the board of a non-for-profit charity Gabriel's House, which is a homeless shelter for women and children based in Oxnard, California.

Kuai is a 25-year veteran of the healthcare industry and a thought leader in applying technological advancements in operational process automation, eCommerce, utilization of artificial intelligence and data analytics.

Kuai received a Master’s degree in Mathematics from the University of Texas, Arlington, and a Bachelor’s degree in Mathematics from National Taiwan University.

There are no family relationships between the Company's executive officers and directors.

CORPORATE GOVERNANCE

Director Independence

As required under the NASDAQ listing rules (“Listing Rules”), a majority of the members of a listed company’s Board of Directors must qualify as “independent,” as affirmatively determined by the Board of Directors.

Our board considered certain relationships between our directors and us when determining each director’s status as an “independent director” under Rule 5605(a)(2) of the Listing Rules.

Based upon such definition and SEC regulations, we have determined that Russell T.

Libby, Valerie Chase, Dr.

Hong Wang and Prudence Kuai are “independent” under the Listing Rules.

Board Leadership Structure and Role in Risk Oversight

Libby is the Chairman of our Board of Directors and also the Lead Independent Director.

Our corporate governance guidelines provide that the Board of Directors is responsible for reviewing the process for assessing the major risks facing us and the options for their mitigation.

This responsibility is largely satisfied by our Audit Committee, which is responsible for reviewing and discussing with management and our independent registered public accounting firm our major risk exposures and the policies management has implemented to monitor such exposures, including our financial risk exposures and risk management policies.

Hedging and Pledging Policy

The Company’s insider trading policy prohibits the purchase or sale of puts, calls, options, or other derivative securities based on the Company’s securities.

Directors and executive officers may not margin or make any offer to margin any of the Company’s securities as collateral to purchase the Company’s securities or the securities of any other issuer.

Directors and executive officers may, however, use the Company’s securities they beneficially own as collateral for a bona fide loan.

Committees of the Board of Directors

Audit Committee

Our Audit Committee is currently comprised of Valerie Chase (Chair), Russell T.

Hong Wang and Prudence Kuai, all of whom meet the independence standards for purposes of serving on an audit committee under the Listing Rules and the Exchange Act.

During 2021, Xi Lin served as the Chair of the Audit Committee until his transition to a non-independent board member on May 1, 2022.

Our Audit Committee (i) assists the Board of Directors in its oversight of the integrity of our financial statements, compliance with legal and regulatory requirements, and corporate policies and controls, (ii) has the sole authority to retain and terminate our independent registered public accounting firm, approve all auditing services and related fees and the terms thereof, and pre-approve any non-audit services to be rendered by our independent registered public accounting firm, and (iii) is responsible for confirming the independence and objectivity of our independent registered public accounting firm.

Our independent registered public accounting firm has unrestricted access to our Audit Committee.

Our Board of Directors has determined that Valerie Chase qualifies as an “audit committee financial expert,” as such term is defined in Item 407 of Regulation S-K.

Our Audit Committee operates under a written charter that is reviewed annually.

The charter is available at https://hffoodsgroup.com .

The Audit Committee held five meetings during the year ended December 31, 2021.

Compensation Committee

Our Compensation Committee is comprised of Dr.

Hong Wang (Chair), Valerie Chase, Russell T.

Libby and Prudence Kuai, all of whom currently meet the independence standards under the Listing Rules and the Exchange Act.

During 2021, Xi Lin served as a member of the Compensation Committee until his transition to a non-independent board member on May 1, 2022.

The Compensation Committee’s duties include overseeing our overall compensation philosophy, policies and programs.

This includes reviewing and analyzing the design and function of our various compensation components, establishing salaries, incentives and other forms of compensation for officers and non-employee directors, and administering our equity incentive plan.

In fulfilling its responsibilities, the Compensation Committee has the authority to delegate any or all of its responsibilities to a subcommittee of the Compensation Committee.

Our Compensation Committee operates under a written charter that is reviewed annually.

The charter is available at https://hffoodsgroup.com .

The Compensation Committee held four meetings during the year ended December 31, 2021.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has ever been an officer or employee of the Company.

As disclosed above, aside from Xi Lin none of the Company’s executive officers serves, or has served, since inception, as a member of the Board of Directors, Compensation Committee or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of the Company’s directors or on the Company’s Compensation Committee.

Nominating and Governance Committee

Our Nominating and Governance Committee (“Nominating Committee”) is comprised of Russell T.

Libby (Chair), Dr.

Hong Wang, Valerie Chase and Prudence Kuai, all of whom currently meet the independence standards under the Listing Rules and the Exchange Act.

During 2021, Xi Lin served as a member of the Nominating and Governance Committee until his transition to a non-independent board member on May 1, 2022.

The Nominating Committee's duties include overseeing director candidates recommended for nomination by our shareholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of shareholders (or, if applicable, a special meeting of shareholders).

The Nominating Committee held three meetings during the year ended December 31, 2021.

Special Transactions Review Committee

Our Special Transactions Review Committee (“Special Transactions Committee”) is comprised of Valerie Chase (Chair), Russell T.

Hong Wang and Prudence Kuai, all of whom currently meet the independence standards under the Listing Rules and the Exchange Act.

During 2021, Xi Lin served as a member of the Special Transactions Committee until his transition to a non-independent board member on May 1, 2022.

The Special Transactions Committee’s duties include evaluating and negotiating transactions in which other directors, members of management or significant shareholders may be interested parties.

The Special Transactions Committee held three meetings during the year ended December 31, 2021.

Considerations in Evaluating Director Nominees

In selecting nominees for director, without regard to the source of the recommendation, our Nominating Committee uses a variety of methods for identifying and evaluating director nominees.

In its evaluation of director candidates, our Nominating Committee may consider, among other things, the current size and composition of our Board of Directors, the needs of our Board of Directors, and the respective committees of our Board of Directors.

Some of the qualifications that may be considered include, without limitation, issues of character, integrity, judgment, diversity of experience, independence, area of expertise, corporate experience, length of service, leadership skills, potential conflicts of interest, and other commitments.

Director candidates must have sufficient time available, in the judgment of our Nominating Committee, to perform all Board of Director and Committee responsibilities.

In addition, our Nominating Committee considers all applicable statutory and regulatory requirements and the requirements of any exchange upon which our common stock is listed or to which it may apply in the foreseeable future.

Although our Board of Directors does not maintain a specific policy with respect to board diversity, we believe that our Board of Directors should be a diverse body, and our Nominating Committee considers a broad range of backgrounds and experiences in reviewing candidates for nomination to the Board of Directors.

In making determinations regarding nominations of directors, our Nominating Committee may take into account the benefits of diverse viewpoints and other related factors as it oversees the annual Board of Director and committee evaluations.

After completing its review and evaluation of director candidates, our Nominating Committee recommends to our full Board of Directors the director nominees for selection.

Board Diversity Matrix

Recently adopted NASDAQ Rule 5605(f) (the "NASDAQ Diversity Rule") requires each listed company that has five or fewer board members to have, or explain why it does not have, at least one diverse director on the board.

Inasmuch as our current Board of Directors includes a number of diverse directors within the meaning of the NASDAQ Diversity Rule, the composition of our Board of Directors is in compliance with the NASDAQ Diversity Rule.

The table below highlights certain features of the composition of our Board of Directors as of January 27, 2023:

Total number of directors 5

Female Male Non-Binary Did Not Disclose Gender

Gender Identity

Directors 2 3 — —

Demographic Background

African American or Black — — — —

Alaskan Native or Native American — — — —

Asian 1 2 — —

Hispanic or Latinx — — — —

Native Hawaiian or Pacific Islander — — — —

White 1 1 — —

Two or more races or ethnicities — — — —

Did not disclose demographic background —

Stockholder Recommendations for Nominations to the Board of Directors

We will consider director candidates recommended by shareholders so long as such recommendations comply with our certificate of incorporation, our bylaws, and applicable laws, rules and regulations, including those promulgated by the SEC.

Our Nominating Committee will evaluate such recommendations in accordance with our charter, bylaws, policies and procedures for director candidates, and the regular director nominee criteria described above.

This process is designed to ensure that our Board of Directors includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business.

Eligible shareholders wishing to recommend a candidate for nomination should contact our Secretary in writing.

Such recommendations must include information about the candidate, evidence of the recommending stockholder’s ownership of our common stock, and written consent from the candidate confirming willingness to serve on our Board of Directors, if elected.

Our Nominating Committee has the discretion to decide which individuals to recommend for nomination as directors.

Director Attendance

During 2021, the Board of Directors held nine meetings.

Each of our directors attended at least 75% of all meetings of the Board of Directors and any committees on which such director was a member.

Although we do not have a specific director attendance policy, directors are encouraged to attend the annual meetings of shareholders.

Code of Conduct and Ethics

We have adopted a Code of Conduct and Ethics that applies to our directors, officers, employees and independent contractors.

Our Code of Conduct and Ethics is designed to deter wrongdoing and promote:

(i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications;

(iii) compliance with applicable governmental laws, rules, and regulations;

(iv) the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code;

and (v) accountability for adherence to the code.

A copy of our Code of Conduct and Ethics is available on our official website at https://hffoodsgroup.com.

We intend to disclose any amendments or waivers of the Code of Conduct and Ethics on our website within four business days.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of our common stock (collectively, “reporting persons”) to file reports regarding ownership of, and transactions in, our securities with the SEC.

Based solely on our review of Forms 3, 4 and 5 and amendments thereto filed electronically with the SEC by the reporting persons, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and ten percent beneficial owners were complied with during the year ended December 31, 2021, except that, in each case due to administrative error, (i) the Form 3 filed by Christine Chang on October 6, 2021, (ii) the Form 4 filed by Hong Wang on July 15, 2021, (iii) the Form 4 filed by Victor Lee on July 13, 2021, (iv) the Form 4 filed by Russell Libby on July 13, 2021, (v) the Form 4 filed by Felix Lin on July 13, 2021, and (vi) the Form 4 filed by Peter Zhang on July 13, 2021, were each filed late.

Information required by this Item will be included in our Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the SEC, within 120 days of the fiscal year ended December 31, 2022, and is incorporated herein by reference.

EXECUTIVE COMPENSATION.

The following table sets forth a summary of the compensation paid to or accrued by our Chief Executive Officer and the most highly compensated executive officers other than our Chief Executive Officer for the fiscal years ended December 31, 2021 and 2020:

Summary Compensation Table

Name Year Salary

Xiao Mou Zhang (1 )

2021 621,231 300,000 774,819 — 1,696,050

Chief Executive Officer 2020 403,077 200,000 — — 603,077

Kong Hian Lee (2)

2021 270,817 103,125 215,217 111,600 (6)

Executive Vice President, Chief Financial Officer 2020 198,510 100,000 — — 298,510

Christine Chang (3)

2021 41,346 — 215,929 40,000 (7)

General Counsel and Chief Compliance Officer

Zhou Min Ni (1)

2021 116,212 — — 100,000 (8)

Co-Chief Executive Officer 2020 403,590 — — 1,004,540 (8)

Caixuan Xu (4)

2021 92,491 — — 63,929 (9)

Vice President, Finance & Accounting 2020 221,129 40,000 — — 261,129

Zhang was appointed Co-CEO on November 4, 2019 following the merger with B&R Global and became sole CEO on February 23, 2021 following the voluntary resignation of former Co-CEO, Mr.

Lee joined the Company in November 2019 and left in July 2022.

Refer to "Subsequent Events" below for additional information regarding Mr.

Lee's departure.

Chang joined the Company in September 2021.

Xu joined the Company in February 2019 and left in March 2021.

(5) Amounts reflect the full grant-date fair value of restricted stock units (“RSUs”) and performance restricted stock units (“PSUs”) granted during the year ended December 31, 2021 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named executive officer.

The value of the PSUs set forth above is based on the probable outcome of the performance conditions on the grant date.

We provide information regarding the assumptions used to calculate the value of all PSUs and RSUs granted to our executive officers in Note 16 to the consolidated financial statements included in in our Annual Report on Form 10-K for the year ended December 31, 2021.

(6) Amount includes relocation allowance of $100,000.

(7) This amount is a signing bonus per Ms.

Chang’s employment contract.

(8) Amount includes amounts paid to UGO and the Revolution Entities.

(9) Amount includes payments of employee matching contributions under the Company’s defined contribution plan of $2,534 and severance payments totaling $61,575.

Grants of Plan-Based Awards

Name Grant Date Estimated future payouts under equity incentive plan awards (1)

All other stock awards:

Number of shares of stock or units (2)

Grant date fair value of stock awards (3)

Threshold/Target

Xiao Mou Zhang

07/08/2021 87,042 87,042 87,042 774,819

Kong Hian Lee (4)

07/08/2021 24,177 24,177 24,177 215,217

Christine Chang 09/08/2021 20,937 20,937 20,937 215,929

(1) Represents PSUs granted under the 2018 Omnibus Equity Incentive Plan (the “2018 Plan”).

The PSUs vest over three equal installments beginning from April 1, 2022 to April 1, 2024 and may be earned over a three year performance period based on the applicable named executive officer’s continuation in service through the end of the performance period and the attainment of pre-determined goals.

(2) Represents RSUs granted under the 2018 Plan.

The RSUs vest over three years in equal annual installments following the date of grant and are subject to forfeiture in the event of the executive’s termination of service to the Company under specified circumstances.

(3) Amounts reflect the full grant-date fair value of RSUs and PSUs granted during the year ended December 31, 2021 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named executive officer.

The value of the PSUs set forth above is based on the probable

outcome of the performance conditions on the grant date.

(4) The treatment of Mr.

Lee's RSUs and PSUs subsequent to his termination of employment are described in the Subsequent Events - Departure of Mr.

Lee section below.

Compensation Metrics

We do not use a prescribed formula to establish pay levels.

Rather, the Board of Directors and Compensation Committee considers changes in the business, external market factors and our financial position each year when determining pay levels for the named executive officers.

The Compensation Committee generally seeks to set a named executive officer’s targeted total cash compensation opportunity within a range that is the average of the applicable peer company and/or general industry compensation survey data, adjusted as appropriate for individual performance and internal pay equity and labor market conditions.

Each executive’s base salary is supplemented by various benefit plans that provide health, life, accident, disability and severance benefits, most of which are the same as the benefits provided to all of our employees.

Employment Agreements

Employment & Separation Agreements with Zhou Min Ni

On August 22, 2018, we entered into an employment agreement with Zhou Min Ni to serve as our Chief Executive Officer until August 31, 2023, subject to automatic annual renewals, which would automatically terminate on a change of control (as defined in the employment agreement).

Ni resigned from the Company on February 23, 2021.

Mr Ni's initial base salary was $400,000, and he was eligible to receive a discretionary annual bonus.

Ni’s employment agreement provided that in the event that his employment was terminated without “cause” or he resigned for “good cause”, as such terms are defined in the employment agreement, he was entitled to receive a lump sum cash payment equal to two times the sum of his then current base salary;

(ii) an annual bonus payable for the fiscal year prior to termination date and (iii) continued benefits for up to 12 months.

If such a termination occurred within 90 days following a Change in Control (as defined in the employment agreement), Mr.

Ni was to receive:

(i) a lump sum cash payment equal to two times the sum of his then current base salary plus his annual bonus payable for the fiscal year prior to the termination and (ii) continued benefits for up to 12 months.

The agreement contained confidentiality obligations that apply during and after the term of employment and non-competition obligations that applied during the term of employment.

Ni’s voluntary resignation, a Separation Agreement between Mr.

Ni and the Company, dated as of February 23, 2021, superseded the 2018 employment agreement and released all rights and claims under the 2018 Employment Agreement.

Under the terms of the Separation Agreement, Mr.

Ni received his wages from February 23, 2021 through March 31, 2021.

Employment Agreement with Ms.

On August 2, 2021, the Company appointed Ms.

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

Chang’s compensation includes a signing bonus of $40,000, initial base salary of $250,000 per year, a target bonus of 75% of base salary (2021 bonus pro-rated and guaranteed), and participation in the Company’s equity compensation plan, with a 2021 award of 50% of base salary in Restricted Stock Units and 50% of base salary in Performance Stock Units.

Chang is eligible for severance benefits under the Severance Plan, as described in the Adoption of Executive Severance Plan section below.

Employment Agreement with Mr.

On December 6, 2019, the Company entered into an employment letter with Mr.

Lee to become the Vice President of Corporate Finance, Investor Relations and Corporate Strategy of the Company beginning on November 14, 2019.

This was amended on

December 6, 2019, to reflect that Mr.

Lee had become the Executive Vice President of the Company and served as its Chief Financial Officer.

The agreement provided for employment at-will, initial annual base compensation of $180,000 and an annual bonus of up to 60% of base salary (but no lower than $70,000).

Lee also received a $20,000 relocation bonus, which was subject to repayment if his employment voluntarily terminated within 18 months of the agreement.

Lee entered into a restrictive covenant agreement in connection with his employment letter, which contained confidentiality and work product assignment provisions, as well as non-solicitation of customers and employees provisions that applied during the term and for one year following his termination of employment.

Further information regarding termination rights for Mr.

Lee are discussed in the Subsequent Events - Departure of Mr.

Lee section below.

Employment Agreement with Ms.

On January 30, 2019, the Company entered into an employment letter with Ms.

Xu to become the Co-Chief Financial Officer of the Company beginning on February 1, 2019, for a term of employment of one year, subject to earlier termination.

Xu’s initial annualized base salary was $200,000, and she was eligible to earn an annual bonus which was targeted at $30,000 per year, subject to the achievement of performance criteria.

Xu’s employment terminated without cause or for good reason (each as defined in the employment agreement), she was entitled to receive the pro-rata portion of her annual bonus that would be payable with respect to the bonus year in which the termination occurs and base salary continuation payments for eight months.

Xu’s employment terminated due to the lapsing of the one-year term, she was entitled to receive the pro-rata portion of her annual bonus that would be payable with respect to the bonus year in which the termination occurs and a lump-sum payment of $55,000.

Xu’s employment terminated in March 2021, and she entered into a Separation Agreement and Release of Claims effective January 23, 2021.

She was paid $55,000 in severance benefits and $6,575 with respect to her pro-rata portion of her annual bonus for 2021.

Defined Contribution Retirement Plan

The Company maintains a defined contribution retirement plan, the HF Foods Group, Inc.

Employees 401(k) Savings Plan, which is described in more detail in Note 17 - Employee Benefit Plan to the Company’s audited consolidated financial statements disclosed in this Annual Report on Form 10-K.

Adoption of Executive Severance Plan

On August 2, 2021, our Board of Directors adopted and approved the HF Foods Group Inc.

Severance Plan (the “Severance Plan”), effective August 2, 2021, for employees at the level of Vice President or above, including the Company’s executive officers.

The Severance Plan previously was approved by the Compensation Committee of the Company’s Board of Directors .

The Severance Plan provides for the payment of severance and other benefits on a discretionary basis to eligible employees in the event of an involuntary termination of employment with the Company other than for Cause or other disqualifying circumstances, or upon resignation for Good Reason, as defined in the Severance Plan.

In the event of a qualifying termination and subject to the employee’s execution of a general release of liability against the Company and other requirements as specified in the Severance Plan, the Company may award the following discretionary Severance Plan payments and benefits to the eligible executive officer:

• payment of base salary multiplied by two in the case of the Chief Executive Officer, base salary multiplied by one in the case of key executive officers other than the Chief Executive Officer, or base salary multiplied by one-half in the case of each eligible vice president;

• payment of COBRA premiums, for up to 12 months in the case of the Chief Executive Officer and key Executive Officers other than the Chief Executive Officer (which includes Xi Lin, Carlos Rodriguez and Christine Chang who are "key Executive Officers"), or for up to 6 months in the case of each eligible Vice President.

In addition, in the event of a qualifying termination during the 6-month period before or the 12-month period following a Change in Control, as defined in the Severance Plan, and subject to the applicable participant’s execution of a general release of liability against the Company and other requirements as specified in the Severance Plan, the Severance Plan provides that the Company may award the following discretionary payments and benefits to the eligible executive officers:

• payment of base salary multiplied by two in the case of the Chief Executive Officer and in the case of key Executive Officers other than the Chief Executive Officer, or base salary multiplied by one in the case of each eligible Vice President;

• payment of COBRA premiums, for up to 12 months in the case of the Chief Executive Officer and key Executive Officers other than the Chief Executive Officer, or for up to 6 months in the case of each eligible Vice President.

Other Change in Control Provisions

Our 2018 Plan provides for the acceleration of the vesting of unvested equity awards upon a “Change in Control” of the Company.

A Change in Control is defined in the 2018 Plan and the Severance Plan to include (i) a sale or transfer of substantially all of the Company’s assets;

(ii) the dissolution or liquidation of the Company;

(iii) a merger or consolidation to which the Company is a party and after which the prior shareholders of the Company hold less than 50% of the combined voting power of the surviving corporation’s outstanding securities;

or (iv) the incumbent directors cease to constitute at least a majority of the Board of Directors.

In the event of a “Change In Control,” the 2018 Plan provides for the immediate vesting of all equity awards issued thereunder.

Subsequent Events

Employment Agreement with Mr.

On April 15, 2022, the Company agreed to hire Xi Lin as Chief Operating Officer.

Lin was previously a member of the Company's Board of Directors, in which capacity he had served since November 4, 2019.

Lin entered into an agreement with the Company providing for an at-will employment relationship.

The agreement provides that Mr.

Lin will receive an annual base salary of $450,000 as well as a grant of restricted stock units equal to $100,000 as soon as practicable after Mr.

Lin’s start date.

The agreement also provides Mr.

Lin with the opportunity to receive an annual target bonus equal to 100% of his base salary and equity grants in the form of restricted stock units equal to the value of 50% of his base salary and performance stock units equal to the value of 50% of his base salary.

Lin is eligible for severance benefits under the Severance Plan.

The agreement also provided that Mr.

Lin transition to a non-independent Board member on May 1, 2022, and resign from his position on the Board when a new independent Board member is appointed, which occurred on June 30, 2022.

Employment Offer Letter with Mr.

Effective August 1, 2022, the Company appointed Carlos A.

Rodriguez as Chief Financial Officer.

Rodriguez entered into an offer letter with the Company (the “Offer Letter”) providing for an at-will employment relationship.

The Offer Letter provides that Mr.

Rodriguez will receive an annual base salary of $400,000.

The Offer Letter also provides Mr.

Rodriguez with the opportunity to receive an annual target bonus equal to 100% of his base salary and equity grants in the form of restricted stock units equal to the value of 50% of his base salary and performance stock units equal to the value of 50% of his base salary.

For fiscal year 2022, Mr.

Rodriguez will receive a prorated guaranteed bonus in the amount of $250,000, payable on or before March 31, 2023.

Rodriguez is eligible for severance benefits under the Severance Plan.

Departure of Mr.

On May 6, 2022 (the “Transition Date”), Mr.

Lee departed from his position as the Company's Chief Financial Officer.

Following the Transition Date through July 31, 2022 (the “Separation Date”), Mr.

Lee remained employed as a non-executive employee of the Company in an advisory capacity, and assisted the Company with respect to all transition matters.

In connection with Mr.

Lee’s departure, the Company entered into a Transition and Separation Agreement (the “Separation Agreement”) with Mr.

Lee on May 18, 2022.

Under the Severance Plan and the Separation Agreement Mr.

Lee was entitled, subject to his non-revocation of a general release of claims in favor of the Company, to the following separation benefits:

the Company paid Mr.

Lee his base salary between the Transition Date and July 31, 2022 (the “Separation Date”) in accordance with its normal payroll processing procedures, which was equal to $51,826;

after the Separation Date, the Company paid severance equal to $195,000, which is Mr.

Lee's base salary less $80,000 (the cost of the company car which Mr.

Lee purchased) as detailed in the Separation Agreement, paid out in 12 monthly installments following the Separation Date through the Company’s standard payroll policies and procedures;

Lee elected COBRA, the Company would have paid COBRA premiums at the contribution level in effect on the Separation Date for up to 12 months, however, Mr.

Lee did not elect COBRA;

the outstanding RSUs granted to Mr.

Lee and scheduled to vest on July 8, 2022 continued to vest as scheduled pursuant to the applicable award agreement, and the shares of common stock of the Company underlying such RSUs will be delivered to Mr.

Lee as soon as is practicable once the Company files this Annual Report on Form 10-K and its Form 10-Q for the three months ended March 31, 2022.

If the filings are not made by December 31, 2022, the parties will negotiate to arrive at a mutually satisfactory solution;

contingent on the Company’s filing its Form 10-K, Mr.

Lee will be entitled to a payment of $42,165.60, to be paid out in a lump sum within 10 business days of the filing date of the Form 10-K;

a lump sum payment of $8,662.40, equal to 80% of the $10,828 amount of Mr.

Lee’s outstanding 2021 bonus payment, payable within five business days following the execution of the Separation Agreement.

Amendment and Restatement of Severance Plan

On December 30, 2022, the Company’s Board of Directors adopted and approved an amendment and restatement of the Severance Plan, effective December 30, 2022.

For the Chief Executive Officer and Key Executives other than the Chief Executive Officer, the amendments increase the amount of severance payable in the six months prior to or the 12 months after a Change in Control (as defined in the amended Severance Plan) from the base salary multiplied by two to the base salary multiplied by three.

The Change in Control severance will be paid in 36 equal monthly installments.

The amended Severance Plan defines “Key Executives” as the Chief Financial Officer, Chief Operating Officer, General Counsel, Chief Compliance Officer, each individual classified as Executive Vice President by the Company and each other executive officer of the Company designated a Key Executive by a committee comprised of the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer.

Some additional changes include (i) stating that the severance policy for Vice Presidents under the Severance Plan applies to Senior Vice Presidents, and (ii) amending the definition of “Cause” and adding a 15-day cure period for certain triggers of Cause, as more fully set forth in the amended Severance Plan.

The amended Severance Plan provides that if any eligible employee would receive payments that would be treated as “parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended (the “ Internal Revenue Code”), the eligible employee will receive the “greater of” the full amount (subject to the excise tax) or the amount which would result in no portion of the payment being subject to the excise tax under Section 4999 of the Internal Revenue Code.

The amended Severance Plan also prohibits (i) the amendment of the Severance Plan that causes an individual or group of individuals to cease to be eligible, unless communicated to the affected individual(s) in writing at least six months prior to the effective date, and (ii) the amendment or termination of the Severance Plan within 12 months following a change in control, to the extent such amendment would reduce the benefits under the Severance Plan, impair an employee’s eligibility, or impose additional requirements on an employee’s right to receive benefits, unless the individual consents in writing.

Outstanding Equity Awards at December 31, 2021

The following table provides information regarding outstanding stock awards to our named executive officers that remained subject to vesting at December 31, 2021.

Equity Incentive Plan Awards:

Number of unearned shares, units or other rights that have not vested

Equity Incentive Plan Awards:

Market or payout value of unearned shares, units or other rights that have not vested (3)(4)

Xiao Mou Zhang 87,042 (1)

Kong Hian Lee (5)

Christine Chang 20,937 (1)

(1) Shares of RSUs granted to the named executive officers vest over a period between one to three years in equal installments following the date of grant and are subject to forfeiture in the event of the executive’s termination of service to the Company under specified circumstances.

(2) Shares of PSUs granted to the named executive officers vest over three equal installments beginning from April 1, 2022 to April 1, 2024 and are subject to forfeiture in the event of the executive’s termination of service to the Company under specified circumstances.

The number of shares shown is the target amount, and the actual number of shares that may vest ranges from 0% to 100% of the target amount, depending on the achievement of specified performance goals.

(3) Dollar amount is determined by multiplying the number of unvested shares of RSUs by the closing price per share of the Company’s common stock on December 31, 2021 ($8.46), as reported on the NASDAQ Capital Market.

(4) Dollar amount is determined by multiplying the number of unvested shares of PSUs by the closing price per share of the Company’s common stock on December 31, 2021 ($8.46), as reported on the NASDAQ Capital Market.

(5) Subsequent to December 31, 2021, in accordance with his Separation Agreement, Mr.

Lee forfeited 16,118 RSUs and 24,177 PSUs.

DIRECTOR COMPENSATION

The following table sets forth compensation for each director for the year ended December 31, 2021:

Name Fees Earned (3)

Stock Awards (4)

All Other Compensation

Xiao Mou Zhang (1)

Libby 145,000 75,000 — 220,000

Hong Wang 75,000 50,000 — 125,000

Xi Lin 115,000 50,000 — 165,000

Valerie Chase (2)

4,167 — — 4,167

Zhang did not receive any additional compensation for his service as a director.

Chase was appointed as a director on December 15, 2021.

(3) Includes fees earned for serving on the Special Investigation Committee of $50,000 for Messrs.

Libby and Lin and $15,000 for Dr.

(4) Amounts reflect the full grant-date fair value of RSUs granted during the year ended December 31, 2021 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the director.

Narrative Disclosure to Director Compensation Table

We paid our Chairman of the Board $18,750 and independent directors $12,500 per quarter for the year ended December 31, 2021.

We also paid the Chairs of the Audit, Compensation, Nominating and Governance and Special Transaction Committees $3,750, $2,500, $2,500 and $2,500, respectively, per quarter for the year ended December 31, 2021.

For the year ending December 31, 2022, we will pay our Chairman of the Board $25,000 per quarter and independent directors $15,000 per quarter, as well as an annual equity award in the form of RSUs, which vest on the one year anniversary of the grant, with grant date fair values of $100,000 for our Chairman of the Board and $60,000 for our independent directors.

We will also pay the Chairs of the Audit, Compensation, Nominating and Governance, Special Transaction and Special Investigation Committees $3,750 per quarter for the year ended December 31, 2021.

Special Investigation Committee members will also receive $2,500 per quarter.

We reimburse directors for any out-of-pocket expenses incurred in connection with attending board or committee meetings.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Equity Compensation Plan Information

The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31, 2021.

securities to be

upon exercise

of outstanding

exercise price

of outstanding

Number of securities remaining available for future issuance under equity compensation plans

(excluding securities reflected in column (a))

Equity compensation plans approved by security holders — $ — 2,503,803

Equity compensation plans not approved by security holders — $ — —

Total — $ — 2,503,803

On August 10, 2018, our shareholders adopted the 2018 Plan.

The 2018 Plan reserves 3,000,000 shares of common stock for issuance of awards to employees, non-employee directors, and consultants and is administered by the Compensation Committee of the Board.

The 2018 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, other stock awards, and performance awards that may be settled in stock, or other property.

The term of stock options granted may not exceed ten years and exercise prices may not be less than 100% of the fair market value of the common stock subject to the stock option on the date of grant.

If an equity award granted under the 2018 Plan, or any portion thereof, expires, is forfeited or otherwise terminates without all of the shares covered by the equity award having been issued, such expiration, termination or settlement will not reduce or otherwise offset the number of shares available for issuance under the 2018 Plan.

In the event of a change in control, an equity award under the 2018 Plan may be subject to additional acceleration of vesting and exercisability.

Unless terminated sooner by our Board of Directors, the 2018 Plan will automatically terminate on August 9, 2028.

As of December 31, 2021, there were 352,920 RSU and 143,277 PSU granted under the 2018 Plan and 2,503,803 shares were available for future grants.

The Compensation Committee of the Board of Directors will approve forms of RSU award agreements that will set forth the terms of RSU awards that may be granted to the Company’s executive officers and directors, as well as performance awards that may be granted to certain senior executives and managers.

Beneficial Ownership

The following table sets forth, as of January 27, 2023, information with respect to the securities holdings of all persons that we, pursuant to filings with the SEC and our stock transfer records, have reason to believe may be deemed the beneficial owner of more than 5% of our common stock.

The following table also sets forth, as of such date, the beneficial ownership of our common stock by all of our current officers and directors, both individually and as a group.

The beneficial owners and amount of securities beneficially owned have been determined in accordance with Rule 13d-3 under the Exchange Act and, in accordance therewith, include all shares of our common stock that may be acquired by such beneficial owners within 60 days of January 27, 2023 upon the exercise or conversion of any options, warrants or other convertible securities.

This table has been prepared based on 53,844,804 shares of common stock outstanding as of January 27, 2023.

Name and Address of Beneficial Owner (1)

Xiao Mou Zhang (2)

Carlos Rodriguez (4)

Christine Chang (5)

Kong Hian Lee 8,059 *

Hong Wang (6)

Valerie Chase (6)

All directors and executives officers as a group (9 individuals) 2,670,981 5%

Five Percent Holders:

Zhou Min Ni/Ni Family Trusts (8)

13,426,028 25%

Irrevocable Trust for Raymond Ni (9)

5,591,553 10%

*Less than one percent.

(1) Unless otherwise indicated, the address of each person listed below is c/o HF Foods Group Inc., 6325 South Rainbow Boulevard Suite 420, Las Vegas, Nevada, 89118.

(2) Includes (i) 2,575,083 common shares pledged as collateral for a loan and (ii) 14,507 shares underlying performance restricted stock units that are scheduled to vest within 60 days of January 27, 2023.

Excludes 146,091 restricted stock units that have not yet vested and do not carry any voting or dividend rights until vested.

Also excludes 72,535 performance restricted stock units that have not yet vested and do not carry any voting or dividend rights until vested.

(3) Excludes 75,343 restricted stock units that have not yet vested and do not carry any voting or dividend rights until vested.

(4) Excludes 39,139 restricted stock units that have not yet vested and do not carry any voting or dividend rights until vested.

(5) Includes 3,490 shares underlying performance restricted stock units that are scheduled to vest within 60 days of January 27, 2023.

Excludes 33,222 restricted stock units that have not yet vested and do not carry any voting or dividend rights until vested.

Also excludes 17,447 performance restricted stock units that have not yet vested and do not carry any voting or dividend rights until vested.

(6) Excludes 11,742 restricted stock units that have not yet vested and do not carry any voting or dividend rights until vested.

(7) Excludes 19,569 restricted stock units that have not yet vested and do not carry any voting or dividend rights until vested.

(8) Includes 5,553,096 shares owned by Mr.

Ni personally, 5,591,553 shares owned by the Irrevocable Trust for Raymond Ni, 798,793 shares owned by the Irrevocable Trust for Amanda Ni, 798,793 shares owned by the Irrevocable Trust for Ivy Ni and 683,793 shares owned by the Irrevocable Trust for Tina Ni.

Ni disclaims beneficial ownership of and voting and dispositive power over the shares owned by each of the trusts.

Jason Lam, as trustee, has voting and dispositive power over the shares owned by Irrevocable Trust for Raymond Ni.

Amanda Ni, as trustee, has voting and dispositive power over the shares owned by Irrevocable Trust for Amanda Ni, Irrevocable Trust for Ivy Ni and Irrevocable Trust for Tina Ni.

The business address for Zhou Min Ni and each of the trusts is 810 Northern Shore Point, Greensboro, NC.

(9) Jason Lam, as trustee, has voting and dispositive power over the shares owned by Irrevocable Trust for Raymond Ni.

The business address for the four trusts is 810 Northern Shore Point, Greensboro, NC.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Zhou Min Ni and trusts for the benefit of Mr.

Ni's four children are beneficial owners of 26.2% of the Company’s outstanding shares of common stock, and he and certain of his immediate family members have ownership interests in various companies (the “Related Parties”) involved in (i) the distribution of food and related products to restaurants and other retailers and (ii) the supply of fresh food, frozen food, and packaging supplies to distributors.

Ni voluntarily resigned from the Board of Directors and as co-Chief Executive Officer effective February 23, 2021.

Xiao Mou Zhang, our Chief Executive Officer, and certain of his immediate family also have ownership interests in various companies (the “Related Parties”) involved in (i) the distribution of food and related products to restaurants and other retailers and (ii) the supply of fresh food, frozen food, and packaging supplies to distributors.

The Company purchases products from and sells products to some of these Related Parties which at times also involve making advance payments to, or receiving advance payments from, these Related Parties.

Prices paid for these goods are based on the prices published by the particular Related Party.

The Company also leased to a Related Party, a warehouse and distribution facility near Savannah, Georgia, which promotes a relationship that helps the Company source a reliable supply of fresh and frozen seafood.

The Company also leases from a Related Party its warehouse and distribution facility in Atlanta, Georgia, which enables the Company’s operations in that market.

The Company has also made loans to certain Related Parties.

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

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

Management believes that the prices paid to these Related Parties as well as the level of service, reliability, delivery terms, and historical performance of these Related Parties are substantially equivalent to, or more advantageous than, prices and terms the Company would receive in arm’s length transactions from third parties that have no relationship with the Company and are capable of providing the same level of service.

The related party affiliations, including the bona fides and fairness of certain transactions with related parties, are among the issues that are being scrutinized as part of an ongoing internal investigation, and disclosures concerning particular transactions are subject to the outcome of, and conclusions that may ultimately be reached in, this ongoing investigation.

Zhou Min Ni and Mr.

Xiao Mou Zhang were the Co-Chief Executive Officers as of December 31, 2020 and 2019.

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

Upon resignation, Mr.

Ni personally owned 10.7% of outstanding shares of common stock.

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

For more information on the Company's related party transactions, see Note 15 - Related Party Transactions in the consolidated financial statements in this Annual Report on Form 10-K.

Director Independence

Our Board of Directors determined that each of our directors, other than Mr.

Zhang, qualify as independent directors, as defined under the Listing Rules and that our Board of Directors consists of a majority of "independent directors," as defined under the rules of the SEC and the Listing Rules related to director independence requirements.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

As previously reported in the Company’s Current Report on Form 8-K dated September 10, 2021, the Company engaged BDO as its independent registered public accounting firm on September 8, 2021.

The Company’s previous independent registered public accounting firm Friedman LLP (“Friedman”) was dismissed on the same date.

The decision to engage BDO and to dismiss Friedman was approved by the Audit Committee.

The reports of Friedman on the Company’s consolidated financial statements for the years ended December 31, 2019 and 2020 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or

accounting principles.

In connection with the audits of the Company's consolidated financial statements for the years ended December 31, 2019 and 2020, and in the subsequent interim period through September 8, 2021, Friedman had no disagreements with the Company’s management on any matters of accounting principles or practices, financial statement disclosure or auditing scope and procedures which, if not resolved to the satisfaction of Friedman, would have caused Friedman to make reference to the matter in their reports on the financial statements for such years.

There were no reportable events (as that term is described in Item 304(a)(1)(v) of Regulation S-K) during the two years ended December 31, 2019 and 2020, or in the subsequent period through September 8, 2021, other than as noted in the 2020 and 2021 Annual Reports on Form 10-K regarding material weaknesses identified related to ineffective internal accounting controls that may not be adequately designed or operating effectively.

The Company furnished a copy of the above disclosure to Friedman and requested that Friedman provide a letter addressed to the SEC stating whether or not it agrees with the statements made above.

A copy of such letter is filed as Exhibit 16.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 10, 2021.

During the years ended December 31, 2019 and 2020 and the subsequent period through September 8, 2021, neither the Company nor anyone on its behalf consulted BDO regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that BDO concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue;

or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event.

Audit and Related Fees

The following table presents fees for professional audit services performed by our independent registered public accounting firms for the audit of our annual financial statements and review of our quarterly financial statements for the year ended December 31, 2021.

We did not pay any fees to BDO for audit-related services or tax services in the year ended December 31, 2021.

Fee Category 2021

Audit related fees —

All other fees —

Total fees $ 1,521,059

Audit Fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements.

Audit fees also include fees for services provided in connection with review of documents filed with the SEC.

Audit Committee Pre-Approval Procedures

The Audit Committee of our Board of Directors consists of Valerie Chase (Chairman), Dr.

Hong Wang and Russell Libby.

The Audit Committee approves the engagement of our independent auditors to render audit and non-audit services before they are engaged.

All of the fees for 2021 and 2020 shown above were pre-approved by the Audit Committee.

The Audit Committee pre-approves all audit and other permitted non-audit services provided by our independent auditors.

Pre-approval is generally provided for up to one year, is detailed as to the particular category of services and is subject to a monetary limit.

Our independent auditors and senior management periodically report to the Audit Committee the extent of services provided by the independent auditors in accordance with the pre-approval, and the fees for the services performed to date.

The Audit Committee may also pre-approve particular services on a case-by-case basis.

Our Audit Committee will not approve engagements of our independent registered public accounting firm to perform non-audit services for us if doing so will cause our independent registered public accounting firm to cease to be independent within the meaning of applicable SEC rules.

In addition, our Audit Committee considers, among other things, whether our independent registered public accounting firm is able to provide the required services in a more or less effective and efficient manner than other available service providers.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

12 unchanged sentences

8-K 3.1.2 11/5/2019

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

3.2 Amended and Restated Bylaws

18 unchanged sentences

DEF14A B 7/18/2018

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

10.60 Form of Escrow Agreement between Atlantic Acquisition Corp., Loeb and Loeb L.P.

35 unchanged sentences

10-K 10.18 4/1/2019

10.19† Employ ment A greement with Kong Hian Victor Lee dated December 6, 2019

10.19† Employment Agreement with Kong Hian Victor Lee dated December 6, 2019

10-Q 10.1 11/9/2020

10.20† Amendment to Employ ment Agreement with Kong Hian Victor Lee dated October 1, 2020

10.20† Amendment to Employment Agreement with Kong Hian Victor Lee dated October 1, 2020

10-Q 10.2 11/9/2020

1 unchanged sentence

10-Q 2.1 5/18/2020

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

10.22 Second Amended and Restated Credit Agreement among HF Foods Group Inc.

25 unchanged sentences

10.31† HF Foods Group Inc.

Severance Plan dated August 2, 2021

Amended and Restated Severance Plan

8-K 10.1 1/5/2023

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

10.32† Employment Agreement between Christine Chang and HF Foods Group Inc., dated as of July 29, 2021

34 unchanged sentences

8-K 10.1 7/14/2022

10.44† Letter Agreement, dated January 17, 2022, by and among HF Food s Group Inc.

and Prudence Kuai

8-K 10.1 1/19/2023

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

10.45 Consent Under Third Amended and Restated Credit Agreement, dated October 26, 2022

2 unchanged sentences

and Caixuan Xu

10-K 10.45 1/31/2023

16.1 Letter from Friedman LLP to the Securities and Exchange Commission dated September 10, 2021

9 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

101* Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K

104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

_______________

* Filed herewith.

4 unchanged sentences

HF Foods Group Inc.

January 31, 2023 By:

March 31, 2023 By:

/s/ Xiao Mou Zhang

1 unchanged sentence

Chief Executive Officer

January 31, 2023 By:

March 31, 2023 By:

/s/ Carlos Rodriguez

4 unchanged sentences

Signature Title Date

/s/ Xiao Mou Zhang Chief Executive Officer and Director January 31, 2023

/s/ Xiao Mou Zhang Chief Executive Officer and Director March 31, 2023

Xiao Mou Zhang

/s/ Russell Libby Chairman of the Board and Director January 31, 2023

/s/ Russell Libby Chairman of the Board and Director March 31, 2023

Russell Libby

/s/ Valerie Chase Director January 31, 2023

/s/ Valerie Chase Director March 31, 2023

Valerie Chase

/s/ Hong Wang Director January 31, 2023

Director January 31, 2023

/s/ Prudence Kuai Director March 31, 2023

Prudence Kuai

/s/ Hong Wang Director March 31, 2023

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 9A. Controls and Procedures