What changed in this filing

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Item 9A. Controls and Procedures

2025-03-17 compared with 2024-03-26 · 101 added, 71 removed, 208 unchanged (45% of the section changed)

19 unchanged sentences

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

We did not design and implement certain review controls with a sufficient precision to prevent or detect a material misstatement, did not consistently perform

sufficient review of journal entries, or consistently retain adequate supporting documentation for financial statement balances and the related footnote disclosures.

Additionally, we did not design and maintain effective controls over certain non-routine transactions or significant management estimates, including the review of underlying data and assumptions for completeness and accuracy.

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

Additionally, we did not design and maintain effective controls over

certain non-routine transactions or significant management estimates, including the review of underlying data and assumptions for completeness and accuracy.

Remediation Activities

1 unchanged sentence

Specifically, we have:

• Hired additional finance and accounting personnel and also provided training in key financial reporting and internal control areas;

• Designed and implemented new entity-level controls (“ELCs”) with greater alignment to the COSO 2013 Internal Controls Framework;

• Established requirements over documentation and retention of appropriate evidence to support the operation of ELCs, business process controls, IT general controls;

• Enhanced the structure, governance, and communication over related party transactions;

• Designed and implemented enhanced review procedures over technical accounting memos for non-routine transactions and complex accounting matters;

• Implemented new enterprise finance and human capital system and evaluated technology alternatives to initiate a change from our legacy inventory and distribution system to better ensure data accuracy, completeness, and continued progress towards an improved operational and control environment;

• Designed and implemented uniform controls across all distribution centers and improved processes around our inventory cycle counts and year-end inventory count procedures;

• Designed and implemented controls over stock compensation, corporate tax, and year-end financial reporting procedures with enhanced precision and control attributes;

• Designed and implemented an enhanced control testing program throughout the period to evaluate our system of internal control to determine whether components of the internal control were present and functioning properly in a more timely manner.

• Internal Controls and Leadership

◦ Accounting, Internal Audit & IT teams

▪ Hired a new CFO in May 2024 with public company experience to execute the finance and accounting transformation planned approach.

▪ Hired new Head of Internal Audit in September 2024 and engaged ITGC and business process control experts to assist the company in remediation efforts.

▪ Hired a new VP, Corporate Controller in February 2025 with extensive experience in internal controls over financial reporting at publicly traded companies and material weakness remediation efforts.

▪ Promoted a VP, Operations who brings 20+ years of industry and operational control standardization experience to lead transformation initiatives.

◦ Oversight & Governance

▪ Established a cross functional Remediation Steering Committee, chaired by the new CFO, to set strategic direction.

▪ Developed a detailed, integrated remediation approach, ensuring senior leadership across all functions (i.e.

Accounting, IT, Finance, Operations, HR and Internal Audit) is actively involved.

• Technology and Data

◦ System Implementation & Automation

▪ Implemented a new inventory and distribution system in several of our distribution centers to improve operational and financial processes, working towards greater accuracy and completeness of financial data.

The remaining distribution centers will implement the new system in FY25.

▪ Legacy applications are set to be retired across all distribution centers in FY25, marking another milestone in our multi-year technology upgrade program.

◦ Standardizing Processes & Compliance Programs

▪ Continued progress on designing and implementing uniform processes across all distribution centers.

▪ Implemented new training programs related to safety, security and compliance through Learning Management System (LMS) application that provides greater visibility into tracking compliance.

We are committed to ensuring that our internal controls over financial reporting are designed and operating effectively.

2 unchanged sentences

Additionally, while we believe these efforts will improve our internal control environment, our remediation is still in progress and subject to ongoing testing of the design and operating effectiveness over a sufficient period of time in order to effectively remediate these material weaknesses.

The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by BDO USA, P.C., an independent registered public accounting firm, as stated in their attestation report, which is included in Part II, Item 8 of this Form 10-K.

The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by BDO USA, P.C., an independent registered public accounting firm, as stated in their attestation report, which is included in Part II, Item 8 of this Annual Report on Form 10-K.

Changes in Internal Controls Over Financial Reporting and Disclosure Controls

Management remains committed to ongoing efforts to address material weaknesses.

Although we will continue to implement measures to remedy our internal control deficiencies, there can be no assurance that our efforts will be successful or avoid potential future material weaknesses.

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 previously identified will continue to exist.

Other than the actions taken to continue our material weaknesses remediation efforts, described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

7 unchanged sentences

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, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as “the financial statements”) and our report dated March 26, 2024 expressed an unqualified opinion thereon.

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, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated March 17, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

16 unchanged sentences

Additionally, the Company did not design and maintain effective controls over the implementation of new IT systems.

• Financial Reporting - 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.

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

Additionally, the Company did not design and maintain effective controls over certain non-routine transactions or significant management estimates, including the review of underlying data and assumptions for completeness and accuracy.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 financial statements, and this report does not affect our report dated March 26, 2024.

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

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report dated March 17, 2025 on those consolidated financial statements.

Definition and Limitations of Internal Control over Financial Reporting

9 unchanged sentences

OTHER INFORMATION.

During the fiscal quarter ended December 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

35 unchanged sentences

S-1/A 4.2 7/28/2017

4.2 Form of Rights Agreement, dated August 8, 2017, by and between American Stock Transfer & Trust Company, LLC and the Registrant

8-K 4.1 8/11/2017

4.2 Form of Unit Purchase Option between the Registrant and Chardan Capital Markets, LLC

S-1/A 4.5 7/28/2017

4.3 Form of Rights Agreement, dated August 8, 2017, by and between American Stock Transfer & Trust Company, LLC and the Registrant

8-K 4.1 8/11/2017

4.4 Preferred Stock Rights Agreement, dated as of April 11, 2023, by and between HF Foods Group Inc.

1 unchanged sentence

8-K 4.1 4/12/2023

4.5 Amendment to Preferred Stock Rights Agreement, dated as of April 11, 2024, by and between HF Foods Group Inc.

and Equiniti Trust Company, LLC (f/k/a American Stock Transfer & Trust Company, LLC), as rights agent

8-A 4.2 4/12/2024

4.6 Form of Indenture

S-3 4.5 9/4/2024

4.7* Description of Registrant ’ s Securities

4 unchanged sentences

8-K 10.9 8/27/2018

10.3† Employment Agreement as amended dated as of August 22, 2018 between HF Foods Group Inc.

and Zhou Min Ni

8-K 10.10 9/13/2018

10.4† Employment Agreement as amended dated as of August 22, 2018 between HF Foods Group Inc.

and Chan Sin Wong

8-K 10.11 9/13/2018

10.5† Employment Agreement as amended dated as of August 22, 2018 between HF Foods Group Inc.

and Jian Ming Ni

8-K 10.12 9/13/2018

10.3 Credit Agreement dated as of January 5, 2012 between Han Feng, Inc.

24 unchanged sentences

10-Q 10.1 5/18/2020

10.15† Letter Agreement between HF Foods Group Inc.

and Russell T.

10-Q 10.2 5/18/2020

10.16 Mutual Rescission Agreement between HF Foods and Rescinding Shareholders dated April 1, 2020

10-Q 10.3 5/18/2020

10.13 Assignment and Assumption of Lease Agreement, dated as of January 21, 2021 between Anheart, Inc.

7 unchanged sentences

10-K 10.27 3/16/2021

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

10.20† Separation Agreement between HF Foods Group Inc.

and Zhou Min Ni, dated February 23, 2021

10-K 10.28 3/16/2021

10.16 Lease Agreement between Yoan Chang Trading, Inc.

3 unchanged sentences

8-K 10.1 6/1/2021

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

10.18† HF Foods Group Inc.

6 unchanged sentences

8-K 10.1 9/9/2021

10.26† Letter Agreement by and between HF Foods Group Inc.

and Valerie P.

Chase, dated December 10, 2021

8-K 5.1 12/15/2021

10.21 Consent, Waiver, Joinder and Amendment No.

16 unchanged sentences

8-K 10.1 4/25/2022

10.33† Separation and Release Agreement, dated May 18, 2022, by and among HF Foods Group Inc.

and Kong Hian Lee

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

8-K 10.1 10/31/2022

10.34† Offer Letter, dated July 8, 2022, by and among HF Foods Group, Inc.

and Carlos A.

10.28 Amendment No.

1 to Third Amended and Restated Credit Agreement, dated as of February 6, 2024

8-K 10.1 2/9/2024

10.35† Letter Agreement, dated January 17, 2022, by and among HF Foods Group Inc.

and Prudence Kuai

10.29† Offer Letter, dated April 22, 2024, by and among HF Foods Group Inc.

and Cindy Yao.

8-K 10.1 4/25/2024

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

10.30 Lease dated July 2, 2018, between Anheart Inc.

and 825 Broadway Realty, LLC, Samayabeneli RE LLC, AS 2 East 30, LLC, 273 Yoco LLC, and UBA 2 East 30, LLC.

8-K 10.1 5/6/2024

10.37† Separation Agreement and Release of Claims, dated March 26, 2021, by and among HF Foods Group Inc.

and Caixuan Xu

10.31 Amendment to Lease, dated as of January 21, 2021, between Anheart, Inc.

and 825 Broadway Realty, LLC, Samayabeneli RE LLC, AS 2 East 30, LLC, 273 Yoco LLC, and UBA 2 East 30, LLC.

8-K 10.2 5/6/2024

10.32 Assignment and Assumption of Lease Agreement, dated as of August 16, 2022 and effective as of April 30, 2024, between Anheart, Inc.

and 273 Fifth Avenue, L.L.C.

8-K 10.3 5/6/2024

10.33† Form of Restricted Stock Unit Award Agreement

S-8 4.2 6/5/2024

10.34† Form of Performance Awards Agreement

S-8 4.3 6/5/2024

10.35† First Amendment to HF Foods Group Inc.

2018 Omnibus Equity Incentive Plan

S-8 4.4 6/5/2024

10.36† Second Amendment to HF Foods Group Inc.

2018 Omnibus Equity Incentive Plan

DEF14A Annex 4/24/2024

10.37† Separation Agreement, effective May 31, 2024, between HF Foods Group Inc.

and Carlos Rodriguez.

8-K 10.1 6/5/2024

10.38† Form of Director Letter Agreement

8-K 10.1 6/28/2024

10.39 Amendment No.

2 to Third Amended and Restated Credit Agreement, dated as of July 15, 2024

10-Q 10.1 11/12/2024

10.40* Amendment No.

3 to Third Amended and Restated Credit Agreement, dated as of September 18, 2024

Incorporated by Reference

Exhibit Number Description Form Exhibit/

Appendix Filing Date

10.41 Lease Agreement between CH Realty IX-NDG Atlanta Freeman Intermodal, L.P., as Landlord, and HF Foods Group, Inc., as Tenant, dated as of September 30, 2024

10-Q 10.2 11/12/2024

10.42 Cooperation Agreement, dated as of November 18, 2024, by and among the Stockholder Related Parties and HF Foods Group, Inc.

8-K 10.1 11/22/2024

10.43† Employment Agreement between HF Foods Group Inc.

and Xi Li n, dated as of December 16, 2024 and effective as of January 1, 2025

8-K 10.1 12/19/2024

10.44 Amendment No.

4 to Third Amended and Restated Credit Agreement, dated as of February 12, 2025

8-K 10.1 2/18/2025

19.1* Insider Trading Policy

21.1* Subsidiaries of Registrant

4 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

32.2** Certification of Chief Financial Officer pursuant to 18 U.S.C.

1 unchanged sentence

97.1 Policy for the Recovery of Erroneously Awarded Compensation

10-K 97.1 3/26/2024

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

8 unchanged sentences

March 17, 2025 By:

/s/ Xiao Mou Zhang

Xiao Mou Zhang

Chief Executive Officer

March 26, 2024 By:

/s/ Felix Lin

Interim Chief Financial Officer;

President and Chief Operating Officer

(Principal accounting and financial officer)

President and Chief Executive Officer

(Principal Executive Officer)

March 17, 2025 By:

/s/ Cindy Yao

Chief Financial Officer

(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Xiao Mou Zhang Chief Executive Officer and Director March 26, 2024

/s/ Xiao Mou Zhang Director March 17, 2025

Xiao Mou Zhang

/s/ Russell Libby Chairman of the Board and Director March 26, 2024

Russell Libby

/s/ Valerie Chase Director March 26, 2024

Valerie Chase

/s/ Prudence Kuai Director March 26, 2024

Prudence Kuai

/s/ Hong Wang Director March 26, 2024

/s/ Lisa Lim Director March 17, 2025

/s/ Maria Ross Director March 17, 2025

/s/ Yujie Wang Director March 17, 2025

/s/ Charlotte Westfall Director March 17, 2025

Charlotte Westfall

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