As of ~~November 13, 2017, 5,872,497~~January 27, 2023, the registrant had 53,706,392 shares of common stock ~~par value $0.001 per share, were issued and~~ outstanding.

~~ATLANTIC ACQUISITION CORP.~~

HF FOODS GROUP INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTER ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~

2022

TABLE OF CONTENTS

	~~Page~~
~~Part I.~~Description				~~Financial Information~~		3Page

PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements		3 1
		Condensed Consolidated Balance Sheets (Unaudited)		3 1
		Condensed Consolidated Statements of ~~Operations~~I ncome and Comprehensive Income (Unaudited)		4 2
		Condensed Consolidated Statements of Cash Flows (Unaudited)		5 3
		Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)		5
		Notes to Unaudited Condensed Consolidated Financial Statements		6
		Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18 25
		Item 3. ~~Quantitative~~	Quantitative and Qualitative Disclosures ~~Regarding~~about Market Risk		19 34
		Item 4.	Controls and Procedures		19 35
~~Part II.~~		~~Other Information~~		21
PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings		36
Item 1A.		Risk Factors		36
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		21 36
Item 3.		~~Item 5. Other Information~~ Defaults Upon Senior Securities		36
Item 4.		~~Item 6. Exhibits~~Mine Safety Disclosures		22 36
~~Signatures~~Item 5.		23 Other Information		36

Item 6.	Exhibits	37

SIGNATURE PAGE		38

PART ~~I –~~I. FINANCIAL ~~STATEMENTS~~

INFORMATION

Item 1. Financial ~~Statements~~

~~Atlantic Acquisition Corp.~~

~~Condensed Balance Sheets~~

September 30, 2017 December 31, 2016
(Unaudited)
ASSETS

Current Assets
Current assets-cash $ 694,798 $ 44,955
Prepaid expenses 10,500 —
Deferred offering costs — 154,820
Total Current Assets 705,298 199,775

Cash and marketable securities held in Trust Account 45,185,462 —
Total Assets $ 45,890,760 $ 199,775

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable $ 35,175 $ 475
Accrued state franchise taxes 21,021 —
Note payable to related parties — 175,000
Total Current Liabilities 56,196 175,475

Deferred underwriting compensation 1,106,250 —
Total Liabilities 1,162,446 175,475

Commitments and Contingencies
Common stocks subject to possible conversion; 3,894,933 and -0- (at conversion value of $10.20 per share) 39,728,313 —

Stockholders’ Equity
Preferred stock, $.0001 par value, 1,000,000 shares authorized — —
Common Stock, $.0001 par value, 30,000,000 shares authorized , 1,977,564 and 1,150,000⁽¹⁾ common stocks issued and outstanding (excluding 3,894,933 and -0- shares subject to redemption) 198 115
Additional paid- in capital 5,001,622 24,885
Accumulated deficit (1,819 ) (700 )
Total Stockholders’ Equity 5,000,001 24,300

Total Liabilities and Stockholders’ Equity $ 45,890,760 $ 199,775

~~(1)~~

This number includes an aggregate of up to 150,000 shares of common stock that were subject to forfeiture if the over-allotment option was not exercised in full by the underwriters. An aggregate of 43,753 shares of common stock were cancelled after partial exercise of the overallotment option by the underwriters.

Statements.

HF FOODS GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(In thousands, except share data)	June 30, 2022		December 31, 2021
ASSETS
CURRENT ASSETS
Cash	$	18,818	$	14,792
Accounts receivable, net	42,700		36,281
Accounts receivable - related parties	878		249
Inventories	130,198		102,690
Other current assets	10,036		5,559

TOTAL CURRENT ASSETS	202,630		159,571
Property and equipment, net	142,006		145,908
Operating lease right-of-use assets	13,999		11,664
Long-term investments	2,732		2,462
Customer relationships, net	163,031		159,161
Trademarks and other intangibles, net	39,203		35,891
Goodwill	85,118		80,257
Other long-term assets	2,524		2,032
TOTAL ASSETS	$	651,243	$	596,946
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued not presented for payment	$	20,183	$	17,834
Line of credit	60,017		55,293
Accounts payable	57,107		57,745
Accounts payable - related parties	2,101		1,941
Current portion of long-term debt, net	6,638		5,557
Current portion of obligations under finance leases	2,371		2,274
Current portion of obligations under operating leases	3,494		2,482
Accrued expenses and other liabilities	12,447		12,138

TOTAL CURRENT LIABILITIES	164,358		155,264
Long-term debt, net of current portion	118,511		81,811
Promissory note payable - related party	—		4,500
Obligations under finance leases, non-current	11,613		11,676
Obligations under operating leases, non-current	10,602		9,251
Deferred tax liabilities	36,780		39,455
Lease guarantee liability, net of current portion	5,625		—
TOTAL LIABILITIES	347,489		301,957
Commitments and contingencies (Note 15)
SHAREHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021	—		—
Common stock, $0.0001 par value, 100,000,000 shares authorized, 53,706,392 shares issued and outstanding as of June 30, 2022 and December 31, 2021	5		5
Additional paid-in capital	597,738		597,227
Accumulated deficit	(298,606)		(306,284)
TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.	299,137		290,948
Noncontrolling interests	4,617		4,041
TOTAL SHAREHOLDERS’ EQUITY	303,754		294,989
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	651,243	$	596,946

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

~~Atlantic Acquisition Corp.~~

~~Condensed Statements of Operations~~

~~(Unaudited)~~

For Three Months ended September 30, For The Nine Months Ended For The Period From May 19, 2016 (Inception) Through
2017 2016 September 30, 2017 September 30, 2016

General and administrative expenses $ (30,478 ) $ (100 ) $ (30,560 ) $ (625 )
State franchise taxes (21,021 ) — (21,021 ) —
Interest income on cash and marketable securities held in trust 50,462 — 50,462 —
Net Loss (1,037 ) (100 ) (1,119 ) (625 )

Basic and diluted weighted average shares outstanding⁽¹⁾ 1,467,996 1,000,000 1,157,713 1,000,000
Basic and diluted net loss per share $ (0.02 ) $ (0.00 ) $ (0.02 ) $ (0.00 )

~~(1)~~

Excludes an aggregate of up to 3,894,933 common shares subject to redemption at September 30, 2017 and 150,000 shares of common stock that were subject to forfeiture if the over-allotment option is not exercised in full by the underwriter at September 30, 2016. An aggregate of 43,753 shares of common stock were cancelled after partial exercise of the overallotment option by the underwriters.

HF FOODS GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except share and per share data)	2022		2021		2022		2021
Net revenue - third parties	$	298,138	$	190,460	$	574,289	$	347,450
Net revenue - related parties	1,504		3,086		3,568		5,476
TOTAL NET REVENUE	299,642		193,546		577,857		352,926

Cost of revenue - third parties	245,716		154,920		471,349		282,559
Cost of revenue - related parties	1,356		3,492		3,211		5,805
TOTAL COST OF REVENUE	247,072		158,412		474,560		288,364

GROSS PROFIT	52,570		35,134		103,297		64,562

Distribution, selling and administrative expenses	45,843		29,790		86,251		57,879

INCOME FROM OPERATIONS	6,727		5,344		17,046		6,683

Other Expense (Income)

Interest expense	1,549		928		2,827		1,830
Other income	(163)		(428)		(939)		(864)
Change in fair value of interest rate swap contracts	(208)		112		(566)		(1,319)
Lease guarantee expense	(42)		—		5,889		—
Total Other Expense (Income), net	1,136		612		7,211		(353)

INCOME BEFORE INCOME TAX PROVISION	5,591		4,732		9,835		7,036

Income tax provision	1,097		1,416		2,201		2,062
NET INCOME AND COMPREHENSIVE INCOME	4,494		3,316		7,634		4,974
Less: net income (loss) attributable to noncontrolling interests	(70)		(91)		(44)		209
NET INCOME AND COMPREHENSIVE INCOME ATTRIBUTABLE TO HF FOODS GROUP INC.	$	4,564	$	3,407	$	7,678	$	4,765

EARNINGS PER COMMON SHARE - BASIC	$	0.08	$	0.07	$	0.14	$	0.09
EARNINGS PER COMMON SHARE - DILUTED	$	0.08	$	0.07	$	0.14	$	0.09

WEIGHTED AVERAGE SHARES - BASIC	53,706,392		51,913,411		53,706,392		51,913,411
WEIGHTED AVERAGE SHARES - DILUTED	53,900,883		51,913,411		53,927,957		51,913,411

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

~~Atlantic Acquisition Corp.~~

~~Condensed Statements of Cash Flows~~

~~(Unaudited)~~

For The Nine Months Ended September 30, 2017 For The Period From May 19 (Inception) Through September 30, 2016

Cash flow from operating activities
  Net loss $ (1,119 ) $ (625 )
  Adjustments to reconcile net loss to net cash used in operating activities:
    Interest income on cash and marketable securities held in trust (50,462 ) —
  Change in operating assets and liabilities:
    Change in prepaid expenses (10,500 ) —
    Change in accounts payable 34,700 475
    Change in accrued state franchise taxes 21,021 —
Net cash used in operating activities (6,360 ) (150 )

Cash flows from investing activities
  Investment of cash and marketable securities in Trust Account (45,135,000 ) —
Net cash used in investing activities (45,135,000 ) —

Cash flow from financing activities
  Proceeds from sale of public units during the public offering 40,000,000 —
  Proceeds from sale of private units concurrent with the public offering 3,025,000 —
  Proceeds from sale of underwriter’s unit purchase option 100 —
  Proceeds from sale of units upon partial exercise of overallotment option 4,250,000 —
  Proceeds from sale of private units upon partial exercise of overallotment option 212,500 —
  Payment of offering costs (1,696,397 ) (118,621 )
  Proceeds from note payable to related party — 175,000
  Proceeds from sale of common stock — 25,000
Net cash provided by financing activities 45,791,203 81,379

Net Change in Cash and Cash Equivalents 649,843 81,229
  Cash at beginning of period 44,955 —
Cash at end of period $ 694,798 $ 81,229

Supplemental disclosure of non-cash financing activities
  Repayment of old note payable by new note holder (Note 5) $ 175,000 $ —
  Conversion of note payable into private units $ 175,000 $ —

Supplemental disclosure of non-cash investing activities
    Proceeds from issuance of shares in May 2017 paid directly by new Shareholders to repurchase initial shareholder shares $ 25,000 $ —

HF FOODS GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended June 30,
(In thousands)	2022		2021
Cash flows from operating activities:
Net income	$	7,634	$	4,974
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	11,859		9,490
Gain from disposal of property and equipment	(1,351)		(49)
Provision for doubtful accounts	111		(23)
Allowance for inventories			67
Deferred tax benefit	(2,674)		(1,305)
Income from equity method investment	(270)		(49)
Change in fair value of interest rate swap contracts	(565)		(1,319)
Stock-based compensation	511		—
Amortization of debt issuance and other debt-related costs	144		—
Non-cash lease expense	1,579		393
Lease guarantee expense	5,889		—
Other operating expense	501		—
Changes in operating assets and liabilities (excluding effects of acquisitions):
Accounts receivable, net	(6,529)		(5,428)
Accounts receivable - related parties	(629)		(660)
Inventories	(13,662)		(5,594)
Advances to suppliers - related parties	—		197
Other current assets	(4,199)		794
Other long-term assets	(494)		(558)
Accounts payable	16,799		13,929
Accounts payable - related parties	159		60
Operating lease liabilities	(1,551)		(271)
Accrued expenses and other liabilities	396		(489)
Net cash provided by operating activities	13,658		14,159
Cash flows from investing activities:
Purchase of property and equipment	(4,028)		(664)
Proceeds from disposal of property and equipment	7,667		69
Payment made for acquisition of noncontrolling interest	—		(5,000)
Payment made for acquisition of Sealand	(34,849)		—
Payment made for acquisition of Great Wall Group	(17,445)		—
Net cash used in investing activities	(48,655)		(5,595)
Cash flows from financing activities:
Checks issued not presented for payment	2,348		179
Proceeds from line of credit	625,656		358,185
Repayment of line of credit	(620,783)		(357,418)
Proceeds from long-term debt	45,952		—
Repayment of long-term debt	(7,882)		(2,976)
Payment of debt financing costs	(579)		—
Repayment of promissory note payable - related party	(4,500)		(1,500)
Repayment of obligations under finance leases	(1,243)		(1,039)
Proceeds from noncontrolling interest shareholder	240		—
Cash distribution to shareholders	(186)		(151)
Net cash provided by (used in) financing activities	39,023		(4,720)
Net increase in cash	4,026		3,844
Cash at beginning of the period	14,792		9,581
Cash at end of the period	$	18,818	$	13,425

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

~~Atlantic Acquisition Corp.~~

~~Notes to Unaudited Condensed Financial Statements~~

~~Note~~

HF FOODS GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(UNAUDITED)


	Six Months Ended June 30,
(In thousands)	2022		2021

Supplemental disclosure of cash flow data:
Cash paid for interest	$	1,883	$	1,478
Cash paid for income taxes	$	8,525	$	1,898
Supplemental disclosure of non-cash operating, investing and financing activities:
Right of use assets obtained in exchange for operating lease liabilities	$	3,913	$	2,108
Property acquired in exchange for finance leases	$	1,220	$	8,468
Property and equipment purchases from notes payable	$	—	$	257
Intangible asset acquired in exchange for noncontrolling interests	$	566	$	—

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

HF FOODS GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(UNAUDITED)


	Common Stock			Additional Paid-in Capital	Accumulated Deficit		Total Shareholders’ Equity Attributable to HF Foods Group Inc.		Noncontrolling Interests		Total Shareholders’ Equity
(In thousands, except for shares)	Number of Shares	Amount
Balance at January 1, 2021	51,913,411	$	5		$	587,579	$	(328,429)	$	259,155	$	4,367	$	263,522
Net income	—	—			—		1,358		1,358		300		1,658
Distribution to shareholders	—	—			—		—		—		(73)		(73)
Balance at March 31, 2021	51,913,411	5			587,579		(327,071)		260,513		4,594		265,107
Net income (loss)	—	—			—		3,407		3,407		(91)		3,316
Acquisition of noncontrolling interest	—	—			(3,856)		—		(3,856)		(1,144)		(5,000)
Distribution to shareholders	—	—			—		—		—		(77)		(77)
Balance at June 30, 2021	51,913,411	$	5		$	583,723	$	(323,664)	$	260,064	$	3,282	$	263,346








Balance at January 1, 2022	53,706,392	$	5		$	597,227	$	(306,284)	$	290,948	$	4,041	$	294,989
Net income	—	—			—		3,114		3,114		26		3,140
Capital contributions by shareholders	—	—			—		—		—		806		806
Distribution to shareholders	—	—			—		—		—		(89)		(89)
Stock-based compensation	—	—			290		—		290		—		290
Balance at March 31, 2022	53,706,392	5			597,517		(303,170)		294,352		4,784		299,136
Net income (loss)	—	—			—		4,564		4,564		(70)		4,494
Distribution to shareholders	—	—			—		—		—		(97)		(97)
Stock-based compensation	—	—			221		—		221		—		221
Balance at June 30, 2022	53,706,392	$	5		$	597,738	$	(298,606)	$	299,137	$	4,617	$	303,754

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

HF FOODS GROUP INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — - ORGANIZATION AND BUSINESS DESCRIPTION

Organization and ~~Plan~~General

HF Foods Group Inc. and subsidiaries (collectively “HF Group”, or the “Company”) is an Asian foodservice distributor that markets and distributes fresh produce, seafood, frozen and dry food, and non-food products to primarily Asian restaurants and other foodservice customers throughout the United States. The Company's business consists of ~~Business Operations~~

~~Organization~~

~~Atlantic Acquisition Corp. (the “Company”) was incorporated in Delaware on May 19, 2016 as a blank check company whose objective~~one operating segment, which is ~~to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar Business Combination,~~also its one or more businesses or entities (a “Business Combination”). The Company’s efforts to identify a prospective target business will not be limited to any particular industry or geographic region, although the Company initially intends to focus on target businesses being operated by and/or serving ethnic minoritiesreportable segment: HF Group, which operates solely in the United ~~States, especially within Asian-American communities.~~

~~At September~~States. The Company's customer base consists primarily of Chinese and Asian restaurants, and it provides sales and service support to customers who mainly converse in Mandarin or Chinese dialects.

On December 30, ~~2017,~~2021, the Company ~~had not yet commenced any~~completed the acquisition of Great Wall Seafood Supply, Inc., Great Wall Restaurant Supplier, Inc., and First Mart Inc. (collectively the “Great Wall Group”), and substantially all of the operating assets of the Great Wall Group’s seafood and restaurant products sales, marketing, and distribution businesses (the “Great Wall Acquisition”). The acquisition was completed as part of the Company’s strategy to develop a national footprint through expansion into the Midwest, Southwest and Southern regions of the United States. The total acquisition price for all operating assets and inventory was approximately $68.2 million.

On April 29, 2022, the Company completed the acquisition of substantially all of the assets of Sealand Food, Inc. ("Sealand"). This included the acquisition of equipment, machinery and vehicles for cash consideration of $20.0 million, inventory for cash consideration of $14.4 million, and additional fixed assets for cash consideration of approximately $0.5 million (the "Sealand Acquisition"). The acquisition was completed as part of the Company’s strategy to develop a national footprint through continued expansion in the East Coast of the United States, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

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

Independent Investigation Update

In March 2020, an analyst report suggested certain improprieties in the Company’s operations. ~~All activity through September 30, 2017 relates~~These allegations became the subject of two putative stockholder class action lawsuits which have subsequently been dismissed. In response to the ~~Company’s formation and~~allegations in the ~~public offering described below.~~

~~Plan~~analyst report, the Company's Board of ~~Business Operation~~

~~Financing~~

~~The registration statement for~~Directors appointed a Special Investigation Committee of Independent Directors (the “Special Investigation Committee”) to conduct an independent investigation with the ~~Company’s initial public offering (the “Public Offering”~~assistance of independent legal counsel. As a result of the investigation, the SIC determined certain factual findings. Management evaluated the factual findings, as ~~described in Note 3) was declared effective~~presented by the ~~United States~~SIC, and analyzed them to determine which had impact on the historical financial statements, including disclosures, of the Company.

In addition to the independent investigation, the Securities and Exchange Commission (“SEC”) on August 8, 2017. On August 14, 2017, the Company consummated the Public Offering of 4,000,000 units at $10.00 per unit (the “Public Units’) and sold to initial shareholders and Chardan Capital Markets, LLC 320,000 units at $10.00 per unit (the “Private Units”) ininitiated a ~~private placement (Note 4). The Company received net proceeds of approximately $41,476,000 from the sale of the Public Units, the Private Units and the proceeds from the note.~~

On August 16, 2017, the underwriters exercised the over-allotment option in part. The closing of the sale 425,000 over-allotment option Units generating gross proceeds of $4,250,000 took place on August 21, 2017. Simultaneously with the sale of the over-allotment units, the Company consummated the private sale of an additional 21,250 Private Units, generating gross proceeds of $212,500.

~~Trust Account~~

Upon the closing of the Public Offering and the private placement (including the shares sold upon exercise of the over-allotment option), an aggregate of $45,135,000 was placed in a trust account (the “Trust Account”) with American Stock Transfer & Trust LLC acting as trustee. The funds held in the Trust Account can be invested in United States government treasury bills, bonds or notes, having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act until the earlier of (i) the consummation of the Company’s initial Business Combination and (ii) the Company’s failure to consummate a Business Combination within 18 months from the closing of the Public Offering. Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Additionally, the interest earned on the Trust Account balance may be released to the Company to pay the Company’s tax obligations.

~~Business Combination~~

Pursuant to Nasdaq listing rules, the Company’s Initial Business Combination must occur with one or more target businesses having an aggregate fair market value equal to at least 80% of the value of the funds in the Trust Account (excluding any deferred underwriter’s fees and taxes payable on the income earned on the Trust Account), which the Company refers to as the 80% test, at the time of the execution of a definitive agreement for our initial Business Combination, although the Company may structure a Business Combination with one or more target businesses whose fair market value significantly exceeds 80% of the trust account balance. If the Company is no longer listed on Nasdaq, it will not be required to satisfy the 80% test.

The Company currently anticipates structuring a Business Combination to acquire 100% of the equity interests or assets of the target business or businesses. The Company may, however, structure a Business Combination where the Company merges directly with the target business or where the Company acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but the Company will only complete such Business Combination if the post-transaction company owns 50% or more of the outstanding voting securities of the target or otherwise owns a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% test.

The Company will either seek stockholder approval of any Business Combination at a meeting called for such purpose at which stockholders may seek to convert their shares into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid, or provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid. These shares have been recorded at redemption value and are classified as temporary equity, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination only if it will have net tangible assets of at least $5,000,001 upon consummation of the Business Combination and, solely if stockholder approval is sought, a majority of the outstanding common sharesformal, non-public investigation of the Company, ~~voted are voted in favor of the Business Combination.~~

Notwithstanding the foregoing, a public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 25% or more of the common shares sold in the Public Offering. Accordingly, all shares purchased by a holder in excess of 25% of the shares sold in the Public Offering will not be converted to cash. In connection with any stockholder vote required to approve any Business Combination, the Initial Stockholders will agree (i) to vote any of their respective shares, including the common shares sold to the Initial Stockholders in connection with the organization of the Company (the “Initial Shares”), common shares included in the Private Units to be sold in the Private Placement, and any common shares which were initially issued in connection with the Public Offering, whether acquired in or after the effective date of the Public Offering, in favor of the initial Business Combination and (ii) not to convert such respective shares into a pro rata portion of the Trust Account or seek to sell their shares in connection with any tender offer the Company engages in.

~~Liquidation~~

Pursuant to the Company’s Certificate of Incorporation, if the Company is unable to complete its initial Business Combination within 18 months from the date of the Public Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of common stock and the ~~Company’s board of directors, dissolve~~SEC informally requested, and ~~liquidate. However, if the Company anticipates that it may not be able~~later issued a subpoena for, documents and other information. The subpoena relates to ~~consummate its initial Business Combination within 18 months, the Company may,~~ but is not obligated to, extend the period of time to consummate a Business Combination up to two times, each by an additional three months (for a total of up to 24 months to complete a Business Combination). Pursuantnecessarily limited to the ~~terms of~~matters identified in the ~~Company’s amended and restated articles of incorporation~~class action lawsuits. The Special Investigation Committee and the ~~trust agreement~~Company are cooperating with the SEC. The SEC investigation is still ongoing.

As with any SEC investigation, there is also the possibility of potential fines and penalties. At this time, however, there has not been any demand made by the SEC nor is it possible to be entered into between the Company and American Stock Transfer & Trust Company, LLC, in order to extend the time available for the Company to consummate its initial Business Combination, the Company’s insiders or their affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the Trust Account $800,000, or $920,000 if the underwriters’ over-allotment option is exercised in full ($0.20 per share in either case), on or prior to the date of the applicable deadline, up to an aggregate of $1,600,000 (or $1,840,000 if the underwriters’ over-allotment option is exercised in full), or $0.40 per share. The insiders will receive a non-interest bearing, unsecured promissory note equal toestimate the amount of any such deposit that will not be repaid in the event that the Company is unable to close a Business Combination unless there are funds available outside the Trust Account to do so. Such notes would either be paid upon consummation of our initial Business Combination, or, at the lender’s discretion, converted upon consummation of our Business Combination intofines and penalties, should they occur. See Note 15 - Commitments and Contingencies for additional private units at a price of $10.00 per unit. The Company’s stockholders have approved the issuance of the private units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time of the consummation of our initial Business Combination. In the event that the Company receives notice from its insiders five days prior to the applicable deadline of their intent to effect an extension, the Company intends to issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, the Company intends to issue a press release the day after the applicable deadline announcing whether or not the funds had been timely deposited. The Company’s insiders and their affiliates or designees are not obligated to fund the Trust Account to extend the time for the Company to complete its initial Business Combination. To the extent that some, but not all, of the Company’s insiders, decide to extend the period of time to consummate its initial Business Combinations, such insiders (or their affiliates or designees) may deposit the entire amount required. If the Company is unable to consummate an initial Business Combination and is forced to redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account, each holder will receive a pro rata portion of the amount then in the Trust Account. Holders of rights will receive no proceeds in connection with the liquidation. The Initial Stockholders and the holders of Private Units will not participate in any redemption distribution with respect to their initial shares and Private Units, including the common stock included in the Private Units.

information.

To the extent the Company is unable to consummate a Business Combination, it will pay the costs of liquidation from the remaining assets outside of the Trust Account. If such funds are insufficient, Wai Fun Cheng, Ren Hua Zheng, Richard Xu and Tom W. Su have committed to pay the funds necessary to complete such liquidation and have agreed not to seek repayment of such expenses.

~~Emerging Growth Company~~

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) permits emerging growth companies to delay complying with new or revised financial accounting standards that do not yet apply to private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act). The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

~~Note~~

NOTE 2 ~~— Significant Accounting Policies~~

- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of ~~presentation~~

Presentation and Principles of Consolidation

The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim accompanyingconsolidated financial statements have been prepared in accordance with GAAP for interim financial ~~statements~~information pursuant to the rules and ~~Article 8 of Regulation S-X. They do not include all~~regulations of the ~~information~~SEC and ~~notes required by GAAP for complete financial statements.~~have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring ~~adjustments)~~accruals) considered necessary for a fair presentation have been ~~made that~~

included. These financial statements are ~~necessary to present fairly~~condensed and should be read in conjunction with the audited financial ~~position,~~statements and notes thereto for the ~~results of its operations~~fiscal years ended December 31, 2021 and ~~its cash flows.~~2020. Operating results ~~as presented~~for the three and six months ended June 30, 2022 are not necessarily indicative of the results tothat may be expected for ~~a full year.~~

~~Cash~~the year ending December 31, 2022.

The accompanying consolidated financial statements include the accounts of HF Group and ~~Cash Equivalents~~

certain variable interest entities for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interest in its consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entity by the respective noncontrolling party.

Variable Interest Entities

GAAP provides guidance on the identification of VIEs and financial reporting for entities over which control is achieved through means other than voting interests. The Company evaluates each of its interests in an entity to determine whether or not the investee is a VIE and, if so, whether the Company is the primary beneficiary of such VIE. In determining whether the Company is the primary beneficiary, the Company considers ~~all short-term investments with an original maturity~~if the Company (1) has power to direct the activities that most significantly affect the economic performance of ~~three months or less when purchased~~the VIE, and (2) receives the economic benefits of the VIE that could be significant to the VIE. If deemed the primary beneficiary, the Company consolidates the VIE.

Noncontrolling Interests

GAAP requires that noncontrolling interests in subsidiaries and affiliates be ~~cash equivalents. There were no cash equivalents as~~reported in the equity section of ~~September~~the Company’s condensed consolidated balance sheet. In addition, the amounts attributable to the net income of those subsidiaries are reported separately in the condensed consolidated statements of income and comprehensive income.

As of June 30, ~~2017~~2022 and December 31, ~~2016.~~

~~Deferred Offering Costs~~

Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and that were recorded deferred offering costs on the balance sheet and were charged to stockholders’2021, noncontrolling interest equity ~~upon the completion~~consisted of the ~~Public Offering.~~

~~Fair value~~following:

($ in thousands) Ownership of
Noncontrolling
Interest June 30,
2022 December 31,
2021
HF Foods Industrial, Inc. ("HFFI") 45.00% $ 691 $ 462
Min Food, Inc. 39.75% 1,563 1,363
Monterey Food Service, LLC 35.00% 452 453
Ocean West Food Services, LLC 32.50% 1,820 1,763
Syncglobal Inc.(a)
43.00% 91 —
Total $ 4,617 $ 4,041

_______________

(a)During the three months ended March 31, 2022, the Company entered into a joint venture with Syncglobal Inc. contributing $0.6 million and acquiring developed technology. During the three months ended June 30, 2022, the joint venture began to wind down operations, accordingly, the developed technology was fully impaired. See Note 8 - Goodwill and Intangibles for additional information.

Uses of ~~financial instruments~~

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.

~~Loss Per Common Share~~

Basic earnings (loss) per common share is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding during the period, excluding ordinary shares subject to compulsory repurchase by the Company. Diluted earnings per common share is computed by dividing net earnings by the weighted average number of common shares outstanding, plus to the extent dilutive, the incremental number of common shares to settle rights and other ordinary share equivalents (currently none outstanding), as calculated using the treasury stock method. Shares of common stock subject to possible conversion at September 30, 2017, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic and diluted loss per shares since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of (1) rights sold in the Offering and private placement that convert into 476,625 shares of Class A common stock, and (2) 250,000 of Class A common stock and rights that convert into 25,000 shares of Class A common stock in the unit purchase option sold to the underwriter, in the calculation of diluted income per share, since the conversion of the rights into shares of common stock is contingent upon the occurrence of future events. As a result and the Company’s loss position, diluted loss per common share is the same as basic loss per common share for the periods ended September 30, 2017 and 2016.

Estimates

~~Use of Estimates~~

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during ~~the~~each reporting period. Actual results could differ from those estimates.

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

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 (“ASU 2016-13”), Measurement of Credit Losses on Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires companies to measure credit ~~risk~~

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

November 2019 in “Codification Improvements to Topic 326, Financial ~~instruments that potentially subject~~Instruments-Credit losses”. This guidance is effective for fiscal years beginning after December 15, 2019, including those interim periods within those fiscal years. For emerging growth companies, the effective date has been extended to fiscal years beginning after December 15, 2022. The Company will adopt this ASU within the annual reporting period ending as of December 31, 2022 with an effective date of January 1, 2022 because, as of December 31, 2022, the Company will no longer be an emerging growth company. The Company is currently assessing the impact of adopting this standard, but based upon its preliminary assessment, does not expect the adoption of this guidance to ~~concentration~~have a material impact on its consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The guidance requires an acquirer to, at the date of ~~credit risk consist~~acquisition, recognize and measure the acquired contract assets and contract liabilities acquired in the same manner that they were recognized and measured in the acquiree's financial statements before the acquisition. This guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date. The Company is in the process of ~~cash accounts in~~assessing the impact of this ASU on its future consolidated financial statements, but does not expect it to have a ~~financial institution which, at times may exceed the Federal depository insurance coverage of $250,000.~~ material impact.

NOTE 3 - VARIABLE INTEREST ENTITIES

The Company has ~~not experienced losses on these accounts and management believes~~three VIEs for which the Company is not ~~exposed~~the primary beneficiary and therefore does not consolidate, and 14 VIEs for which the Company was the primary beneficiary and consolidates. The VIEs are summarized as follows noting which VIE's the Company no longer has transactions with in 2022:

•Unconsolidated VIEs (collectively "Unconsolidated VIEs"):

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

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

•AnHeart, Inc. ("AnHeart")

•Consolidated VIEs (collectively "Consolidated VIEs"):

•FUSO Trucking LLC ("FUSO")

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

•Anfu, Inc.

•Anshun, Inc.

•Chen Enterprises (until December 2020)

•Georgia Kam (until December 2020)

•Inchoi, Inc.

•Malways, Inc.

•Rousafe

•S&P

•SNP

•Suntone

•THLI, Inc. (until December 2020)

•THLR, Inc. (until December 2020)

•TWRR, Inc. (until December 2020)

Consolidated VIEs

FUSO

FUSO was established solely to ~~significant risks on such accounts.~~

~~Income Taxes~~

provide exclusive trucking services to the Company. The entity lacks sufficient equity to finance its activities without additional subordinated financial support from the Company, and the Company has the power to direct the VIEs’ activities. In addition, the Company receives the economic benefits from the entity and has concluded that the Company is the primary beneficiary. The carrying amounts of the assets, liabilities, the results of operations and cash flows of

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

Staffing Agencies

The Staffing Agencies were set up by an employee of the Company, or their relatives, and provided temporary labor services exclusively to the Company at the direction of the Company. There were no other substantive business activities of the Staffing Agencies. There were immaterial assets held, immaterial liabilities owed by the Staffing Agencies and immaterial equity. The Company has determined it was the primary beneficiary for the Staffing Agencies through December 31, 2021 as it controlled how and when the labor force would be utilized. The Company did not have any guarantees, commitments or other forms of financing to the Staffing Agencies. Beginning January 1, 2022, the Company no longer has involvement with any of the Staffing Agencies.

Unconsolidated VIEs

Revolution Industry and UGO

Revolution Industry was established to produce egg roll mix for the Company. UGO was originally designed to be an online marketplace for various Asian goods. Revolution Industry and UGO were thinly capitalized and were not able to finance their activities without additional subordinated support.The former Co-CEO's (Mr. Ni) son, as sole equity holder of Revolution Industry, had unilateral control over the ongoing activities of Revolution Industry and significantly benefited from their operations. Therefore, the Company is not the primary beneficiary for Revolution Industry. The former Co-CEO (Mr. Ni) and his niece, as equity holders, had unilateral control over the ongoing activities of UGO and significantly benefited from its operations. Therefore, the Company is not the primary beneficiary for UGO.

Revolution Industry and UGO are also related parties and were generally the Company’s suppliers or customers and the Company did not have other involvement with these entities. Therefore, the Company’s exposure to loss due to its involvement with these entities was limited to amounts due from these entities. The Company did not have any guarantees, commitments, or other forms of financing with these entities. All transactions with Revolution Industry and UGO ceased in 2021, therefore, these entities are no longer considered VIEs as of June 30, 2022. Related party transactions, such as purchases of goods and services, with Revolution Industry and UGO are disclosed in Note 13 - Related Party Transactions.

AnHeart

AnHeart, Inc. ("AnHeart") was previously a subsidiary of the Company designed to sell traditional Chinese medicine, sold to a third-party in February 2019. As discussed in Note 15 - Commitments and Contingencies, after the sale, the Company continued to provide a guarantee for all rent and related costs associated with two leases of AnHeart in Manhattan, New York. The Company reassessed its relationship with AnHeart and determined that AnHeart is a VIE as a result of the guarantee. However, the Company concluded it was not the primary beneficiary of AnHeart because it does not have the power to direct the activities of AnHeart that most significantly impact AnHeart's economic performance. Therefore, the Company is not the primary beneficiary for AnHeart. Please refer to Note 15 - Commitments and Contingencies for additional information regarding the Company's maximum exposure to loss to AnHeart.

NOTE 4 - REVENUE

The Company recognizes revenue from the sale of products when control of each product passes to the customer and the customer accepts the goods, which occurs at delivery. Sales taxes invoiced to customers and remitted to government authorities are excluded from net sales.

The Company follows ASC Topic 606 ("ASC 606"), Revenue from Contracts with Customers. The Company recognizes revenue that represents the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfer to a customer. The Company’s contracts contain performance obligations which are satisfied when customers have physical possession of each product. The Company’s revenue streams are recognized at a specific point in time.

For the three and six months ended June 30, 2022 and 2021, revenue recognized from performance obligations related to prior periods was immaterial. Revenue expected to be recognized in any future periods related to remaining performance obligations is immaterial.

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


	Three Months Ended June 30,								Six Months Ended June 30,
($ in thousands)	2022				2021				2022				2021
Asian Specialty	$	75,337	25	%	$	57,361	30	%	$	150,013	26	%	$	107,841	31	%
Commodity	15,427		5	%	11,284		6	%	31,352		5	%	23,417		7	%
Fresh Produce	31,076		10	%	23,532		12	%	60,955		11	%	45,125		13	%
Meat and Poultry	63,109		21	%	53,564		28	%	124,025		22	%	91,612		26	%
Packaging and Other	21,296		7	%	16,417		8	%	43,309		7	%	31,551		9	%
Seafood	93,397		32	%	31,388		16	%	168,203		29	%	53,380		14	%
Total	$	299,642	100	%	$	193,546	100	%	$	577,857	100	%	$	352,926	100	%

NOTE 5 - BALANCE SHEET COMPONENTS

Accounts receivable, net consisted of the following:


(In thousands)	June 30, 2022		December 31, 2021
Accounts receivable	$	43,478	$	37,121
Less: allowance for doubtful accounts	(778)		(840)
Accounts receivable, net	$	42,700	$	36,281

Movement of allowance for doubtful accounts is as follows:


	Six Months Ended June 30,
(In thousands)	2022		2021
Beginning balance	$	840	$	909
Increase (decrease) in provision for doubtful accounts	(54)		(23)
Write off	(8)		(162)
Ending balance	$	778	$	724

Long-term investments consisted of the following:


($ in thousands)	Ownership as of June 30, 2022	June 30, 2022		December 31, 2021
Asahi Food, Inc.	49%	$	932	$	662
Pt. Tamron Akuatik Produk Industri ("Tamron")	12%	1,800		1,800
Total		$	2,732	$	2,462

The investment in Tamron is accounted for ~~income taxes~~using the measurement alternative under ASC ~~740 Income Taxes~~Topic 321 (“ASC ~~740”~~321”), Investments – Equity Securities, which is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments, if any. The investment in Asahi Food, Inc. is accounted for under the equity method due to the fact that the Company has significant influence but does not exercise control over this investee. The Company determined there was no impairment as of June 30, 2022 and December 31, 2021 for these investments.

Property and equipment, net consisted of the following:


(In thousands)	June 30, 2022		December 31, 2021
Automobiles	$	34,787	$	31,577
Buildings	70,805		68,998
Building improvements	11,592		19,004
Furniture and fixtures	409		211
Land	49,920		51,412
Machinery and equipment	16,574		14,114
Total property and equipment at cost	184,087		185,316
Less: accumulated depreciation	(42,081)		(39,408)
Property and equipment, net	$	142,006	$	145,908

Depreciation expense was $2.2 million and $2.0 million for the three months ended June 30, 2022 and 2021, respectively. Depreciation expense was $4.4 million and $4.0 million for the six months ended June 30, 2022 and 2021, respectively.

NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows the provisions of ASC Topic 820 ("ASC 820"), Fair Value Measurements and Disclosures. ASC ~~740~~820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

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

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

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

Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized at the end of the reporting period in which the transfer occurs. There were no transfers between fair value levels in any of the periods presented herein.

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

The carrying value of the variable rate debt approximates its fair value because of the variability of interest rates associated with these instruments. For the Company's fixed rate debt, the fair values were estimated using discounted cash flow analyses, based on the current incremental borrowing rates for similar types of borrowing arrangements.

As of June 30, 2022, the carrying value of the fixed rate debt was $5.0 million and the fair value was $3.7 million. As of December 31, 2021, the carrying value of the fixed rate debt, which included the Company's promissory note payable to related party, was $15.0 million and the fair value was $12.2 million. The variable and fixed rate debt are both classified as Level 2.

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

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

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

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

NOTE 7 - ACQUISITIONS

Sealand Acquisition

On April 29, 2022, the Company completed the acquisition of substantially all of the operating assets of Sealand including equipment, machinery and vehicles. The acquisition was completed to expand the Company's territory along the East Coast, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

The price for the purchased assets was $20.0 million paid in cash at closing. In addition to the closing cash payment, the Company separately acquired all of the Sellers' saleable product inventory for approximately $14.4 million and additional fixed assets for approximately $0.5 million. The Company is in the process of finalizing its purchase accounting, which relates to the valuation of intangible assets, which may impact the valuation of goodwill.

The Company accounted for this transaction under ASC 805, Business Combinations, by applying the acquisition method of accounting and established a new basis of accounting on the date of acquisition. The assets acquired by the Company were measured at their estimated fair values as of the date of acquisition. Goodwill is calculated as the excess of the purchase price over the net assets recognized and represent synergies and benefits expected as a result from combining operations with an emerging national presence. The transaction costs for the acquisition totaled approximately $0.6 million for the six months ended June 30, 2022 and were reflected in distribution, selling and administrative expenses in the unaudited condensed consolidated statement of income and comprehensive income.

The information included herein has been prepared based on the allocation of the purchase price using estimates of the fair value of assets acquired and liabilities assumed which were determined using a combination of quoted market prices, discounted cash flows, and other estimates made by management. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets and liabilities acquired are fully evaluated by the Company, not to exceed one year as permitted under ASC 805.

Preliminary Purchase Price Allocation

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


(In thousands)	Amount
Inventory	$	13,846
Property plant, and equipment	1,424
Right-of-use assets	127
Intangible assets	14,717
Total assets acquired	30,114

Obligations under operating leases	127
Total liabilities assumed	127
Net assets	29,987
Goodwill	4,861
Total consideration	$	34,848

The Company recorded acquired intangible assets of $14.7 million, which were measured at fair value using Level 3 inputs. These intangible assets include tradenames and trademarks of $4.4 million, customer relationships of $8.9 million and non-compete agreements of $1.4 million. The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology and Level 3 inputs including a discount rate.The fair value of tradenames and trademarks was determined by applying the income approach utilizing the relief from royalty methodology and Level 3 inputs including a royalty rate of 1% and a discount rate.The fair value of non-competition agreements was determined by applying the income approach and Level 3 inputs including a discount rate. Discount rates used in determining fair values for customer relationships, tradenames and trademarks, and non-competition agreements ranged from 17.5% to 18.0%. The useful lives of the tradenames and trademarks are ten years, customer relationships are ten years and non-compete agreements are three years, with a weighted average amortization period of approximately nine years. The associated goodwill is deductible for tax purposes.

Great Wall Acquisition

On December 30, 2021, the Company executed an Asset Purchase Agreement with Great Wall Seafood Supply Inc., a Texas Corporation; Great Wall Restaurant Supplier Inc., an Ohio Corporation, and First Mart Inc., an Illinois Corporation (collectively the “Great Wall Group”) to purchase substantially all of the operating assets of the Great Wall Group’s seafood and restaurant products sales, marketing, and distribution businesses (the “Great Wall Acquisition”). The acquisition was completed as part of the Company’s strategy to develop a national footprint through expansion into the Midwest, Southwest and Southern regions of the United States.

The final aggregate price for the purchased assets was $43.7 million with $30.8 million paid in cash at closing and the issuance of 1,792,981 shares of common stock of the Company (based on a 60-day VWAP of $7.36), with a fair value of $12.9 million based on the share price of $8.11 per share at closing and an 11.5% discount due to a lock-up restriction. In addition to the closing cash payment, the Company separately acquired all of the Sellers’ saleable product inventory of approximately $24.3 million (fair value of $24.7 million) of which approximately $6.8 million was paid during the year ended December 31, 2021 and $17.4 million was recorded in accounts payable on the consolidated balance sheets as of December 31, 2021. The Company also acquired additional vehicles for approximately $0.2 million. As such, the total acquisition price for all operating assets and inventory was approximately $68.2 million. During the three months ended March 31, 2022, the Company paid $17.4 million to acquire the remaining saleable product inventory.

The Company accounted for this transaction under ASC 805, Business Combinations, by applying the acquisition method of accounting and established a new basis of accounting on the date of acquisition. The assets acquired by the Company were measured at their estimated fair values as of the date of acquisition. Goodwill is calculated as the excess of the purchase price over the net assets recognized and represent synergies and benefits expected as a result from combining operations with an emerging national presence. The transaction costs for the acquisition were reflected in distribution, selling and administrative expenses in the condensed consolidated statements of income and comprehensive income (loss) and totaled $0.4 million for the six months ended June 30, 2022.

Purchase Price Allocation

The total consideration paid to acquire the assets and liabilities of the Great Wall Group is as set forth below:


(In thousands)	Amount
Inventory	$	24,728
Property plant, and equipment	1,537
Intangible assets	30,145
Total assets acquired	56,410
Goodwill	11,745
Total consideration	$	68,155

The Company recorded acquired intangible assets of $30.1 million, which were measured at fair value using Level 3 inputs. These intangible assets include tradenames and trademarks of $10.5 million, customer relationships of $17.2 million and non-compete agreements of $2.4 million. The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology using Level 3 inputs including a discount rate.The fair value of tradenames and trademarks was determined by applying the income approach utilizing the relief from royalty methodology and Level 3 inputs including a royalty rate of 1% and a discount rate.The fair value of non-competition agreements was determined by applying the income approach using Level 3 inputs including a discount rate. Discount rates used in determining fair values for customer relationships, tradenames and trademarks, and non-competition agreements ranged from 11.5% to 14.0%. The useful lives of the tradenames and trademarks are ten years, customer relationships are ten years and non-compete agreements are three years, with a weighted average amortization period of approximately nine years. The associated goodwill is deductible for tax purposes.

Unaudited Supplemental Pro Forma Financial Information

The following table presents the Company’s unaudited pro forma results for the three and six months ended June 30, 2022, as if both the Great Wall Acquisition and Sealand Acquisition had been consummated on January 1, 2021. The unaudited pro forma financial information presented includes the effects of adjustments related to the amortization of acquired intangible assets and excludes synergies and other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees. Statutory rates were used to calculate income taxes. Accordingly, the unaudited pro forma information does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations.


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Pro forma net revenue	$	307,587	$	262,832	$	609,685	$	481,724
Pro forma net income	$	3,513	$	5,042	$	7,210	$	7,162
Pro forma net income attributable to HF Group	$	3,628	$	5,133	$	7,253	$	6,952

NOTE 8 - GOODWILL AND ACQUIRED INTANGIBLE ASSETS

Goodwill

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


(In thousands)	Six Months Ended June 30, 2022
Balance at December 31, 2021	$	80,257
Acquisition of Sealand Food, Inc.	4,861
Balance at June 30, 2022	$	85,118

Acquired Intangible Assets

The components of the intangible assets are presented below:


	June 30, 2022						December 31, 2021
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Non-competition agreement	$	3,893	$	(484)	$	3,409	$	2,407	$	—	$	2,407
Tradenames	44,256		(8,462)		35,794		39,833		(6,349)		33,484
Customer relationships	185,265		(22,234)		163,031		176,408		(17,247)		159,161
Developed technology	440		(440)		—		—		—		—
Total	$	233,854	$	(31,620)	$	202,234	$	218,648	$	(23,596)	$	195,052

Amortization expense for intangible assets was $4.0 million and $2.7 million for the three months ended June 30, 2022 and June 30, 2021, respectively. Amortization expense for intangible assets was $7.6 million and $5.4 million for the six months ended June 30, 2022 and June 30, 2021, respectively. During the three months ended June 30, 2022, the Company impaired its acquired developed technology and recognized impairment expense of $0.4 million in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive income.

NOTE 9 - DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes interest rate swaps ("IRS") contracts for the sole purpose of mitigating interest rate fluctuation risk associated with floating rate debt instruments (as defined in Note 10 - Debt). The Company does not use any other derivative financial instruments for trading or speculative purposes.

On August 20, 2019, HF Group entered into two IRS contracts with East West Bank (the "EWB IRS") for initial notional amounts of $1.1 million and $2.6 million, respectively. The EWB IRS contracts were entered into in conjunction with two mortgage term loans of corresponding amounts that were priced at USD 1-month LIBOR (London Interbank Offering Rate) plus 2.25% per annum for the entire duration of the term loans. The EWB IRS contracts fixed the two term loans at 4.23% per annum until maturity in September 2029.

On December 19, 2019, HF Group entered into an IRS contract with Bank of America (the "BOA IRS") for an initial notional amount of $2.7 million in conjunction with a newly contracted mortgage term loan of corresponding amount. The term loan was contracted at USD 1-month LIBOR plus 2.15% per annum, but was fixed at 4.25% per annum resulting from the corresponding BOA IRS contract. On December 19, 2021, the Company entered into the Second Amendment to Loan Agreement, which pegged the mortgage term loan to SOFR (Secured Overnight Financing Rate) + 2.5%. The BOA IRS was modified accordingly to fix the SOFR based loan to approximately 4.50%. The term loan and corresponding BOA IRS contract mature in December 2029.

On June 24, 2020, HF Group entered into a forward starting IRS contract with J.P. Morgan Chase Bank (the "JPM IRS") for a fixed $80.0 million notional amount, effective from June 30, 2021 and expiring on June 30, 2025, as a means to partially hedge its existing floating rate loans exposure. On March 3, 2021, the Company unwound the JPM IRS. The contract was unwound with a view that 1-month LIBOR will continue to remain low in the foreseeable future despite the spike at the long end of the yield curve. The Company recorded a gain of approximately $0.7 million in the three months ended March 31, 2021.

The Company evaluated the above mentioned interest rate swap contracts currently in place and did not designate those as cash flow hedges. Hence, the fair value change on the aforementioned interest rate swap contracts are accounted for and recognized as a change in fair value of interest rate swap contracts in the unaudited condensed consolidated statements of income and comprehensive income (loss).

As of June 30, 2022, the Company determined that the fair value of the IRS contracts in an asset position was $0.3 million, which is included in other current assets in the unaudited condensed consolidated balance sheets. As of December 31, 2021, the Company determined that the fair value of the interest rate swap contracts in a liability position was $0.3 million, which is included in accrued expenses and other liabilities in the unaudited condensed consolidated balance sheets. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in its assessment of fair value. The IRS are classified as Level 2 in the fair value hierarchy.

NOTE 10 - DEBT

On November 4, 2019, the Company entered into a credit agreement with J.P. Morgan Chase Bank (the “JPM Credit Agreement”). The JPM Credit Agreement provided for a $100.0 million asset-secured revolving credit facility maturing on November 4, 2022, with an option to renew at the bank’s discretion. On January 17, 2020, the Company and certain of its wholly-owned subsidiaries and affiliates of the Company as borrowers, and certain material subsidiaries of the Company as guarantors, entered into the Second Amended Credit Agreement ("Second Amended Credit Agreement"). On December 31, 2021, the Company entered into the Consent, Waiver, Joinder and Amendment No. 3 to the Second Amended Credit Agreement with JP Morgan, as Administrative Agent, and certain lender parties thereto including Comerica Bank. The Second Amended Credit Agreement, provided for (i) a $100.0 million asset-secured revolving credit facility maturing on November 4, 2022 (the “Revolving Facility”), and (ii) a mortgage-secured term loan of $75.6 million (the "Term Loan"), and (iii) amendment to the referenced interest rate from 1-month LIBOR to 1-month Secured Overnight Financing Rate (“SOFR”) plus a credit adjustment of 0.1% (difference between LIBOR and SOFR plus 1.375% per annum).

The existing revolving credit facility balance under the Second Amended Credit Agreement, was rolled over to the Revolving Facility on December 30, 2021. On the same day, the Company utilized an additional $33.3 million drawdown from the Revolving Facility to fund the Great Wall Acquisition. The Second Amended Credit Agreement, as amended, contains certain financial covenants, including, but not limited to, a fixed charge coverage ratio and effective tangible net worth.

On March 31, 2022, the Company amended the JPM Credit Agreement extending the Revolver Facility for five years with a maturity date of November 4, 2027. The amendment provides for a $100.0 million asset-secured revolving credit facility with a 1-month SOFR plus a credit adjustment of 0.1% plus 1.375% per annum as well as an increase in the Term Loan from $69.0 million to $115.0 million with a 1-month SOFR plus a credit adjustment of 0.1% plus 1.875% per annum, (the "2022 Credit Agreement"). In connection with the amendment, the Company incurred $0.6 million in financing fees, of which $0.5 million will be amortized over the life of the respective facilities. Additionally, $0.1 million of the unamortized financing fees related to the Revolving Facility has been deferred and will be amortized over the life of the Revolving Facility.

As of June 30, 2022, the Company was in compliance with its covenants. Subsequent to June 30, 2022, the Company's lenders consented to the delivery of the Company's 2021 audited financial statements on or before January 31, 2023. The outstanding principal balance on the line of credit as of June 30, 2022 was $60.0 million.

Long-Term Debt

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


					(In thousands)
Bank Name	Maturity	Interest Rate as of June 30, 2022			June 30, 2022		December 31, 2021
Bank of America (a)	October 2022 - December 2029	3.73%	—	5.80%	$	4,700	$	5,134
East West Bank (b)	August 2027 - September 2029	4.25%	—	4.40%	5,906		5,994
First Horizon Bank (c)	Paid off in May 2022	—			—		4,571
J.P. Morgan Chase (d)	February 2023 - January 2030	3.02%	—	3.06%	114,605		70,866
Other finance institutions (e)	July 2022 - March 2024	3.90%	—	6.14%	261		838
Total debt, principal amount					125,472		87,403
Debt issuance costs					(323)		(35)
Total debt, carrying value					125,149		87,368
Less: current portion					(6,638)		(5,557)
Long-term debt					$	118,511	$	81,811

_______________

(a)Loan balance consists of real estate term loan, equipment term loans, and vehicle term loans, collateralized by one real property and specific equipment and vehicles. The real estate term is pegged to TERM SOFR + 2.5%.

(b)Real estate term loans with East West Bank are collateralized by four real properties. Balloon payments of $1.8 million and $2.9 million are due at maturity in 2027 and 2029, respectively.

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

(d)Real estate term loan with a principal balance of $113.9 million as of June 30, 2022 and $69.9 million as of December 31, 2021 is secured by assets held by the Company and has a maturity date of January 2030. Equipment term loan with a principal balance of $0.7 million as of June 30, 2022 and $1.0 million as of December 31, 2021 is secured by specific vehicles and equipment as defined in loan agreements. Equipment term loans mature in February 2023 and December 2023.

(e)Secured by vehicles.

The terms of the various loan agreements related to long-term bank borrowings require the Company to comply with certain financial covenants, including, but not limited to, a fixed charge coverage ratio and effective tangible net worth. As of June 30, 2022 and December 31, 2021, the Company was in compliance with its covenants. Subsequent to June 30, 2022, the Company's lenders consented to the delivery of the Company's 2021 audited financial statements on or before January 31, 2023..

NOTE 11 - EARNINGS PER SHARE

The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260 (“ASC 260”), Earnings per Share. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS, but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, warrants and restricted stock) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There were 3,471 and 3,668 potential common shares related to total shareholder return performance-based restricted stock units that were excluded from the calculation of diluted EPS for the three and six

months ended June 30, 2022, respectively, because their effect would have been anti-dilutive. There were no anti-dilutive potential common shares for the three and six months ended June 30, 2021.

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


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except share and per share data)	2022		2021		2022		2021
Numerator:
Net income attributable to HF Foods Group Inc.	$	4,564	$	3,407	$	7,678	$	4,765

Denominator:
Weighted-average common shares outstanding	53,706,392		51,913,411		53,706,392		51,913,411
Effect of dilutive securities	194,491		—		221,565		—
Weighted-average dilutive shares outstanding	53,900,883		51,913,411		53,927,957		51,913,411

Earnings per common share:
Basic	$	0.08	$	0.07	$	0.14	$	0.09
Diluted	$	0.08	$	0.07	$	0.14	$	0.09

NOTE 12 - INCOME TAXES

The determination of the Company’s overall effective income tax rate requires the ~~recognition~~use of estimates. The effective income tax rate reflects the income earned and taxed in U.S. federal and various state jurisdictions based on enacted tax law, permanent differences between book and tax items, tax credits and the Company’s change in relative income in each jurisdiction. Changes in tax laws and rates may affect recorded deferred tax assets and liabilities ~~for both~~and the ~~expected impact~~Company’s effective income tax rate in the future. The Company has no operations outside the U.S., as such, no foreign income tax was recorded.

For the three and six months ended June 30, 2022, the Company's effective income tax rate of ~~differences~~19.6% and 22.4%, respectively, differed from the federal statutory tax rate primarily as a result of state income taxes. For the three and six months ended June 30, 2021, the Company's effective income tax rate of 29.9% and 29.3% differed from the federal statutory tax rate primarily as a result of state income taxes.

NOTE 13 - RELATED PARTY TRANSACTIONS

The Company makes regular purchases from and sales to various related parties. Related party affiliations were attributed to transactions conducted between the ~~financial statement~~Company and ~~tax basis~~those business entities partially or wholly owned by the Company, the Company's officers and/or shareholders who owned no less than 10% shareholdings of ~~assets~~the Company.

Mr. Zhou Min Ni ("Mr. Ni"), the Company's former Co-Chief Executive Officer, resigned from all of his official posts on February 23, 2021. Mr. Ni and ~~liabilities~~his immediate family members are treated as related parties for purposes of this report because Mr. Ni is a principal holder of the Company's securities.

North Carolina Good Taste Noodle, Inc. ("NC Noodle") is a related party due to Mr. Jian Ming Ni's, a former Chief Financial Officer of the Company, continued ownership interest in NC Noodle.

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

The related party transactions as of June 30, 2022 and December 31, 2021 and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated on May 19, 2016, the evaluation was performed for the 2016 tax year, which will be the only period subject to examination. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.

~~The Company was incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.~~

~~Recent Accounting Pronouncements~~

~~Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.~~

~~Note 3 — Public Offering~~

~~Public Unit~~

On August 14, 2017, the Company sold 4,000,000 Public Units at a price of $10.00 per Public Unit in the Public Offering. Each Public Unit consists of one ordinary share of the Company, $0.0001 par value per share (the “Public Shares”), and one right (the “Public Rights”). Each Public Right entitles the holder to receive one-tenth (1/10) of an ordinary share upon consummation of an initial Business Combination.

If the Company does not complete its Business Combination within the necessary time period described in Note 1, the Public Rights will expire and be worthless. Since the Company is not required to net cash settle the Rights and the Rights are convertible upon the consummation of an initial Business Combination, the Management determined that the Rights are classified within shareholders’ equity as “Additional paid-in capital” upon their issuance in accordance with ASC 815-40. The proceeds from the sale are allocated to Public Shares and Rights based on the relative fair value of the securities in accordance with ASC 470-20-30. The value of the Public Shares and Rights will be based on the closing price paid by investors.

At the closing of the Public Offering and over-allotment option, the Company paid an upfront underwriting discount of $1,200,000 and $127,500, 3.0% of the per unit offering price to the underwriter, respectively, with an additional fee of $1,000,000 and $106,250 (the “Deferred Discount”), 2.5% of the gross offering proceeds payable upon the Company’s completion of the Business Combination, respectively. The Deferred Discount will become payable to the underwriter from the amounts held in the Trust Account solely in the event the Company completes its Business Combination. In the event that the Company does not close a Business Combination, the underwriter has waived its right to receive the Deferred Discount. The underwriter is not entitled to any interest accrued on the Deferred Discount. Total offering costs were $1,851,217, which consist of $1,327,500 of underwriter’s commissions and $523,717 of other offering costs.

~~Purchase Option~~

On August 14, 2017, the Company sold the underwriters, for $100, a unit purchase option to purchase up to a total of 250,000 Units exercisable at $10.50 per Unit (or an aggregate exercise price of $2,625,000) commencing on the later of the consummation of a Business Combinationthree and six months ended June 30, 2022 and 2021 are identified as follows:

Related Party Sales and Purchases Transactions

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

a.Purchase - related parties

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


			Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)		Nature	2022		2021		2022		2021
(a)	Best Food Services, LLC	Trade	$	3,546	$	2,497	$	6,491	$	3,487
(b)	Eastern Fresh NJ LLC	Trade	—		1,474		1,093		2,969
(c)	Enson Group, Inc. (formerly "Enson Group, LLC")	Trade	—		76		—		128
(d)	First Choice Seafood, Inc.	Trade	26		77		109		160
(e)	Fujian RongFeng Plastic Co., Ltd.	Trade	—		790		398		1,590
(f)	North Carolina Good Taste Noodle, Inc.	Trade	1,769		1,268		3,427		2,593
(g)	Ocean Pacific Seafood Group Inc.	Trade	141		208		277		339
(h)	Revolution Industry, LLC	Trade	—		—		—		259
(i)	UGO USA Inc.	Trade	—		—		—		242
	Other	Trade	53		70		85		154
	Total		$	5,535	$	6,460	$	11,880	$	11,921

_______________

(a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020.

(b)Mr. Ni owns an equity interest in this entity.

(c)Mr. Ni owns an equity interest in this entity.

(d)Mr. Ni owns an equity interest in this entity indirectly through its parent company.

(e)Mr. Ni owns an equity interest in this entity indirectly through its parent company.

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

(g)Mr. Ni owns an equity interest in this entity.

(h)Raymond Ni, one of Mr. Ni’s family members, owns an equity interest in this entity. On February ~~8, 2018. The unit~~25, 2021, Han Feng executed an asset purchase ~~option expires August 8, 2022. The units issuable upon exercise~~agreement to acquire the machinery and equipment of ~~this option are identical~~Revolution Industry, LLC ("RIL"). Han Feng has acquired substantially all of the operating assets used or held for use in such business operation for the amount of $250,000 plus the original wholesale purchase value of all verified, useable cabbage and egg roll mix inventory of RIL. Advances due from RIL at the time of transaction were an offset to the ~~Units being offered~~purchase price paid to RIL. Going forward, Han Feng has taken the egg roll production business in house and ceased its vendor relationship with RIL.

(i)Mr. Ni owns an equity interest in this entity.

b. Sales - related parties

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


		Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)		2022		2021		2022		2021
(a)	ABC Food Trading, LLC	$	1,070	$	506	$	2,262	$	1,220
(b)	Asahi Food, Inc.	188		223		369		341
(c)	Best Food Services, LLC	223		327		868		401
(d)	Eagle Food Service, LLC	—		1,067		—		2,076
(e)	Eastern Fresh NJ LLC	—		76		—		99
(f)	Enson Group, Inc. (formerly "Enson Group, LLC")	—		27		—		53
(g)	Enson Seafood GA, Inc. (formerly “GA-GW Seafood, Inc.”)	—		554		—		555
(h)	First Choice Seafood Inc	9		8		18		82
(i)	Fortune One Foods, Inc.	14		—		14		—
(i)	Heng Feng Food Services, Inc.	—		65		—		105
(j)	N&F Logistics, Inc.	—		160		36		367
	Other	—		73		—		177
	Total	$	1,504	$	3,086	$	3,567	$	5,476

_______________

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

(c)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020.

(d)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity indirectly through its parent company.

(e)Mr. Ni owns an equity interest in this entity.

(f)Mr. Ni owns an equity interest in this entity.

(g)Mr. Ni owns an equity interest in this entity.

(h)Mr. Ni owns an equity interest in this entity indirectly through its parent company.

(i)Mr. Ni owns an equity interest in this entity.

(j)Mr. Ni owns an equity interest in this entity.

c. Lease agreements - related parties

The Company leases various facilities to related parties.

The Company leased a facility to UGO USA Inc. under an operating lease agreement which was mutually terminated by both parties effective April 1, 2021. No rental income was recorded for the three and six months ended June 30, 2022 and for the three months ended June 30, 2021. Rental income was $7,000 for the six months ended June 30, 2021 and is included in other income in the ~~Public Offering.~~ unaudited condensed consolidated statements of income and comprehensive income.

The Company leased a facility to iUnited Services, LLC ("iUnited"), which has agreed to grant to the holders of the unit purchase option, demand and “piggy back” registration rights for periods of five and seven years, respectively, from the effective date of the Public Offering, including securities directly and indirectly issuable upon exercise of the unit purchase option.

The Company has accounted for the fair value of the unit purchase option, inclusive of the receipt of a $100 cash payment, as an expense of the Public Offering resulting in a charge directly to stockholders’ equity. The Company estimates that the fair value of this unit purchase option is $610,265 using a Black-Scholes option-pricing model adjusted for the likelihood of a completed Business Combination. The fair value of the unit purchase optionbeen determined to be granted to the placement agent is estimated as of the date of grant using the following assumptions: (1) expected volatility of 51.14%, (2) risk-free interest rate of 1.77% and (3) expected life of five years, (4) estimated possibility of 55% for consummation of initial Business Combination.

~~Note 4 — Private Placement~~

On August 14, 2017 (see Note 7) Certain of the Company’s shareholders, and Chardan Capital Markets, LLC purchased an aggregate of 320,000 Private Units at $10.00 per Private Unit of which 17,500 units were issued for the conversion of the May 30, 2017 note payable by one of our directors (see Note5). They also purchased an additional 21,250 Private Units from the Company at a price of $10.00 per Private Unit at the closing of the sale of 425,000 Units in connection with the exercise of the over-allotment option. Chardan Capital Markets, LLC purchased 20,000 of the 320,000 Private Units issued simultaneously with the close of the Public Offering, and 2,125 of the 21,250 Private Units issued simultaneously with the exercise of overallotment option.

The Private Units are identical to the Units sold in the Public Offering. Additionally, the holders of the Private Units have agreed (A) to vote the shares underlying their Private Units in favor of any proposed Business Combination, (B) not to propose, or vote in favor of, an amendment to the Company’s amended and restated certificate of incorporation with respect to the Company’s pre-Business Combination activities prior to the consummation of such a Business Combination unless the Company provides dissenting Public Stockholders with the opportunity to convert their public shares in connection with any such vote, (C) not to convert any shares underlying the Private Units into the right to receive cash from the Trust Account in connection with a stockholder vote to approve an initial Business Combination or a vote to amend the provisions of the Company’s amended and restated certificate of incorporation relating to shareholders’ rights or pre-Business Combination activity or sell their shares to the Company in connection with a tender offer the Company engages in and (D) that the shares underlying the Private Units shall not participate in any liquidating distribution upon winding up if a Business Combination is not consummated. The purchasers have also agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to transferees that agree to the same terms and restrictions) until the completion of an initial Business Combination.

~~Note 5 — Related Party Transactions~~

On June 9, 2016, the Company issued a $175,000 principal amount unsecured promissory note to the Company’s former President and Director. On May 30, 2017, the Company issued a separate $175,000 principal amount unsecured promissory note to one of the Company’s current directors. The proceed from the Company’s current director was wired into an escrow account and used to repay the original outstanding $175,000 loanrelated party due to the ~~Company’s~~equity ownership interest in iUnited of Mr. Jian Ming Ni, the Company's former ~~President on June 1, 2017.~~Chief Financial Officer. The ~~new note~~lease agreement was non-interest bearing and was payable on the consummation of the Public Offering. On August 14, 2017, a $175,000 loan from the director was converted into Private Units as part of the Private Placement at a price of $10.00 per Private Unit and 17,500 units were issued to this director.

All expenses incurred by the Company prior to an initial Business Combination may be paid only from the net proceeds of the Public Offering and related private placements not held in the Trust Account. Thus, in order to meet the Company’s working capital needs following the consummation of the Public Offering if the funds not held in the Trust Account, Wai Fun Cheng, Ren Hua Zheng, Richard Xu, Tom W. Su may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. Up to $500,000 of the notes may, at the lender’s discretion, be converted upon consummation of an initial Business Combination into additional private units at a price of $10.00 per unit (“Working Capital Units”). If the Company does not complete an initial Business Combination, the loans will only be repaid with funds not held in the Trust Account, to the extent available.

~~Note 6 — Commitments~~

~~Deferred Underwriter Commission~~

The Company is obligated to pay the Deferred Discount of 2.5% of the gross Public Offering proceeds, in the amount of $1,106,250, to the underwriter upon the Company’s consummation of the Business Combination. The underwriter is not entitled to any interest accrued on the Deferred Discount, and has waived its right to receive the Deferred Discount if the Company does not close a Business Combination.

~~Registration Rights~~

The Initial Stockholders are entitled to registration rights with respect to their Initial Shares and the purchasers of the Private Units are entitled to registration rights with respect to the Private Units (and underlying securities), pursuant to a registration rights agreement signed on the effective date of the Public Offering. The holders of the majority of the initial shares are entitled to demand that the Company register these shares at any time commencing three months prior to the first anniversary of the consummation of a Business Combination. The holders of the Private Units (or underlying securities) are entitled to demand that the Company register these securities at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a Business Combination.

~~Engagement of B. Riley & Co. LLC~~

The Company plans to engage B. Riley & Co. LLC (“B. Riley”) to provide certain advisory services to it. In consideration for such services, the Company’s management team has agreed to transfer 20,000 insider shares to B. Riley upon the consummation of the initial Business Combination. Such shares will be subject to the same restrictions and escrow arrangement as the other insider shares. The value of the service provided by B. Riley will be accounted at the fair value at the date of transfer as operating expenses and a credit to additional paid-in capital upon the transfer of the shares.

~~Note 7 — Stockholders’ Equity~~

~~Preferred Shares~~

The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2017, there are no preferred shares issued or outstanding.

~~Common Stock~~

~~The Company is authorized to issue 30,000,000 shares of common stock with a par value of $0.0001 per share.~~

On June 9, 2016, 1,150,000 shares of the Company’s common stock were sold at a price of approximately $0.02 per share for an aggregate of $25,000. On May 25, 2017, the Company repurchased and canceled the initial shareholder shares. On May 30, 2017, the Company issued an additional 1,150,000 shares for $25,000, or approximately $0.02 per share, which amount was wired into an escrow account and was directly used to pay for the May 25, 2017 repurchase. All of these shares were placed in escrow on the date of the closing of the Public Offering until (1) with respect to 50% of the shares, the earlier of six months after the date of the consummation of an initial Business Combination and the date on which the closing price of the Company’s common stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after the Company’s initial Business Combination and (2) with respect to the remaining 50% of the insider shares, six months after the date of the consummation of an initial Business Combination, or earlier, in either case, if, subsequent to an initial Business Combination, the Company consummates a liquidation, merger, share exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares for cash, securities or other property. The escrow share arrangement does not require the continued employment of the stockholders who received the shares or the insiders. At the closing of the Business Combination, the fair value of the escrow arrangement would be both charged and credited to additional paid-in capital.

At September 30, 2016, there were 1,150,000 shares of common stock issued and outstanding. This amount included 150,000 shares that were subject to forfeiture to the extent the underwriter’s over-allotment option was not exercised in full.

On August 14, 2017, the Company consummated the Public Offering of 4,000,000 units at $10.00 per unit (the “Public Units’) and sold to initial shareholders and Chardan Capital Markets, LLC 320,000 units at $10.00 per unit (the “Private Units”) in a private placement (Note 4). The Company received net proceeds of approximately $41,476,000. On August 16, 2017, the underwriters exercised the over-allotment option in part. The closing of the sale 425,000 over-allotment option Units generating gross proceeds of $4,250,000 took place on August 21, 2017. Simultaneously with the sale of the over-allotment units, the Company consummated the private sale of an additional 21,250 Private Units, generating gross proceeds of $212,500. On August 22, 2017, the underwriters canceled the remainder of the over-allotment option. In connection with the cancellation of the remainder of the over-allotment option, the Company canceled an aggregate of 43,753 shares of common stock issued to the Company’s initial stockholders.

~~At September 30, 2017, there were 1,977,564 shares of common stock issued and outstanding, excluding 3,894,933 shares subject to possible redemption.~~

~~Note 8 — Fair Value Measurements~~

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

~~The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received~~terminated in connection with the sale of the ~~assets~~facility on November 3, 2021. The building and related land was sold to iUnited for $1.5 million and a gain of $0.8 million. Rental income for the three and six months ended June 30, 2021 was $15,000 and $30,000, respectively, which is included in other income in the consolidated statements of income and comprehensive income.

The Company leased a production area to Revolution Industry, LLC under a month-to-month lease agreement. This lease agreement was terminated as a result of the asset purchase agreement executed on February 25, 2021. No rental income was recorded for the three and six months ended June 30, 2022 and the three months ended June 30, 2021. Rental income was $6,000 for the six months ended June 30, 2021 and is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

The Company leased a warehouse to Enson Seafood GA Inc. (formerly “GA-GW Seafood, Inc.”) under an operating lease agreement expiring on September 21, 2027. During the three months ended June 30, 2022, the Company sold the warehouse to Enson Seafood GA Inc. (see Note 10 - Debt for additional information). Rental income for three months ended June 30, 2022 and 2021 was $120,000 and $120,000, respectively, and is included in other income in the unaudited condensed consolidated statements of income and comprehensive income. Rental income for the six months ended June 30, 2022 and 2021 was $200,000 and $240,000, respectively, and is included in other income in the unaudited condensed consolidated statements of income and comprehensive income.

In 2020, the Company renewed a warehouse lease from Yoan Chang Trading Inc. ("Yoan") under an operating lease agreement expiring on December 31, 2020. In February 2021, the Company executed a new 5-year operating lease agreement with Yoan effective January 1, 2021 and expiring on December 31, 2025. Rent incurred was $72,000 and $77,000 for the three months ended June 30, 2022 and 2021, respectively, and is included in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive income. Rent incurred to the related party was $144,000 and $155,000 for the six months ended June 30, 2022 and 2021, respectively, and is included in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive income.

Related Party Balances

a.Accounts receivable - related parties, net

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


(In thousands)		June 30, 2022		December 31, 2021
(a)	ABC Food Trading, LLC	$	492	$	76
(b)	Asahi Food, Inc.	205		72
(c)	Best Food Services, LLC	126		1
	Other	55		100
	Total	$	878	$	249

_______________

(a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to 3 Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020.

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

(c)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to 3 Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020.

All accounts receivable from these related parties are current and considered fully collectible. No allowance is deemed necessary as of June 30, 2022 and December 31, 2021.

b. Accounts payable - related parties, net

All the accounts payable to related parties are payable upon demand without interest. Below is a summary of accounts payable with related parties recorded as of June 30, 2022 and December 31, 2021, respectively:


(In thousands)		June 30, 2022		December 31, 2021
(a)	Best Food Services, LLC	$	1,483	$	699
(b)	Eastern Fresh NJ, LLC	18		581
(c)	North Carolina Good Taste Noodle, Inc.	556		595
	Other	44		66
	Total	$	2,101	$	1,941

_______________

(b)Mr. Ni owns an equity interest in this entity.

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

c. Advances to suppliers - related parties, net

The Company periodically provides purchase advances to various vendors, including the related party suppliers. There were no advances to related party suppliers recorded as of June 30, 2022 and December 31, 2021.

d.Promissory note payable - related party

The Company issued a $7.0 million Unsecured Subordinated Promissory Note to BRGR (a related party via ownership by certain shareholders of the Company, and a former VIE through 2020) in January 2020 as part of the payment for the acquisition of BRGR. The note was to mature in January 2030 and carried a fixed interest rate of 6% per annum. There was no requirement to make principal repayments until maturity. During the three months ended June 30, 2022, the Company paid the remaining $4.5 million of the Unsecured Subordinated Promissory Note. Interest payments paid were $62,000 and $97,000 for the three months ended June 30, 2022 and 2021, respectively. Interest payments paid were $129,000 and $197,000 for the six months ended June 30, 2022 and 2021, respectively.

NOTE 14 - STOCK-BASED COMPENSATION

In July 2021, the Company began issuing awards under the HF Foods Group Inc. 2018 Omnibus Equity Incentive Plan (the “2018 Incentive Plan”), which reserves up to 3,000,000 shares of the Company's common stock for issuance of awards to employees, non-employee directors and consultants. As of June 30, 2022, the Company had 353,439 time-based vesting restricted stock units (“RSUs”) outstanding, 119,396 performance-based restricted stock units (“PSUs”) outstanding, and 2,496,963 shares remaining available for future awards under the 2018 Incentive Plan.

For the three and six months ended June 30, 2022, stock-based compensation expense was $0.2 million and $0.5 million, respectively, and was included in distribution, selling and administrative expenses in the Company's unaudited condensed consolidated statements of income and comprehensive income. No stock-based compensation expense was recognized for three and six months ended June 30, 2021.

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

NOTE 15 - COMMITMENTS AND CONTINGENCIES

From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. When the Company becomes aware of a claim or ~~paid~~potential claim, it assesses the likelihood of any loss or exposure. In accordance with authoritative guidance, the Company records loss contingencies in ~~connection~~its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. Adverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against us that could adversely affect our ability to conduct our business. There also exists the possibility of a material adverse effect on our financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

On May 20, 2022, the Board of Directors of HF Group received a letter from a purported stockholder, James Bishop (the “Bishop Demand”). The Bishop Demand alleges that certain current and former officers and directors of HF Group engaged in misconduct and breached their fiduciary duties, and demands that HF Group investigate the allegations and, if warranted, assert claims against those current or former officers and directors. Many of the allegations contained in the Bishop Demand were the subject of a shareholder derivative action that Bishop filed in August 2020 (the “Bishop Derivative Action”). On November 24, 2021, after the United States District Court for the Central District of California dismissed with prejudice a related securities class action, captioned Mendoza v. HF Foods Group Inc. et al., the Bishop Derivative Action was voluntarily dismissed without prejudice.

On June 30, 2022, the Board of Directors of HF Group resolved to form a special committee (the “Special Litigation Committee”) comprised of independent directors and advised by counsel to analyze and evaluate the allegations in the Bishop Demand in order to determine whether the Company should assert any claims against the current or former officers and directors.

On August 19, 2022, James Bishop filed a verified stockholder derivative complaint in the Court of Chancery of the State of Delaware (the “Delaware Action”), which asserts similar allegations to those set forth in the Bishop Demand. On September 21, 2022, Bishop and the Company filed a stipulation to stay the Delaware Action for 90 days, which the court granted on September 22, 2022. On December 20, 2022, Bishop and the Company filed a stipulation to extend the stay of the Delaware Action for an additional 60 days, which the court granted on December 21, 2022.

The Special Litigation Committee is in the process of analyzing and evaluating the claims alleged in the Bishop Demand and Delaware Action, and has not determined whether any claims should be asserted or the probability of recovery for such claims.

In addition, the SEC initiated a formal, non-public investigation of the Company, and the SEC informally requested, and later issued a subpoena for, documents and other information. The subpoena relates to but is not necessarily limited to the matters identified in the two putative class actions which were subsequently dismissed. The Special Investigation Committee and the Company are cooperating with the ~~transfer~~SEC.While the SEC investigation is ongoing, the Special Investigation Committee has made certain factual findings based on evidence adduced during the investigation and made recommendations to management regarding improvements to Company operations and structure, including but not limited to its dealings with related parties. The Company is working to implement those improvements. See the Company's 2021 Annual Report for additional information on the findings of the ~~liabilities~~Special Investigation Committee.

AnHeart Lease Guarantee

As discussed in Note 3 - Variable Interest Entities, the Company provided a guarantee for two separate leases for two properties located in Manhattan, New York, at 273 Fifth Avenue and 275 Fifth Avenue, for 30 years and 15 years, respectively.

On February 10, 2021, the Company entered into an ~~orderly transaction between market participants~~Assignment and Assumption of Lease Agreement (“Assignment”), dated effective as of January 21, 2021, with AnHeart and Premier 273 Fifth, LLC, pursuant to which it assumed the lease of the premises at 273 Fifth Avenue (the “273 Lease Agreement”). At the ~~measurement date.~~same time, the closing documents were delivered to effectuate the amendment of the 273 Lease Agreement pursuant to an Amendment to Lease (the “Lease Amendment”). The Assignment and the Lease Amendment were negotiated in light of the Company’s guarantee obligations as guarantor under the 273 Lease Agreement. The Company agreed to observe all the covenants and conditions of the Lease Agreement, as amended, including the payment of all rents due. Under the terms of the 273 Lease Agreement and the Assignment, the Company has undertaken to construct, at its own expense, a building on the premises at a minimum cost of $2.5 million. The Lease Amendment permits subletting of the premises, and the Company intends to sublease the newly constructed premises to defray the rental expense undertaken pursuant to its guaranty obligations.

On January 17, 2022, the Company received notice that AnHeart had defaulted on its obligations as tenant under the lease for 275 Fifth Avenue. On February 7, 2022, the Company undertook its guaranty obligations by assuming responsibility for payment of monthly rent and other tenant obligations, including past due rent as well as property tax obligations beginning with the January 2022 rent due. On February 25, 2022, the Company instituted a legal action to pursue legal remedies against AnHeart and Minsheng. In ~~connection~~March 2022, the Company agreed to stay litigation against AnHeart in exchange for AnHeart's payment of certain back rent from January to April 2022 and its continued partial payment of monthly rent. While the case remains pending in New York, the Company is not actively litigating the claim.

In accordance with ~~measuring~~ASC 460, Guarantees, the Company has determined that its maximum exposure resulting from the 275 Fifth Avenue lease guarantee includes future minimum lease payments plus potential additional payments to satisfy maintenance, property tax and insurance requirements under the leases with a remaining term of approximately 11 years. The Company elected a policy to apply the discounted cash flow method to loss contingencies with more than 18 months of payments. During the three months ended March 31, 2022, the Company recorded a lease guarantee liability of $5.9 million. The Company determined the discounted value of the lease guarantee liability was $5.9 million as of March 31, 2022 using a discount rate of 4.55% and is classified as Level 2 in the fair value hierarchy. The current portion of the lease guarantee liability of $0.3 million is recorded in Accrued expenses and other liabilities on the condensed consolidated balance sheet. The

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

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



(In thousands)	Amount
Year Ending December 31,
2022 (remaining six months)	$	254
2023	543
2024	582
2025	604
2026	621
Thereafter	5,116
Total	7,720
Less: Imputed interest	(1,838)
Total	$	5,882

NOTE 16 - SUBSEQUENT EVENTS

See Note 10 - Debt regarding the Company's waiver received related to the timing of the filing of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

	~~Level 1:~~	Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

	~~Level 2:~~	Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

	~~Level 3:~~	~~Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.~~

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Description Level September 30,
2017 December 31,
2016
Assets:
Cash and marketable securities held in Trust Account 1 45,185,462 $ —

~~Note 9 — Reconciliation of Net Income (Loss) per Common Stock~~

The Company’s net loss is adjusted for the portion of income that is attributable to common stock subject to redemption, as these shares only participate in the income of the Trust Account and not the losses of the Company. Accordingly, basic and diluted loss per common share is:

For Three Months ended September 30, For The Nine Months
Ended For The Period
From May 19, 2016 (Inception)
2017 2016 September 30, 2017 Through September 30, 2016

Net loss (1,037 ) (100 ) (1,119 ) (625 )
Less: income attributable to common stock subject to redemption (25,914 ) — (25,914 ) —
Adjusted loss (26,951 ) (100 ) (27,033 ) (625 )
Basic and diluted weighted average shares outstanding⁽¹⁾ 1,467,996 1,000,000 1,157,713 1,000,000
Basic and diluted net loss per share (0.02 ) (0.00 ) (0.02 ) (0.00 )

~~(1)~~

Excludes an aggregate of up to 3,894,933 common shares subject to redemption at September 30, 2017 and 150,000 shares of common stock that are subject to forfeiture if the over-allotment option is not exercised by the underwriter at September 30, 2016. An aggregate of 43,753 shares of common stock were cancelled after partial exercise of the overallotment option by the underwriters.

~~Note 10 — Subsequent Events~~

The Company’s management reviewed all material events that have occurred after the balance sheet date through the date which these financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in theconsolidated financial statements.

~~Item~~

ITEM 2. ~~Management’s~~Management's Discussion and ~~Analysis.~~

~~Forward-Looking Statements~~

~~This~~Analysis of Financial Condition and Results of Operations.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q ~~includes~~including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. ~~We have based these~~When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “possible,” “potential,” “predict,” “project,” “will” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the Securities and Exchange Commission (“SEC”). All subsequent written or oral forward-looking statements attributable to us or persons acting on our ~~current expectations and projections about future events. These~~behalf are qualified in their entirety by this paragraph. All forward-looking statements are subject to ~~known~~risks and ~~unknown~~uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include without limitation:

•The effects of the COVID-19 pandemic or other pandemics;

•Low margins in the foodservice distribution industry and periods of significant or prolonged inflation;

•Qualified labor shortages;

•Unfavorable macroeconomic conditions in the United States;

•Competition in the foodservice distribution industry particularly the entry of new competitors into the Chinese/Asian restaurant supply market niche;

•Increases in fuel costs;

•Disruption of relationships with vendors and increases in product prices;

•Dependency on the timely delivery of products from vendors, particularly the prolonged diminution of global supply chains;

•Our business has been affected and may in the future be affected by the COVID-19 pandemic and the steps taken by the Chinese government to address the pandemic;

•Disruption of relationships with or loss of customers;

•Changes in consumer eating and dining out habits;

•Related party transactions and possible conflicts of interests;

•Related parties and variable interest entities consolidation;

•Failure to protect our intellectual property rights;

•Our ability to renew or replace our current warehouse leases on favorable terms, or terminations prior to expiration of stated terms;

•Failure to retain our senior management and other key personnel, particularly our CEO, COO, CFO and CCO/General Counsel;

•Our ability to attract, train and retain employees;

•Changes in and enforcement of immigration laws;

•Failure to comply with various federal, state and local rules and regulations regarding food safety, sanitation, transportation, minimum wage, overtime and other health and safety laws;

•Product recalls, voluntary recalls or withdrawals if any of the products we distribute are alleged to have caused illness, been mislabeled, misbranded or adulterated or to otherwise have violated applicable government regulations;

•Costs to comply with environmental laws and regulations;

•Litigation;

•Increases in commodity prices;

•U.S. government tariffs on products imported into the United States, particularly from China;

•Severe weather, natural disasters and adverse climate change;

•Unfavorable geopolitical conditions;

•Any cyber security incident, other technology disruption or delay in implementing our information technology systems;

•Current indebtedness affecting our liquidity and ability of future financing;

•Failure to acquire other distributors or wholesalers and enlarge our customer base could negatively impact our results of operations and financial condition;

•Scarcity of and competition for acquisition opportunities;

•Our ability to obtain acquisition financing;

•The impact of non-cash charges relating to the amortization of intangible assets related to material acquisitions;

•Our ability to identify acquisition candidates;

•Increases in debt in order to successfully implement our acquisition strategy;

•Difficulties in integrating operations, personnel, and assets of acquired businesses that may disrupt our business, dilute stockholder value, and adversely affect our operating results;

•Our ability to regain compliance with Securities Exchange Act of 1934 reporting requirements; and

•The development of an active trading market for our common stock.

All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other filings with the Securities and Exchange Commission (the "SEC") and public communications. We caution you that the important factors referenced above may not contain all of the risks, uncertainties ~~and assumptions about us that may cause~~(some of which are beyond our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such termscontrol) or other ~~similar expressions.~~assumptions that are important to you. Factors that might cause or contribute to such ~~a discrepancy~~differences include, but are not limited to, those ~~described~~contained in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC. We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, unless required by law.

Company Background and Overview

We market and distribute Asian specialty food products, seafood, fresh produce, frozen and dry food, and non-food products primarily to Asian restaurants and other ~~Securities~~foodservice customers throughout the United States. HF Group was formed through a merger between two complementary industry participants, HF Foods Group Inc. and ~~Exchange Commission (“SEC”~~B&R Global.

On December 30, 2021, HF Group acquired the Great Wall Group, a seafood supplier, resulting in the addition of three distribution centers, located in Illinois and Texas (the “Great Wall Acquisition”) ~~filings. References~~.

On April 29, 2022, HF Group acquired substantially all of the assets of Sealand Food, Inc. (the "Sealand Acquisition"), one of the largest frozen seafood suppliers servicing the Asian/Chinese restaurant market along the eastern seaboard, from Massachusetts to ~~“we”~~Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

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

Capitalizing on our institutional understanding of the Chinese culture, our over 1,000 employees and subcontractors and our support from two outsourced call centers in China, we serve over 15,000 Asian restaurants in 46 states with 18 distribution centers strategically located throughout the nation, providing round-the-clock sales and service support to customers who mainly converse in Mandarin or other Chinese dialects. We are dedicated to serving the vast array of Asian and Chinese restaurants in need of high-quality and specialized food ingredients at competitive prices.

As a market leader in servicing the Asian/Chinese restaurant sector, we are well-positioned for long-term success. The fragmented nature of the Asian/Chinese foodservice industry and the current environment creates opportunities for a company that has the necessary expertise and a comprehensive cultural understanding of this unique customer base. We believe we are differentiated from our competitors given our extensive footprint, strong vendor and customer relationships, and value-added service offerings, all of which have allowed and will continue to allow us to better serve our customers in these unprecedented conditions.

Financial Overview


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
($ in thousands)	2022		2021		Amount		%		2022		2021		Amount		%
Net revenue	$	299,642	$	193,546	$	106,096	54.8	%	$	577,857	$	352,926	$	224,931	63.7	%
Net income attributable to HF Foods Group Inc.	$	4,564	$	3,407	$	1,157	34.0	%	$	7,678	$	4,765	$	2,913	61.1	%
Adjusted EBITDA	$	13,923	$	10,532	$	3,391	32.2	%	$	31,836	$	17,037	$	14,799	86.9	%

For additional information on our non-GAAP financial measures, EBITDA and Adjusted EBITDA, see the section entitled “EBITDA and Adjusted EBITDA” below.

COVID-19 Impact

The devastating impact of the COVID-19 pandemic seen in 2020 has generally subsided. Our net revenue for the fiscal year ended December 31, 2021 recovered to 96% of pre-COVID-19 pandemic levels. Based on current sales volumes and adjusted cost structures, we continue to generate positive operating cash flows on a weekly basis and do not have immediate liquidity concerns. We remain optimistic with regards to the long-term prospects for our business although the extent to which the COVID-19 pandemic will impact our financial condition or results of operations is uncertain and will depend on future developments including new information that may emerge on the severity or transmissibility of the disease, new variants, government responses, trends in infection rates, development and distribution of effective medical treatments and vaccines, and future consumer spending behavior, among other factors.

How to Assess HF Group’s Performance

In assessing our performance, we consider a variety of performance and financial measures, including principal growth in net revenue, gross profit, distribution, selling and administrative expenses, as well as certain non-GAAP financial measures, including EBITDA and adjusted EBITDA. The key measures that we use to evaluate the performance of our business are set forth below:

Net Revenue

Net revenue is equal to gross sales minus sales returns, sales incentives that we offer to our customers, such as rebates and discounts that are offsets to gross sales; and certain other adjustments. Our net revenue is driven by changes in number of customers and average customer order amount, product inflation that is reflected in the pricing of our products and mix of products sold.

Gross Profit

Gross profit is equal to net revenue minus cost of revenue. Cost of revenue primarily includes inventory costs (net of supplier consideration), ~~“us”, “our”~~inbound freight, customs clearance fees and other miscellaneous expenses. Cost of revenue generally changes as we incur higher or lower costs from suppliers and as the ~~“Company” are~~customer and product mix changes.

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses consist primarily of salaries, stock-based compensation and benefits for employees and contract laborers, trucking and fuel expenses, utilities, maintenance and repair expenses, insurance expenses, depreciation and amortization expenses, selling and marketing expenses, professional fees and other operating expenses.

EBITDA and Adjusted EBITDA

Discussion of our results includes certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA, that we believe provides an additional tool for investors to ~~Atlantic Acquisition Corp., except where~~use in evaluating ongoing operating results and trends and in comparing our financial performance with other companies in the ~~context requires otherwise. The following discussion should be read~~same industry, many of which present similar non-GAAP financial measures to investors. We present EBITDA and Adjusted EBITDA in ~~conjunction with~~order to provide supplemental information that we consider relevant for the readers of our ~~condensed~~consolidated financial statements ~~and related notes thereto~~ included elsewhere in this ~~report.~~

~~Overview~~

~~We were formed on May 19, 2016~~report, and such information is not meant to replace or supersede GAAP measures.

Management uses EBITDA to measure operating performance, defined as net income before interest expense, income taxes, and depreciation and amortization. In addition, management uses Adjusted EBITDA, defined as net income before interest expense, interest income, income taxes, and depreciation and amortization, further adjusted to exclude certain unusual, non-cash, or non-recurring expenses. Management believes that Adjusted EBITDA is less susceptible to variances in actual performance resulting from non-recurring expenses, and other non-cash charges and is more reflective of other factors that affect our operating performance.

The definition of EBITDA and Adjusted EBITDA may not be the same as similarly titled measures used by other companies in the industry. EBITDA and Adjusted EBITDA are not defined under GAAP and are subject to important limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of HF Group’s results as reported under GAAP. For example, Adjusted EBITDA:

•excludes certain tax payments that may represent a reduction in cash available to the Company;

•does not reflect any cash capital expenditure requirements for the ~~purpose~~assets being depreciated and amortized that may have to be replaced in the future;

•does not reflect changes in, or cash requirements for, our working capital needs; and

•does not reflect the significant interest expense, or the cash requirements, necessary to service our debt.

For additional information on EBITDA and Adjusted EBITDA, see the table entitled “EBITDA and Adjusted EBITDA” below.

Results of ~~entering~~Operations for the Three Months Ended June 30, 2022 and 2021

The following table sets forth a summary of our consolidated results of operations for the three months ended June 30, 2022 and 2021. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.


	Three Months Ended June 30,				Change
($ in thousands)	2022		2021		Amount		%
Net revenue	$	299,642	$	193,546	$	106,096	54.8	%
Cost of revenue	247,072		158,412		88,660		56.0	%
Gross profit	52,570		35,134		17,436		49.6	%
Distribution, selling and administrative expenses	45,843		29,790		16,053		53.9	%
Income from operations	6,727		5,344		1,383		25.9	%
Interest expense	1,549		928		621		66.9	%
Other income, net	(163)		(428)		265		(61.9)	%
Change in fair value of interest rate swap contracts	(208)		112		(320)		NM
Lease guarantee expense	(42)		—		(42)		NM
Income before income tax provision	5,591		4,732		859		18.2	%
Income tax provision	1,097		1,416		(319)		(22.5)	%
Net income	4,494		3,316		1,178		35.5	%
Less: net loss attributable to noncontrolling interests	(70)		(91)		21		(23.1)	%
Net income attributable to HF Foods Group Inc.	$	4,564	$	3,407	$	1,157	34.0	%

____________________

NM - Not meaningful

The following table sets forth the components of our consolidated results of operations expressed as a percentage of net revenue for the periods indicated:


	Three Months Ended June 30,
	2022		2021
Net revenue	100.0	%	100.0	%
Cost of revenue	82.5	%	81.8	%
Gross profit	17.5	%	18.2	%
Distribution, selling and administrative expenses	15.3	%	15.4	%
Income from operations	2.2	%	2.8	%
Interest expense	0.5	%	0.5	%
Other income, net	(0.1)	%	(0.2)	%
Change in fair value of interest rate swap contracts	(0.1)	%	0.1	%

Income before income tax provision	1.9	%	2.4	%
Income tax provision	0.4	%	0.7	%
Net income	1.5	%	1.7	%
Less: net income (loss) attributable to noncontrolling interests	—	%	—	%
Net income attributable to HF Foods Group Inc.	1.5	%	1.7	%

Net Revenue

Net revenue for the three months ended June 30, 2022 increased by $106.1 million or 54.8% compared to the same period in 2021, primarily due to the easing of COVID-19-related restrictions in 2022 that resulted in more dine-in business for our customers and an increase in overall foot traffic to restaurants, as well as the additional revenue generated due to recent acquisitions and overall product cost inflation. Recent acquisitions, which shifted our product mix to higher Seafood sales compared to the same period in 2021, contributed $65.8 million and organic growth contributed the remaining $40.3 million.

Gross Profit

Gross profit for the three months ended June 30, 2022 increased by $17.4 million or 49.6%, compared to the same period in 2021 mainly due to strong revenue growth and recent acquisitions, which contributed $9.0 million of gross profit for the three months ended June 30, 2022. Overall gross margin decreased from 18.2% in the three months ended June 30, 2021 to 17.5% in the three months ended June 30, 2022, primarily due to the expected lower gross margin from recent acquisitions due to the lower margin on our increased Seafood sales and higher than expected fluctuation in key commodity pricing, partially offset by increased gross margin due to organic growth.

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses for the three months ended June 30, 2022 increased by $16.1 million, or 53.9%, to $45.8 million compared to $29.8 million for the three months ended June 30, 2021. Of the distribution, selling and administrative expenses increase, $6.3 million primarily resulted from payroll and related labor costs, inclusive of the additional costs due to recent acquisitions, as more workers were, and will continue to be, required to handle the increasing sales demand, $4.0 million was delivery related cost primarily driven by increasing fuel prices and revenue growth, and an increase of $4.2 million in professional fees primarily driven by legal costs, acquisition-related costs and increased compliance costs as a result of the SEC and SIC investigations and an SEC comment letter inquiry. Distribution, selling and administrative expenses as a percentage of net revenue was 15.4% for the three months ended June 30, 2021 and 15.3% for the three months ended June 30, 2022 primarily due to strong revenue growth and fixed cost leverage offset by the costs disclosed above.

Interest Expense

Interest expense for the three months ended June 30, 2022 increased by $0.6 million, or 66.9%, compared to the same period in 2021 mainly due to higher utilization of the line of credit coupled with a higher interest rate and, to a lesser extent, the increase of $46.0 million to our mortgage-secured term loan. Our average daily line of credit balance increased by $26.7 million, or 246.0%, to $37.5 million for the three months ended June 30, 2022 from $10.9 million for three months ended June 30, 2021. The average daily interest rate on our line of credit balance increased to 2.16% for the three months ended June 30, 2022 from 1.48% for three months ended June 30, 2021.

Income Tax Provision

Our provision for income taxes decreased by $0.3 million, or 22.5%, from $1.4 million for the three months ended June 30, 2021 to $1.1 million for the three months ended June 30, 2022 primarily due to the reversal of our FIN 48 liability of $0.4 million.

Net Income Attributable to HF Foods Group Inc.

Net income attributable to HF Foods Group Inc. was $4.6 million for the three months ended June 30, 2022, compared to $3.4 million for the three months ended June 30, 2021. The increase of $1.2 million, or 35.5%, is primarily attributable to increased consumer demand for dine-in/take-out meals as COVID-19 restrictions eased in 2022, thereby prompting restaurants to replenish products more frequently, partially offset by the increased costs disclosed above.

EBITDA and Adjusted EBITDA

The following table sets forth the calculation of EBITDA and Adjusted EBITDA, and reconciliation to net income, the closest GAAP measure:


	Three Months Ended June 30,						Change
($ in thousands)	2022			2021			Amount		%
Net income	$	4,494		$	3,316		$	1,178	35.5	%
Interest expense	1,549			928			621		66.9	%
Income tax provision	1,097			1,416			(319)		(22.5)	%
Depreciation and amortization	6,080			4,760			1,320		27.7	%
EBITDA	13,220			10,420			2,800		26.9	%
Lease guarantee expense	(42)			—			(42)		NM
Change in fair value of interest rate swap contracts	(208)			112			(320)		(285.7)	%
Stock-based compensation expense	221			—			221		NM
Acquisition and integration costs	310			—			310		NM
Impairment loss	422			—			422		NM
Adjusted EBITDA	$	13,923		$	10,532		$	3,391	32.2	%
Adjusted EBITDA margin	4.6		%	5.4		%

____________________

NM - Not meaningful

Adjusted EBITDA was $13.9 million for the three months ended June 30, 2022, an increase of $3.4 million, or 32.2%, compared to $10.5 million for the three months ended June 30, 2021. The $3.4 million increase in Adjusted EBITDA was primarily attributable to our strong business recovery to pre-COVID-19 pandemic levels. Adjusted EBITDA margin decreased by 80 basis points primarily due to a decrease of 70 basis points on gross profit margin.

Results of Operations for the Six Months Ended June 30, 2022 and 2021

The following table sets forth a summary of our consolidated results of operations for the six months ended June 30, 2022 and 2021. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.


	Six Months Ended June 30,				Change
($ in thousands)	2022		2021		Amount		%
Net revenue	$	577,857	$	352,926	$	224,931	63.7	%
Cost of revenue	474,560		288,364		186,196		64.6	%
Gross profit	103,297		64,562		38,735		60.0	%
Distribution, selling and administrative expenses	86,251		57,879		28,372		49.0	%
Income from operations	17,046		6,683		10,363		155.1	%

Interest expense	2,827		1,830		997		54.5	%
Other income, net	(939)		(864)		(75)		8.7	%
Change in fair value of interest rate swap contracts	(566)		(1,319)		753		(57.1)	%
Lease guarantee expense	5,889		—		5,889		NM
Income before income tax provision	9,835		7,036		2,799		39.8	%
Income tax provision	2,201		2,062		139		6.7	%
Net income	7,634		4,974		2,660		53.5	%
Less: net income (loss) attributable to noncontrolling interests	(44)		209		(253)		NM
Net income attributable to HF Foods Group Inc.	$	7,678	$	4,765	$	2,913	61.1	%

____________________

NM - Not meaningful

The following table sets forth the components of our consolidated results of operations expressed as a percentage of net revenue for the periods indicated:


	Six Months Ended June 30,
	2022				2021
Net revenue	100.0	%			100.0	%
Cost of revenue	82.1	%			81.7	%
Gross profit	17.9	%	—	%	18.3	%
Distribution, selling and administrative expenses	14.9	%			16.4	%
Income from operations	3.0	%			1.9	%
Interest expense	0.5	%			0.5	%
Other income, net	(0.2)	%			(0.2)	%
Change in fair value of interest rate swap contracts	(0.1)	%			(0.4)	%
Lease guarantee expense	1.0	%			—	%
Income before income tax provision	1.8	%			2.0	%
Income tax provision	0.4	%			0.6	%
Net income	1.4	%			1.4	%
Less: net income attributable to noncontrolling interests	—	%			0.1	%
Net income attributable to HF Foods Group Inc.	1.4	%			1.3	%

Net Revenue

Net revenue for the six months ended June 30, 2022 increased by $224.9 million, or 63.7% compared to the same period in 2021, primarily due to the easing of COVID-19-related restrictions in 2022 that resulted in more dine-in business for our customers and an increase in overall foot traffic to restaurants, as well as the additional revenue generated due to recent acquisitions and overall product cost inflation. Organic growth contributed $111.2 million and recent acquisitions, which shifted our product mix to higher Seafood sales compared to the same period in 2021, contributed the remaining $113.7 million.

Gross Profit

Gross profit for the six months ended June 30, 2022 increased by $38.7 million or 60.0%, compared to the same period in 2021 mainly due to strong revenue growth and recent acquisitions, which contributed $14.7 million of gross profit for the six months ended June 30, 2022. Overall gross margin decreased from 18.3% in the six months ended June 30, 2021 to 17.9% in the six months ended June 30, 2022, primarily due to lower gross margin from recent acquisitions due to the lower margin on our increased Seafood sales, incremental lower margin sales from newly acquired customers, higher than expected fluctuation in key commodity pricing, partially offset by increased gross margin due to organic growth.

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses for the six months ended June 30, 2022 increased by $28.4 million, or 49.0%, to $86.3 million compared to $57.9 million for the six months ended June 30, 2021. Of the distribution, selling and administrative expenses increase, $16.2 million primarily resulted from payroll and related labor costs, inclusive of the additional costs due to recent acquisitions, as more workers were, and will continue to be, required to handle the increasing sales demand, $5.1 million was in delivery related cost primarily driven by increasing fuel prices and revenue growth, and an increase of $2.6 million in professional fees primarily driven by legal costs, acquisition-related costs and increased compliance costs as a result of the SEC and SIC investigations and an SEC comment letter inquiry. Distribution, selling and administrative expenses as a percentage of net revenue decreased from 16.4% for the six months ended June 30, 2021 to 14.9% for the six months ended June 30, 2022 primarily due to strong revenue growth and fixed cost leverage partially offset by the costs disclosed above.

Interest Expense

Interest expense for the six months ended June 30, 2022 increased by $1.0 million, or 54.5%, compared to the same period in 2021 mainly due to higher utilization of our line of credit coupled with a higher interest rate and, to a lesser extent, the increase of $46.0 million to our mortgage-secured term loan. Our average daily line of credit balance increased by $38.0 million, or 295.0%, to $50.9 million for the six months ended June 30, 2022 from $12.9 million for six months ended June 30, 2021. The average daily interest rate on our line of credit increased to 1.87% for the six months ended June 30, 2022 from 1.49% for six months ended June 30, 2021.

Income Tax Provision

Our provision for income taxes slightly increased by $0.1 million, or 6.7%, from $2.1 million for the six months ended June 30, 2021 to $2.2 million for the six months ended June 30, 2022 primarily due to increasing income before tax, resulting from business expansion and our improved profitability.

Net Income Attributable to HF Foods Group Inc.

Net income attributable to HF Foods Group Inc. was $7.7 million for the six months ended June 30, 2022, compared to $4.8 million for the six months ended June 30, 2021. The increase of $2.9 million, or 61.1%, is primarily attributable to increased consumer demand for dine-in/take out meals as COVID-19 restrictions eased in 2022, thereby prompting restaurants to replenish products more frequently, partially offset by $5.9 million in lease guarantee expense related to our AnHeart lease guarantee and the increased costs disclosed above.

EBITDA and Adjusted EBITDA

The following table sets forth the calculation of EBITDA and Adjusted EBITDA, and reconciliation to net income, the closest GAAP measure:


	Six Months Ended June 30,						Change
($ in thousands)	2022			2021			Amount		%
Net income	$	7,634		$	4,974		$	2,660	53.5	%
Interest expense	2,827			1,830			997		54.5	%
Income tax provision	2,201			2,062			139		6.7	%
Depreciation and amortization	11,859			9,490			2,369		25.0	%
EBITDA	24,521			18,356			6,165		33.6	%
Lease guarantee expense	5,889			—			5,889		NM
Change in fair value of interest rate swap contracts	(566)			(1,319)			753		(57.1)	%
Stock-based compensation expense	511			—			511		NM
Acquisition and integration costs	1,059			—			1,059		NM
Impairment loss	422			—			422		NM
Adjusted EBITDA	$	31,836		$	17,037		$	14,799	86.9	%
Adjusted EBITDA margin	5.4		%	4.8		%

____________________

NM - Not meaningful

Adjusted EBITDA was $31.8 million for the six months ended June 30, 2022, an increase of $14.8 million, or 86.9%, compared to $17.0 million for the six months ended June 30, 2021. The $14.8 million increase in Adjusted EBITDA was primarily attributable to our strong business recovery to pre-COVID-19 pandemic levels and an improvement of distribution, selling and administrative expenses as a percentage of net revenue from 16.4% for the six months ended June 30, 2021 to 14.9% for the six months ended June 30, 2022. In addition, there is a net positive impact of $0.8 million due to the change in fair value of interest rate swap contracts.

Liquidity and Capital Resources

As of June 30, 2022, we had cash of approximately $18.8 million, checks issued not presented for payment of $20.2 million and access to approximately $40.0 million in additional funds through our $100.0 million line of credit, subject to a borrowing base calculation. We have funded working capital and other capital requirements primarily by cash flow from operations and our line of credit. Cash is required to pay purchase costs for inventory, salaries, fuel and trucking expenses, selling expenses, rental expenses, income taxes, other operating expenses and to service debts.

Based on current sales volume, which has been increasing steadily quarter-on-quarter since the third quarter of fiscal year 2020, we believe that our cash flow generated from operations is sufficient to meet our normal working capital needs and debt obligations for at least the next twelve months. However, our ability to repay our current obligations will depend on the future realization of our current assets. Management has taken into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Our efforts to identify a prospective target business will not be limited to any particular industry or geographic region, although we intend to focus our search on target businesses being operated by and/or serving ethnic minoritiesconsideration historical experience, general economic trends in the United States, ~~especially within Asian-American communities. We intend to utilize cash derived from the proceeds of our initial public offering in effecting our initial business combination.~~

~~We presently have no revenue, have had losses since inception from incurring formation costs~~ and have had no operations other than the active solicitation of a target business with which to complete a business combination. We have relied upon the sale of our securities and loans from our officers and directors to fund our operations.

On August 14, 2017, the Company consummated its initial public offering (“IPO”) of 4,000,000 units (the “Units”). Each Unit consists of one share of common stock (“Common Stock”), and one right to receive 1/10 of a share of Common Stock at the closing of the Company’s initial business combination. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $40,000,000. The Company granted the underwriters a 45-day option to purchase up to 600,000 additional Units to cover over-allotments, if any. Simultaneously with the closing of the IPO, the Company consummated a private placement (“Private Placement”) of 320,000 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $3,200,000. Subsequently, the underwriters exercised the over-allotment option in part and, on August 21, 2017, the underwriters purchased 425,000 over-allotment option Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $4,250,000. On August 21, 2017, simultaneously with the sale of the over-allotment units, the Company consummated the private sale of an additional 21,250 Private Units, generating gross proceeds of $212,500. On August 22, 2017, the underwriters canceled the remainder of the over-allotment option. In connection with the cancellation of the remainder of the over-allotment option, the Company canceled an aggregate of 43,753 shares of common stock issued to the Company’s initial stockholders prior to the IPO and Private Placement. A total of $45,135,000 of the net proceeds from the sale of Unitstrends in the ~~IPO (including~~foodservice distribution industry to determine the ~~over-allotment option units)~~expected collectability of accounts receivable and the ~~Private Placements on August 14, 2017 and August 21, 2017 were placed in~~realization of inventories as of June 30, 2022.

On March 31, 2022, we amended the Credit Agreement with J.P. Morgan extending our line of credit for five years. The amendment provided for a ~~trust account established for the benefit~~$100.0 million asset-secured revolving credit facility with a 1-month SOFR plus a credit adjustment of ~~the Company’s public stockholders.~~

~~As of September 30, 2017, a total of $45,185,462 was in the trust account established for the benefit of the Company’s public shareholders.~~

Our management has broad discretion with respect to the specific application of the net proceeds of the IPO and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination.

~~Results of Operations~~

Our entire activity from inception up to August 14, 2017 was in preparation for the IPO. Since the IPO, our activity has been limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and completion of our initial business combination. We expect to generate small amounts of non-operating income in the form of interest income on cash and cash equivalents. Interest income is not expected to be significant in view of current low interest rates on risk-free investments (treasury securities). We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance),0.1% plus 1.375% per annum, as well as an increase to our mortgage-secured term loan from $69.0 million to $115.0 million. In April of 2022, the $46.0 million increase to the mortgage-secured term loan was used to pay down our $100.0 million line of credit. We also received a waiver through January 31, 2023 related to the timing of our filing of our 2021 audited financial statements.

On April 29, 2022, we completed the Sealand Acquisition for ~~due diligence expenses.~~cash consideration of $20.0 million plus approximately $14.4 million of inventory. We ~~expect~~financed the Sealand Acquisition through our ~~expenses to increase substantially after this period.~~

~~For~~$100.0 million line of credit. See Note 7 - Acquisitions for additional information regarding the Sealand Acquisition.

During the three months ended ~~September~~June 30, ~~2017,~~2022, we ~~had net loss~~sold a warehouse to a related party for approximately $7.2 million and used a portion of ~~$1,037, which was comprised~~the proceeds to pay the outstanding balance of ~~$30,478 of general and administrative expenses and $21,021 of State franchise taxes, offset by $50,462 of interest income earned from investment in trust account. For~~our $4.5 million loan with First Horizon Bank. See Note 10 - Debt for additional information.

During the three months ended ~~September~~June 30, ~~2016,~~2022, we ~~had a net loss~~paid the remaining $4.5 million of ~~$100, which was consisted of general~~our related party promissory note payable. See Note 13 - Related Party Transactions for additional information.

Based on the above considerations, management believes we have sufficient funds to meet our working capital requirements and ~~administrative expenses.~~

For the nine months ended September 30, 2017, we had net loss of $1,119, which was comprised of $30,560 of general and administrative expenses and $21,021 of State franchise taxes, offset by $50,462 of interest income earned from investment in trust account. For the period from May 19, 2016 (Inception) to September 30, 2017, we had a net loss of $625, which was comprised of formation and operating costs.

~~Liquidity and Capital Resources~~

~~As of September 30, 2017, we had $694,798 in cash outside the trust account.~~

Our liquidity needs have been satisfied to date through receipt of $25,000 from the sale of the insider shares and loans from insiders in an aggregate amount of $175,000, which was converted into Private Units as part of the Private Placement at the closing of the IPO, and the funds receiveddebt obligations in the ~~IPO and Private Placement~~next twelve months. However, there are a number of factors that ~~are held outside~~could potentially arise which might result in shortfalls in anticipated cash flow, such as the ~~trust account.~~

~~We intend~~demand for our products, economic conditions, government intervention in response to ~~use substantially all~~a potential resurgence of ~~the net proceeds of the IPO, including the funds held~~COVID-19, competitive pricing in the ~~trust account, in connection with~~foodservice distribution industry, and our ~~initial business combination~~bank and suppliers being able to ~~pay our expenses relating thereto, including a deferred underwriting commission payable to Chardan Capital Markets, LLC in an amount equal to 2.5% of~~provide continued support. If the ~~total gross proceeds raised in the IPO upon consummation of our initial business combination. To the extent that our~~future cash flow from operations and other capital ~~stock~~resources is used in whole or in part as consideration to effect our initial business combination, the remaining proceeds held in the trust account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our initial business combination if the funds available to us outside of the trust account were insufficient to ~~cover such expenses.~~

~~We anticipate that the funds held outside of~~fund our ~~trust account will be sufficient to allow us to operate 12 months from the filing date of this Form 10-Q, 2019, assuming that a business combination is not consummated during that time.~~

~~If our estimates of the costs of undertaking due diligence and negotiating our initial business combination are less than the actual amount necessary to do so,~~liquidity needs, we may have ~~insufficient funds available~~ to ~~operate~~resort to reducing or delaying our ~~business prior~~expected acquisition plans, liquidating assets, obtaining additional debt or equity capital, or refinancing all or a portion of our debt.

As of June 30, 2022, we have no off balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial position, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

The following table summarizes cash flow data for the six months ended June 30, 2022and 2021:


	Six Months Ended June 30,				Change
($ in thousands)	2022		2021		Amount		%
Net cash provided by operating activities	$	13,658	$	14,159	$	(501)	(3.5)%
Net cash used in investing activities	(48,655)		(5,595)		(43,060)		769.6%
Net cash provided by (used in) financing activities	39,023		(4,720)		43,743		NM
Net increase in cash and cash equivalents	$	4,026	$	3,844	$	182	4.7%

____________________

NM - Not meaningful

Operating Activities

Net cash provided by operating activities decreased to $13.7 million for the six months ended June 30, 2022, compared to $14.2 million for the six months ended June 30, 2021.

Investing Activities

Net cash used in investing activities was $48.7 million for the six months ended June 30, 2022, compared to net cash used in investing activities of $5.6 million for the six months ended June 30, 2021, an increase of $43.1 million primarily due to the Sealand Acquisition of $34.9 million and the $17.4 million paid for the inventory acquired related to the Great Wall Acquisition partially offset by proceeds from the $7.2 million sale of a warehouse.

Financing Activities

Net cash provided by financing activities was $39.0 million for the six months ended June 30, 2022, compared to net cash used in financing activities of $4.7 million for the six months ended June 30, 2021, primarily due to the $46.0 million increase of our mortgage-secured term loan, partially offset by the $4.5 million payoff of our related party promissory note payable and the $4.5 million repayment of long-term debt related to our ~~initial business combination. Moreover,~~related party warehouse sale mentioned above.

Critical Accounting Policies and Estimates

We have prepared the financial information in this Quarterly Report in accordance with GAAP. Preparing our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we ~~may need~~believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2021 Annual Report on Form 10-K includes a summary of the critical accounting policies we believe are the most important to ~~obtain additional financing either~~aid in understanding our financial results. There have been no changes to ~~consummate~~those critical accounting policies that have had a material impact on our ~~initial business combination~~reported amounts of assets, liabilities, revenue, or ~~because we become obligated~~expenses during the six months ended June 30, 2022.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to ~~convert a significant number~~Recent Accounting Pronouncements in Note 2 - Summary of Significant Accounting Policies in our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

~~Off-Balance Sheet Arrangements~~

~~As of September 30, 2017, we did not have any off-balance sheet arrangements.~~

unaudited condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Risk

Our debt exposes us to risk of fluctuations in interest rates. Floating rate debt, where the interest rate fluctuates periodically, exposes us to short-term changes in market interest rates. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us to changes in market interest rates reflected in the fair value of the debt and to the risk that we may need to refinance maturing debt with new debt at higher rates. We manage our debt portfolio to achieve an overall desired proportion of fixed and floating rate debts and may employ interest rate swaps as a tool from time to time to achieve that position. To manage our interest rate risk exposure, we entered into three interest rate swap contracts to hedge the floating rate term loans. See Note 10 - Debt to the unaudited condensed consolidated financial statements in this Form 10-Q for additional information.

As of ~~September~~June 30, ~~2017, we were not subject~~ 2022, our aggregate floating rate debt’s outstanding principal balance was $174.3 million, or 94.1% of total debt, consisting of long-term debt and our revolving line of credit. See Note 10 - Debt to ~~any market or~~the unaudited condensed consolidated financial statements in this Form 10-Q for additional information. Our floating rate debt interest is based on the floating 1-month SOFR plus a predetermined credit adjustment rate ~~risk. Following~~plus the ~~consummation~~bank spread. The remaining 5.9% of our debt is fixed-rate

and floating rate with hedge. In a hypothetical scenario, a 1% change in the applicable rate would cause the interest expense on our floating rate debt to change by approximately $1.7 million per year.

Fuel Price Risk

We are also exposed to risks relating to fluctuations in the price and availability of diesel fuel. We require significant quantities of diesel fuel for our vehicle fleet, and the inbound delivery of the ~~IPO,~~products we sell is also dependent upon shipment by diesel-fueled vehicles. We currently are able to obtain adequate supplies of diesel fuel, despite the ~~net proceeds of the IPO, including amounts~~fact that prices in the ~~trust account, may be invested~~current quarter increased by 69.9% from the comparable period of 2021. However, it is impossible to predict the future availability or price of diesel fuel. The price and supply of diesel fuel fluctuates based on external factors not within our control, including geopolitical developments, supply and demand for oil and gas, regional production patterns, weather conditions and environmental concerns. Increases in ~~U.S. government treasury bills, notes or bonds with a maturity~~the cost of ~~180 days or less or~~diesel fuel could increase our cost of goods sold and operating costs to deliver products to our customers.

We do not actively hedge against price fluctuations of diesel fuel in ~~certain money market funds that invest solely in U.S. treasuries. Due~~general. Instead, we seek to ~~the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.~~

minimize fuel cost risk through delivery route optimization and fleet utilization improvements.

Item 4. Controls and ~~Procedures~~

Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as ~~of the end of the fiscal quarter ended September 30, 2017, as~~ such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange ~~Act.~~ Act, as of the end of the period covered by this report. In connection with this review and the audit of our consolidated financial statements for the year ended December 31, 2021, we identified two material weaknesses as were reported previously, which continue to exist as of June 30, 2022. In addition, there were other material weaknesses identified during 2021 that exist as of June 30, 2022. We did not properly design or maintain effective controls over the control environment, risk assessment, monitoring, control activities, and information and communication components of the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that ~~during~~as a result of the ~~period covered by this report,~~material weaknesses and control deficiencies as reported in our Annual Report on Form 10-K for the year ended December 31, 2021, our disclosure controls and procedures were ~~effective.~~

not effective as of June 30, 2022. Notwithstanding the weaknesses, our management has concluded that the financial statements included elsewhere in this report present fairly, and in all material respects, our financial position, results of operation and cash flow in conformity with GAAP.

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 Control ~~over~~Over Financial Reporting

~~There was no change in~~

In order to address and resolve the foregoing material weaknesses, we have begun to implement measures designed to improve our internal control over financial reporting to remediate these material weaknesses, including continuously hiring additional financial personnel with requisite training and experience in the preparation of financial statements in compliance with applicable SEC requirements, formalizing our processes to generate documentation sufficient to support customer orders and purchase orders, and implementing controls to obtain documentation evidencing customer agreements to transaction amounts and account balances.

The measures we are implementing are subject to continued management review supported by confirmation and testing, as well as audit committee oversight. Management remains committed to ongoing efforts to address these material weaknesses. Although we will continue to implement measures to remedy our internal control deficiencies, there can be no assurance that ~~occurred during~~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 ~~fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely~~material weaknesses identified and described above will continue to ~~materially affect,~~exist.

There have been no other change to our internal control over financial ~~reporting.~~

reporting during the three months ended June 30, 2022.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to our outstanding legal matters, we believe that the amount or estimable range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. For information relating to legal proceedings, see Note 15 - Commitments and Contingencies in our consolidated financial statements.

Item 1A. Risk Factors.

There have been no material changes from the risk factors that we believe are material to our business, results of operations, and financial condition from those disclosed in Part I, Item 1A — “Risk Factors" of the Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered ~~Securities~~

On August 14, 2017, the Company consummated its initial public offering (“IPO”) of 4,000,000 units (the “Units”). Each Unit consists of one share of common stock (“Common Stock”), and one right to receive 1/10 of a share of Common Stock at the closing of the Company’s initial business combination. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $40,000,000. The Company granted the underwriters a 45-day option to purchase up to 600,000 additional Units to cover over-allotments, if any. Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) of 320,000 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $3,200,000. Subsequently, the underwriters exercised the over-allotment option in part and, on August 21, 2017, the underwriters purchased 425,000 over-allotment option Units, which were sold at an offering price of $10.00 per Unit, generating gross proceeds of $4,250,000. On August 21, 2017, simultaneously with the sale of the over-allotment units, the Company consummated the private sale of an additional 21,250 Private Units, generating gross proceeds of $212,500. On August 22, 2017, the underwriters canceled the remainder of the over-allotment option. In connection with the cancellation of the remainder of the over-allotment option, the Company canceled an aggregate of 43,753 shares of common stock issued to the Company’s initial stockholders prior to the IPO and Private Placement. A total of $45,135,000 of the net proceeds from the sale of Units in the IPO (including the over-allotment option units) and the Private Placements on August 14, 2017 and August 21, 2017, were placed in a trust account established for the benefit of the Company’s public stockholders.

The Private Units are identical to the units sold in the IPO. The holders of the Private Units have agreed (A) to vote the private shares underlying the Private Units (the “Private Shares”) and any public shares acquired by them in favor of any proposed business combination, (B) not to propose, or vote in favor of, an amendment to our certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 14, 2019 (or August 14, 2019, as applicable), unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, (C) not to convert any shares (including the Private Shares) into the right to receive cash from the trust account in connection with a stockholder vote to approve our proposed initial business combination (or sell any shares they hold to us in a tender offer in connection with a proposed initial business combination) or a vote to amend the provisions of our certificate of incorporation relating to the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by February 14, 2019 (or August 14, 2019, as applicable) and (D) that the Private Shares shall not be entitled to be redeemed for a pro rata portion of the funds held in the trust account if a business combination is not consummated. Additionally, our insiders (and/or their designees) have agreed not to transfer, assign or sell any of the private units or underlying securities (except to the same permitted transferees as the insider shares and provided the transferees agree to the same terms and restrictions as the permitted transferees of the insider shares must agree to, each as described above) until the completion of our initial business combination.

As of September 30, 2017, a total of $45,185,462 of the net proceeds from the IPO and the Private Placement, and interest from investment on such net proceeds were in a trust account established for the benefit of the Company’s public shareholders.

We paid a total of $1,327,500 in underwriting discounts and commissions (not including the 2.5% deferred underwriting commission payable at the consummation of initial business combination) and $523,717 for other costs and expenses related to our formation and the IPO.

~~For a description of the use of the proceeds generated in our IPO, see Part I,~~ Securities.

None.

Item ~~2 of this Form 10-Q.~~

3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The following exhibits are being filed or furnished with this Quarterly Report on Form 10-Q:

Incorporated by Reference

Exhibit Number

Description

Form

Exhibit

Filing Date

3.1

Second Amended and Restated Certificate of Incorporation

8-K

3.1

8/11/2017

3.2

Certificate of Amendment to Certificate of Incorporation

8-K

3.1.2

8/27/2018

3.3

Amended and Restated Bylaws

8-K

3.02

11/04/2022

4.1

Specimen Common Stock Certificate

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

4.3

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

S-1/A

4.5

7/28/2017

10.1†

Offer of Employment for Felix Lin dated April 15, 2022

8-K

10.1

4/20/2022

10.2

Asset Purchase Agreement, dated as of April 19, 2022, by and among Sealand Food, Inc., Connie Wang, Jenny Wang and Great Wall Seafood VA, L.L.C. and, solely for purposes of Section 2.1(d) thereof, HF Foods Group, Inc.

8-K

10.1

4/25/2022

10.3†

Separation and Release Agreement, dated May 18, 2022, by and among HF Foods Group Inc. and Kong Hian Lee

8-K

10.1

5/24/2022

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

32.1**

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

104*

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

~~Exhibit No.~~	~~Description~~
*		Filed herewith.
~~1.1~~**		Underwriting Agreement, dated August 8, 2017, by and between the Registrant and Chardan Capital Markets, LLC (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K dated August 8, 2017)Furnished herewith.
~~3.1~~†		~~Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated August 8, 2017)~~Indicates a management contract or compensatory plan or arrangement.
~~4.1~~	Rights Agreement, dated August 8, 2017, by and between American Stock Transfer & Trust Company, LLC and the Registrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated August 8, 2017)
~~10.1~~	Investment Management Trust Account Agreement, dated August 8, 2017, by and between American Stock Transfer & Trust Company, LLC and the Registrant (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K dated August 8, 2017)
~~10.2~~	Registration Rights Agreement, dated August 8, 2017, by and among the Registrant and the initial stockholders (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K dated August 8, 2017)
~~10.3~~	Stock Escrow Agreement dated August 8, 2017 among the Registrant, American Stock Transfer & Trust Company, LLC, and the initial stockholders (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K dated August 8, 2017)
~~10.4~~	Form of Letter Agreement by and between the Registrant, the initial shareholders and the officers and directors of the Company (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 filed with the Securities & Exchange Commission on July 27, 2017)
~~31.1~~	~~Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.~~

~~31.2~~	~~Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.~~

32	~~Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~	~~XBRL Instance Document~~

~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

SIGNATURES

~~In accordance with~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~ATLANTIC ACQUISITION CORP.~~
			HF FOODS GROUP INC.
		~~By:~~	~~/s/ Richard Xu~~
		~~Richard Xu~~By: /s/ Xiao Mou Zhang
		Xiao Mou Zhang Chief Executive Officer ~~(Principal executive officer)~~

		By:	~~/s/ Peiling He~~ /s/ Carlos Rodriguez
		~~Peiling He~~
	Carlos Rodriguez Chief Financial Officer (Principal accounting and financial ~~and accounting~~ officer)

Date: January 31, 2023

~~Date: November 13, 2017~~

~~ATLANTIC ACQUISITION CORP.~~
~~(Exact Name of Registrant as Specified in Its Charter)~~

Delaware	~~81-2717873~~
(State or other jurisdiction of incorporation or organization)		81-2717873 (I.R.S. Employer Identification No.)

6325 South Rainbow Boulevard, Suite 420, Las Vegas, NV 89118
(Address of principal executive offices) (Zip Code)


Large accelerated filer	☐	Accelerated filer	☐ ☒
Non-accelerated filer	☐	Smaller reporting company	☒
~~(Do not check if smaller reporting company)~~		Emerging ~~Growth Company~~growth company	☒

	September 30, 2017			December 31, 2016
		(Unaudited)
ASSETS

Current Assets
Current assets-cash	$	694,798		$	44,955
Prepaid expenses		10,500			—
Deferred offering costs		—			154,820
Total Current Assets		705,298			199,775

Cash and marketable securities held in Trust Account		45,185,462			—
Total Assets	$	45,890,760		$	199,775

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable	$	35,175		$	475
Accrued state franchise taxes		21,021			—
Note payable to related parties		—			175,000
Total Current Liabilities		56,196			175,475

Deferred underwriting compensation		1,106,250			—
Total Liabilities		1,162,446			175,475

Commitments and Contingencies
Common stocks subject to possible conversion; 3,894,933 and -0- (at conversion value of $10.20 per share)		39,728,313			—

Stockholders’ Equity
Preferred stock, $.0001 par value, 1,000,000 shares authorized		—			—
Common Stock, $.0001 par value, 30,000,000 shares authorized , 1,977,564 and 1,150,000⁽¹⁾ common stocks issued and outstanding (excluding 3,894,933 and -0- shares subject to redemption)		198			115
Additional paid- in capital		5,001,622			24,885
Accumulated deficit		(1,819	)		(700	)
Total Stockholders’ Equity		5,000,001			24,300

Total Liabilities and Stockholders’ Equity	$	45,890,760		$	199,775


	For Three Months ended September 30,						For The Nine Months Ended			For The Period From May 19, 2016 (Inception) Through
	2017			2016			September 30, 2017			September 30, 2016

General and administrative expenses	$	(30,478	)	$	(100	)	$	(30,560	)	$	(625	)
State franchise taxes		(21,021	)		—			(21,021	)		—
Interest income on cash and marketable securities held in trust		50,462			—			50,462			—
Net Loss		(1,037	)		(100	)		(1,119	)		(625	)

Basic and diluted weighted average shares outstanding⁽¹⁾		1,467,996			1,000,000			1,157,713			1,000,000
Basic and diluted net loss per share	$	(0.02	)	$	(0.00	)	$	(0.02	)	$	(0.00	)


	For The Nine Months Ended September 30, 2017			For The Period From May 19 (Inception) Through September 30, 2016

Cash flow from operating activities
Net loss	$	(1,119	)	$	(625	)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest income on cash and marketable securities held in trust		(50,462	)		—
Change in operating assets and liabilities:
Change in prepaid expenses		(10,500	)		—
Change in accounts payable		34,700			475
Change in accrued state franchise taxes		21,021			—
Net cash used in operating activities		(6,360	)		(150	)

Cash flows from investing activities
Investment of cash and marketable securities in Trust Account		(45,135,000	)		—
Net cash used in investing activities		(45,135,000	)		—

Cash flow from financing activities
Proceeds from sale of public units during the public offering		40,000,000			—
Proceeds from sale of private units concurrent with the public offering		3,025,000			—
Proceeds from sale of underwriter’s unit purchase option		100			—
Proceeds from sale of units upon partial exercise of overallotment option		4,250,000			—
Proceeds from sale of private units upon partial exercise of overallotment option		212,500			—
Payment of offering costs		(1,696,397	)		(118,621	)
Proceeds from note payable to related party		—			175,000
Proceeds from sale of common stock		—			25,000
Net cash provided by financing activities		45,791,203			81,379

Net Change in Cash and Cash Equivalents		649,843			81,229
Cash at beginning of period		44,955			—
Cash at end of period	$	694,798		$	81,229

Supplemental disclosure of non-cash financing activities
Repayment of old note payable by new note holder (Note 5)	$	175,000		$	—
Conversion of note payable into private units	$	175,000		$	—

Supplemental disclosure of non-cash investing activities
Proceeds from issuance of shares in May 2017 paid directly by new Shareholders to repurchase initial shareholder shares	$	25,000		$	—


($ in thousands)	Ownership of Noncontrolling Interest	June 30, 2022		December 31, 2021
HF Foods Industrial, Inc. ("HFFI")	45.00%	$	691	$	462
Min Food, Inc.	39.75%	1,563		1,363
Monterey Food Service, LLC	35.00%	452		453
Ocean West Food Services, LLC	32.50%	1,820		1,763
Syncglobal Inc.(a)	43.00%	91		—
Total		$	4,617	$	4,041

Description	Level	September 30, 2017		December 31, 2016
Assets:
Cash and marketable securities held in Trust Account	1		45,185,462	$	—


	For Three Months ended September 30,						For The Nine Months Ended			For The Period From May 19, 2016 (Inception)
	2017			2016			September 30, 2017			Through September 30, 2016

Net loss		(1,037	)		(100	)		(1,119	)		(625	)
Less: income attributable to common stock subject to redemption		(25,914	)		—			(25,914	)		—
Adjusted loss		(26,951	)		(100	)		(27,033	)		(625	)
Basic and diluted weighted average shares outstanding⁽¹⁾		1,467,996			1,000,000			1,157,713			1,000,000
Basic and diluted net loss per share		(0.02	)		(0.00	)		(0.02	)		(0.00	)