UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterquarterly period ended September 30, 2017

March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________ to

_______________________.

Commission file number:File Number: 001-38180

HF FOODS GROUP INC.
(Exact name of registrant as specified in its charter)
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)

(888) 905-0988
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

1250 Broadway, 36th Floor

New York, NY 10001

Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.0001 par valueHFFGNasdaq Capital Market
Preferred Share Purchase RightsN/ANasdaq Capital Market

(Address of principal executive offices)

(646) 912-8918

(Issuer’s telephone number)

Check

Indicate by check mark whether the issuerregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒☐ No ☐

☒

As of November 13, 2017, 5,872,497May 7, 2024, the registrant had 52,610,847 shares of common stock par value $0.001 per share, were issuedoutstanding.


HF Foods Group Inc. and outstanding.

Subsidiaries

ATLANTIC ACQUISITION CORP.

FORMForm 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2017

TABLE OF CONTENTS

for the Quarter Ended March 31, 2024
Table of Contents
DescriptionPage
Item 1.3
1
Condensed Consolidated Balance Sheets (Unaudited)
Item 1. Financial Statements1
3
Condensed Balance Sheets
3
CondensedConsolidated Statements of Operations and Comprehensive Loss (Unaudited)4
2
Condensed Consolidated Statements of Cash Flows (Unaudited)
5
3
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
4
Notes to Unaudited Condensed Consolidated Financial Statements
6
5
Item 2.18
17
Item 3. Quantitative19
24
Item 4.19
24
21
Item 1.
26
Item 1A.
26
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds21
26
Item 3.Item 5. Other Information
26
Item 4.22
26
SignaturesItem 5.23
26

2

Item 6.
27
28




PART I –I.     FINANCIAL STATEMENTS

INFORMATION

Item

ITEM 1.    Financial Statements

Atlantic Acquisition Corp.

Statements.

HF Foods Group Inc. and Subsidiaries
Condensed Consolidated 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.

(In thousands, except share data)
(Unaudited)
March 31, 2024December 31, 2023
ASSETS
CURRENT ASSETS:
Cash$18,215 $15,232 
Accounts receivable, net of allowances of $2,077 and $2,11949,705 47,524 
Accounts receivable - related parties295 308 
Inventories107,908 105,618 
Prepaid expenses and other current assets9,363 10,145 
TOTAL CURRENT ASSETS185,486 178,827 
Property and equipment, net137,989 133,136 
Operating lease right-of-use assets11,815 12,714 
Long-term investments2,389 2,388 
Customer relationships, net144,540 147,181 
Trademarks, trade names and other intangibles, net29,196 30,625 
Goodwill85,118 85,118 
Other long-term assets6,532 6,531 
TOTAL ASSETS$603,065 $596,520 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks issued not presented for payment$8,663 $4,494 
Line of credit55,192 58,564 
Accounts payable57,691 51,617 
Accounts payable - related parties143 397 
Current portion of long-term debt, net5,427 5,450 
Current portion of obligations under finance leases2,299 1,749 
Current portion of obligations under operating leases3,766 3,706 
Accrued expenses and other liabilities17,454 17,287 
TOTAL CURRENT LIABILITIES150,635 143,264 
Long-term debt, net of current portion107,331 108,711 
Obligations under finance leases, non-current14,689 11,229 
Obligations under operating leases, non-current8,493 9,414 
Deferred tax liabilities28,557 29,028 
Other long-term liabilities5,198 6,891 
TOTAL LIABILITIES314,903 308,537 
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS’ EQUITY:
Series A Participating Preferred Stock, par value $0.001; 100,000 shares authorized, no shares issued and outstanding— — 
Preferred Stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding— — 
Common Stock, $0.0001 par value; 100,000,000 shares authorized; 54,153,391 and 54,153,391 shares issued and 52,155,968 and 52,155,968 shares outstanding as of March 31, 2024 and December 31, 2023, respectively5 5 
Treasury stock, at cost; 1,997,423 shares as of March 31, 2024, and 1,997,423 shares as of December 31, 2023(7,750)(7,750)
Additional paid-in capital603,832 603,094 
Accumulated deficit(309,382)(308,688)
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.286,705 286,661 
Noncontrolling interests1,457 1,322 
TOTAL SHAREHOLDERS’ EQUITY288,162 287,983 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$603,065 $596,520 
The accompanying notes are an integral part of thethese unaudited condensed consolidated financial statements.

3

1

Atlantic Acquisition Corp.


HF Foods Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

and Comprehensive Loss

(In thousands, except share and per share data)
(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.


Three Months Ended March 31,
20242023
Net revenue - third parties$294,836 $291,562 
Net revenue - related parties818 2,293 
TOTAL NET REVENUE295,654 293,855 
Cost of revenue - third parties244,484 241,457 
Cost of revenue - related parties759 2,226 
TOTAL COST OF REVENUE245,243 243,683 
GROSS PROFIT50,411 50,172 
Distribution, selling and administrative expenses50,496 52,929 
LOSS FROM OPERATIONS(85)(2,757)
Interest expense2,834 2,868 
Other income(94)(228)
Change in fair value of interest rate swap contracts(1,970)2,746 
Lease guarantee income(115)(120)
LOSS BEFORE INCOME TAXES(740)(8,023)
Income tax benefit(181)(2,226)
NET LOSS AND COMPREHENSIVE LOSS(559)(5,797)
Less: net income attributable to noncontrolling interests135 136 
NET LOSS AND COMPREHENSIVE LOSS ATTRIBUTABLE TO HF FOODS GROUP INC.$(694)$(5,933)
LOSS PER COMMON SHARE - BASIC$(0.01)$(0.11)
LOSS PER COMMON SHARE - DILUTED$(0.01)$(0.11)
WEIGHTED AVERAGE SHARES - BASIC52,155,968 53,822,794 
WEIGHTED AVERAGE SHARES - DILUTED52,155,968 53,822,794 
The accompanying notes are an integral part of thethese unaudited condensed consolidated financial statements.

4

2

Atlantic Acquisition Corp.

HF Foods Group Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows

(In thousands)
(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  $— 


Three Months Ended March 31,
20242023
Cash flows from operating activities:
Net loss$(559)$(5,797)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense6,676 6,689 
Provision for credit losses(40)57 
Deferred tax benefit(471)(1,324)
Change in fair value of interest rate swap contracts(1,970)2,746 
Stock-based compensation738 1,096 
Non-cash lease expense935 965 
Lease guarantee income(115)(120)
Other non-cash expense (income)39 93 
Changes in operating assets and liabilities:
Accounts receivable(2,141)1,034 
Accounts receivable - related parties13 (416)
Inventories(2,290)9,822 
Prepaid expenses and other current assets782 1,238 
Other long-term assets368 (829)
Accounts payable6,074 2,327 
Accounts payable - related parties(254)(776)
Operating lease liabilities(897)(961)
Accrued expenses and other liabilities167 (3,274)
Net cash provided by operating activities7,055 12,570 
Cash flows from investing activities:
Purchase of property and equipment(2,585)(629)
Net cash used in investing activities(2,585)(629)
Cash flows from financing activities:
Checks issued not presented for payment4,169 (7,852)
Proceeds from line of credit345,697 298,195 
Repayment of line of credit(349,082)(306,808)
Repayment of long-term debt(1,414)(1,642)
Repayment of obligations under finance leases(857)(646)
Net cash used in financing activities(1,487)(18,753)
Net increase (decrease) in cash2,983 (6,812)
Cash at beginning of the period15,232 24,289 
Cash at end of the period$18,215 $17,477 
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities$36 $79 
Property acquired in exchange for finance leases4,867 643 
The accompanying notes are an integral part of thethese unaudited condensed consolidated financial statements.

5

3

Atlantic Acquisition Corp.

HF Foods Group Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders' Equity
(In thousands, except share data)
(Unaudited)




Common StockTreasury StockAdditional
Paid-in
Capital		Retained Earnings
(Accumulated Deficit)		Total Shareholders’
Equity Attributable to
HF Foods Group Inc.		Noncontrolling
Interests		Total
Shareholders’
Equity
SharesAmount
Shares		Amount
Balance at January 1, 202353,813,777 $5 — $— $598,322 $(306,514)$291,813 $4,436 $296,249 
Net (loss) income— — — — — (5,933)(5,933)136 (5,797)
Issuance of common stock pursuant to equity compensation plan37,847 — — — — — — — — 
Shares withheld for tax withholdings on vested awards(7,132)— — — (34)— (34)— (34)
Stock-based compensation— — — — 1,096 — 1,096 — 1,096 
Balance at March 31, 202353,844,492 $5 — $— $599,384 $(312,447)$286,942 $4,572 $291,514 
Balance at January 1, 202454,153,391 $5 1,997,423 $(7,750)$603,094 $(308,688)$286,661 $1,322 $287,983 
Net (loss) income— — — — — (694)(694)135 (559)
Stock-based compensation— — — — 738 — 738 — 738 
Balance at March 31, 202454,153,391 $5 1,997,423 $(7,750)$603,832 $(309,382)$286,705 $1,457 $288,162 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

HF Foods Group Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements


Note 1 —- Organization and PlanDescription of Business Operations


Organization

Atlantic Acquisition Corp. (the and General


HF Foods Group Inc. and subsidiaries (collectively “HF Foods”, or the “Company”) was incorporated in Delaware on May 19, 2016 as a blank check company whose objective is an Asian foodservice distributor that markets and distributes fresh produce, seafood, frozen and dry food, and non-food products to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization orprimarily Asian restaurants and other similar Business Combination,foodservice customers throughout the United States. The Company's business consists of 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 minoritiesoperating segment, which is also its one reportable segment: HF Foods, which operates solely in the United States, especially within Asian-American communities.

At September 30, 2017, the Company had not yet commenced any operations. All activity through September 30, 2017 relates to the Company’s formation and the public offering described below.

PlanStates. The Company's customer base consists primarily of Business Operation

Financing

The registration statement for the Company’s initial public offering (the “Public Offering” as described in Note 3) was declared effective by the United States 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”) in 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.

6

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 shares of the Company voted are voted in favor of the Business Combination.

7

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 and liquidate. However, if the Company anticipates that it may not be able 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). Pursuant to the terms of the Company’s amended and restated articles of incorporation and the trust agreement 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 to 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 into 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.

8

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 revisedAsian restaurants, and it has different application dates for publicprovides sales and service support to customers who mainly converse in Mandarin 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.

9

Chinese dialects.


Note 2 —- Summary of Significant Accounting Policies


Basis of presentation

Presentation and Principles of Consolidation


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

The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto that are necessaryincluded in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 26, 2024 (our “2023 Annual Report”). There have been no material changes to present fairlyour significant accounting policies as compared to the significant accounting policies described in our 2023 Annual Report.

All significant 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 condensed consolidated statements of operations and comprehensive loss 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 a variable interest entity (“VIE”) and financial position, and the resultsreporting for an entity 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 if the Company (1) has power to direct the activities that most significantly affect the economic performance of the VIE, and (2) has the obligation to absorb losses or the right to receive the economic benefits of the VIE that could be potentially significant to the VIE. If deemed the primary beneficiary, the Company consolidates the VIE.

As of March 31, 2024, the Company has one VIE, AnHeart, Inc. (“AnHeart”), for which the Company is not the primary beneficiary and therefore does not consolidate. The Company did not incur expenses from VIEs and did not have any sales to or income from any VIEs during the three months ended March 31, 2024 and 2023. See Note 13 - Commitments and Contingencies for additional information on AnHeart.



5

Noncontrolling Interests

GAAP requires that noncontrolling interests in subsidiaries and affiliates be reported in the equity section of the Company’s condensed consolidated balance sheets. In addition, the amounts attributable to the net income (loss) of those noncontrolling interests are reported separately in the condensed consolidated statements of operations and its cash flows. Operating results as presented are not necessarily indicativecomprehensive loss.

As of the results to be expected for a full year.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of September 30, 2017March 31, 2024 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’2023, noncontrolling interest equity upon the completionconsisted of the Public Offering.

Fair valuefollowing:

($ in thousands)
Ownership of
noncontrolling interest at March 31, 2024
March 31, 2024December 31, 2023
HF Foods Industrial, LLC ("HFFI")45.00%$(765)$(759)
Min Food, Inc.39.75%1,853 1,715 
Monterey Food Service, LLC35.00%369 366 
Total$1,457 $1,322 

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.

10

Estimates


Use of Estimates

The preparation of condensed 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during theeach reporting period. Actual results could differ from those estimates.

Concentration Significant accounting estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, inventory reserves, impairment of credit risk

Financial instruments that potentially subjectlong-lived assets, impairment of goodwill, and the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accountspurchase price allocation and management believes the Company is not exposed to significant risks on such accounts.

Income Taxes

The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basisfair value of assets and liabilities and foracquired with respect to business combinations.


Recent Accounting Pronouncements

In November 2023, the expected future tax benefitFASB issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to be derived from tax loss and tax credit carry forwards. ASC 740 additionallyReportable Segment Disclosures, which 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 Delawareenhanced disclosures about segment expenses on an annual and interim basis.

Recent Accounting Pronouncements

Management does This standard is effective for the Company’s consolidated financial statements for the year ending December 31, 2024 and for interim periods beginning in 2025. The impact of the adoption of this ASU is not believe that any recently issued, but not yet effective, accounting standards if currently adopted wouldexpected to have a material effect on the accompanyingCompany’s financial statements.

11

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.

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.

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. Sinceposition, or operations, however, the Company is not required to net cash settlecurrently evaluating the Rights and the Rights are convertible upon the consummationimpact 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 basedthis standard 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 priceits disclosures to the underwriter, respectively,consolidated financial statements.


In December 2023, the FASB issued ASU 2023-09, Income Taxes (“Topic 740”): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public entities to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature. ASU 2023-09 also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. This guidance is effective for fiscal years beginning after December 15, 2024, and requires prospective application 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 Combination and six months from February 8, 2018. The unit purchase option expires August 8, 2022. The units issuable upon exercise of this option are identical to the Units being offered in the Public Offering. The Company 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.

12

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 optionapply it retrospectively. Early adoption 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 option 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 loan due to the Company’s former President on June 1, 2017. The new note 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.  

13

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

permitted. The Company is obligated to paycurrently evaluating the Deferred Discountimpact 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 accruedthis guidance on the Deferred Discount,consolidated financial statements 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.

14

disclosures.


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.

15

3 - Revenue

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 in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value 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.

16


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

Three Months Ended March 31,
($ in thousands)20242023
Seafood$94,395 32 %$92,890 32 %
Asian Specialty80,209 27 %77,824 25 %
Meat and Poultry57,750 19 %52,049 18 %
Fresh Produce32,083 11 %32,211 11 %
Packaging and Other16,374 6 %19,396 7 %
Commodity14,843 5 %19,485 7 %
Total$295,654 100 %$293,855 100 %
6



Note 4 - Balance Sheet Components

Accounts receivable, net consisted of the following:

(In thousands)March 31, 2024December 31, 2023
Accounts receivable$51,782 $49,643 
Less: allowance for expected credit losses(2,077)(2,119)
Accounts receivable, net$49,705 $47,524 

Movement of allowance for expected credit losses was as follows:

Three Months Ended March 31,
(In thousands)20242023
Beginning balance$2,119 $1,442 
Increase (decrease) in provision for expected credit losses/doubtful accounts(40)57 
Bad debt write-offs(2)(24)
Ending balance$2,077 $1,475 

Prepaid expenses and other current assets consisted of the following:

(In thousands)March 31, 2024December 31, 2023
Prepaid expenses$4,108 $4,591 
Advances to suppliers4,002 3,340 
Other current assets1,253 2,214 
Prepaid expenses and other current assets$9,363 $10,145 

Property and equipment, net consisted of the following:

(In thousands)March 31, 2024December 31, 2023
Automobiles$41,534 $37,256 
Buildings63,045 63,045 
Building improvements22,076 22,014 
Furniture and fixtures419 474 
Land49,929 49,929 
Machinery and equipment11,639 11,532 
Construction in progress3,590 1,391 
Subtotal192,232 185,641 
Less: accumulated depreciation(54,243)(52,505)
Property and equipment, net$137,989 $133,136 

Depreciation expense was $2.6 million for the three months ended March 31, 2024 and 2023.

7

Long-term investments consisted of the following:

(In thousands)Ownership as of March 31,
2024		March 31, 2024December 31, 2023
Asahi Food, Inc. ("Asahi")49%$589 $588 
Pt. Tamron Akuatik Produk Industri ("Tamron")12%1,800 1,800 
Total long-term investments$2,389 $2,388 

The investment in Tamron is accounted for using the measurement alternative under Accounting Standards Codification (“ASC”) Topic 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 is accounted for under the equity method due to the fact that arethe Company has significant influence but does not exercise control over this investee. The Company determined there was no impairment as of March 31, 2024 for these investments.

Accrued expenses and other liabilities consisted of the following:

(In thousands)March 31, 2024December 31, 2023
Accrued compensation$6,649 $7,941 
Accrued professional fees1,399 1,353 
Accrued interest and fees1,181 1,276 
Self-insurance liability1,697 1,723 
Other6,528 4,994 
Total accrued expenses and other liabilities$17,454 $17,287 

Note 5 - Fair Value Measurements

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

March 31, 2024December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Quoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable InputsQuoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable Inputs
(In thousands)
Assets:
Interest rate swaps$— $781 $— $781 $— $412 $— $412 
Liabilities:
Interest rate swaps$— $— $— $— $— $(1,601)$— $(1,601)

The Company follows the provisions of ASC Topic 820 Fair Value Measurement which 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 September 30, 2017the measurement date.

•Level 2 - Inputs are unadjusted quoted prices for similar assets and December 31, 2016,liabilities in active markets, quoted prices for identical or similar assets and indicatesliabilities 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.
8


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 valuation inputsreporting 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 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.

See Note 7 - Derivative Financial Instruments for additional information regarding the Company’s interest rate swaps.

Carrying Value and Estimated Fair Value of Outstanding Debt - The following table presents the carrying value and estimated fair value of the Company’s outstanding debt as described in Note 8 - Debt, including the current portion, as of the dates indicated:

Fair Value Measurements
(In thousands)Level 1Level 2Level 3Carrying Value
March 31, 2024 
Fixed rate debt:
Bank of America$— $— $139 $155 
Other finance institutions— — 16 17 
Variable rate debt:
JPMorgan Chase$— $104,791 $— $104,791 
Bank of America— 2,159 — 2,159 
East West Bank— 5,636 — 5,636 
December 31, 2023
Fixed rate debt:
Bank of America$— $— $151 $169 
Other finance institutions— — 43 45 
Variable rate debt:
JPMorgan Chase$— $106,079 $— $106,079 
Bank of America— 2,193 — 2,193 
East West Bank— 5,675 — 5,675 

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.

See Note 8 - Debt for additional information regarding the Company's debt.

Nonrecurring Fair Values

The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. No adjustments to fair value from the write-down of asset values due to impairment were made during the three months ended March 31, 2024 and 2023.

There were no assets carried at nonrecurring fair value at March 31, 2024 and December 31, 2023.

9

Note 6 - Goodwill and Acquired Intangible Assets

Goodwill

The Company performed a quantitative goodwill impairment assessment as of December 31, 2023, as a result of the Company’s results of operations compared to previous forecasts, combined with the level of the Company’s stock price. The fair value was determined using an average of the income approach, comparable public company analysis, and comparable acquisitions analysis. The fair value of the reporting unit exceeded the carrying value, and therefore the Company utilizedconcluded no impairment was required to be recorded during the year ended December 31, 2023.

The annual goodwill impairment test in 2023 resulted in an estimated fair value that exceeded carrying value by approximately 10% at December 31, 2023. The most critical assumptions in determining fair value using the income approach were projections of future cash flows such as forecasted revenue growth rates, gross profit margins, and the discount rate. The market approaches were primarily impacted by an enterprise value multiple of EBITDA. A significant change in these assumptions or a sustained decline in the Company’s stock price could result in an interim impairment test and/or potential goodwill impairment in the future.

The Company determined that there were no events or circumstances during the three months ended March 31, 2024 that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Goodwill was $85.1 million as of March 31, 2024 and December 31, 2023.

Acquired Intangible Assets

The components of the intangible assets are as follows:

March 31, 2024December 31, 2023
(In thousands)Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount
Non-competition agreement$3,892 $(2,754)$1,138 $3,892 $(2,429)$1,463 
Trademarks and trade names44,207 (16,149)28,058 44,207 (15,045)29,162 
Customer relationships185,266 (40,726)144,540 185,266 (38,085)147,181 
Total$233,365 $(59,629)$173,736 $233,365 $(55,559)$177,806 

Amortization expense for acquired intangible assets was $4.1 million for the three months ended March 31, 2024 and 2023.

Note 7 - Derivative Financial Instruments

Derivative Instruments

The Company utilizes interest rate swaps ("IRS") for the sole purpose of mitigating interest rate fluctuation risk associated with floating rate debt instruments (as defined in Note 8 - Debt). The Company does not use any other derivative financial instruments for trading or speculative purposes.

On August 20, 2019, HF Foods 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. On April 20, 2023, the Company amended the corresponding mortgage term loans, which pegged the two mortgage term loans to 1-month Term SOFR (Secured Overnight Financing Rate) + 2.29% per annum for the remaining duration of the term loans. The amended EWB IRS contracts fixed the two term loans at 4.23% per annum until maturity in September 2029.

On December 19, 2019, HF Foods 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. On December 19, 2021, the Company entered into the Second Amendment to Loan Agreement, which pegged the mortgage term loan to Term SOFR + 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.

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On March 15, 2023, the Company entered into an amortizing IRS contract with JPMorgan Chase for an initial notional amount of $120.0 million, effective from March 1, 2023 and expiring in March 2028, as a means to partially hedge its existing floating rate loans exposure. Pursuant to the agreement, the Company will pay the swap counterparty a fixed rate of 4.11% in exchange for floating payments based on Term SOFR.

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

As of March 31, 2024, the Company determined that the fair values of the IRS contracts were $0.8 million in an asset position. As of December 31, 2023, the fair values of the IRS contracts were $0.4 million in an asset position and $1.6 million in a liability position. The Company includes these in other long-term assets and other long-term liabilities, respectively, on the consolidated balance sheets. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in its assessment of fair value. The inputs used to determine the fair value of the IRS are classified as Level 2 on the fair value hierarchy.

Note 8 - Debt

Long-term debt at March 31, 2024 and December 31, 2023 is summarized as follows:

($ in thousands)
Bank NameMaturityInterest Rate at March 31, 2024March 31, 2024December 31, 2023
Bank of America (a)
October 2026 - December 20294.34% - 7.95%$2,314 $2,362 
East West Bank (b)
August 2027 - September 20297.64% - 9.00%5,636 5,675 
JPMorgan Chase (c)
January 20307.32% - 7.44%105,039 106,337 
Other finance institutions (d)
July 20245.99% - 6.17%17 45 
Total debt, principal amount113,006 114,419 
Less: debt issuance costs(248)(258)
Total debt, carrying value112,758 114,161 
Less: current portion(5,427)(5,450)
Long-term debt$107,331 $108,711 
_______________
(a)Loan balance consists of real estate term loan and equipment term loan, collateralized by one real property and specific equipment. The real estate term loan is pegged to TERM SOFR + 2.5%.
(b)Real estate term loans with East West Bank are collateralized by three real properties. Balloon payments of $1.8 million and $2.9 million are due at maturity in 2027 and 2029, respectively.
(c)Real estate term loan with a principal balance of $105.0 million as of March 31, 2024 and $106.3 million as of December 31, 2023 is secured by assets held by the Company and has a maturity date of January 2030. 
(d)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 March 31, 2024, the Company was in compliance with its covenants.

On February 6, 2024, the Company amended the JPM Credit Agreement to (i) remove a cap on permitted indebtedness in respect of capital lease obligations, subject to certain enumerated conditions; (ii) create a reserve on the borrowing base, which will be reduced on a dollar-for-dollar basis once the Company has made expenditures in excess of such fair value:

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

amount relating to the development and construction of certain real property, and which amounts shall be excluded from certain financial covenants under the JPM Credit Agreement and; (iii) remove certain sublease income from various financial covenants.


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Note 9 — Reconciliation of Net Income- Earnings (Loss) Per Share

The Company computes earnings per Common Stock

The Company’sshare (“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 loss is adjustedincome divided by the weighted average common shares outstanding for the portionperiod. 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 1,470,541 and 851,443 potential common shares related to performance-based restricted stock units and restricted stock units that is attributable to common stock subject to redemption, as these shares only participatewere excluded from the calculation of diluted EPS for the three months ended March 31, 2024 and 2023, respectively, because their effect could have been anti-dilutive.


The following table sets forth the computation of basic and diluted EPS:
Three Months Ended March 31,
($ in thousands, except share and per share data)20242023
Numerator:
Net loss attributable to HF Foods Group Inc.$(694)$(5,933)
Denominator:
Weighted-average common shares outstanding52,155,968 53,822,794 
Effect of dilutive securities— — 
Weighted-average dilutive shares outstanding52,155,968 53,822,794 
Loss per common share:
Basic$(0.01)$(0.11)
Diluted$(0.01)$(0.11)

Note 10 - Income Taxes

The determination of the Company’s overall effective income tax rate requires the 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 and the Company’s effective income tax rate in the future. As of March 31, 2024, the Company had no subsidiaries outside the U.S., as such, no foreign income tax was recorded.
For the three months ended March 31, 2024 and 2023, the Company's effective income tax rate of 24.5% and 27.7%, respectively, differed from the Trust Accountfederal statutory tax rate primarily as a result of permanent differences and notstate income taxes.

Note 11 - 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 lossesCompany and 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 the Company. Accordingly, basic

Mr. Xiao Mou Zhang (“Mr. Zhang”), the Chief Executive Officer of the Company, and dilutedcertain of his immediate family members (collectively greater than 10% shareholders) have ownership interests in various related parties involved in (i) the distribution of food and related products to restaurants and other retailers and (ii) the supply of fresh food, frozen food, and packaging supplies to distributors. Mr. Zhang does not have any involvement in negotiations with any of the above-mentioned related parties.

The Company believes that Mr. Zhou Min Ni (“Mr. Ni”), the Company’s former Co-Chief Executive Officer, together with various trusts for the benefit of Mr. Ni's four children, are collectively beneficial owners of more than 10% of the outstanding shares of the Company’s common stock, and he and certain of his immediate family members have ownership interests in related parties involved in (i) the distribution of food and related products to restaurants and other retailers and (ii) the supply of fresh food, frozen food, and packaging supplies to distributors.


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The related party transactions as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023 are identified as follows:

Related Party Sales, Purchases, and Lease Agreements

Purchases

Below is a summary of purchases of goods and services from related parties recorded for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
(In thousands)Nature20242023
(a)Asahi Food, Inc.Trade27 22 
(b)Conexus Food Solutions (formerly known as Best Food Services, LLC)Trade$1,150 $2,084 
(c)Eastern Fresh NJ, LLCTrade— 37 
(c)Ocean Pacific Seafood Group, Inc.Trade80 168 
(c)Rainfield Ranches, LPTrade57 30 
Total$1,314 $2,341 
_______________
(a)The Company, through its subsidiary Mountain Food, LLC, owns an equity interest in this entity.
(b)An equity interest is held by three Irrevocable Trusts for the benefit of Mr. Zhang's children.
(c)Mr. Zhou Min Ni owns an equity interest in this entity.

Sales

Below is a summary of sales to related parties recorded for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,
(In thousands)20242023
(a)ABC Food Trading, LLC$403 $593 
(b)Asahi Food, Inc.139 195 
(a)Conexus Food Solutions (formerly known as Best Food Services, LLC)253 433 
(c)Eagle Food Service, LLC— 1,020 
(d)First Choice Seafood, Inc.7 8 
(d)Fortune One Foods, Inc.16 19 
(e)N&F Logistics, Inc.— 6 
(f)Union Food LLC— 19 
Total$818 $2,293 
_______________
(a)An equity interest is held by three Irrevocable Trusts for the benefit of Mr. Zhang's children.
(b)The Company, through its subsidiary Mountain Food, LLC, owns an equity interest in this entity.
(c)Tina Ni, one of Mr. Zhou Min Ni’s family members, owns an equity interest in this entity indirectly through its parent company.
(d)Mr. Zhou Min Ni owns an equity interest in this entity indirectly through its parent company.
(e)Mr. Zhou Min Ni owns an equity interest in this entity.
(f)Tina Ni, one of Mr. Zhou Min Ni’s family members, owns an equity interest in this entity.

Lease Agreements

The Company leases various facilities to related parties.

In 2020, the Company renewed a warehouse lease from Yoan Chang Trading Inc. under an operating lease agreement which expired on December 31, 2020. In February 2021, the Company executed a new five-year operating lease agreement with Yoan Chang Trading Inc., effective January 1, 2021 and expiring on December 31, 2025. Rent expense was $0.1 million for the three months ended March 31, 2024 and 2023, which is included in distribution, selling and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.

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Beginning 2014, the Company leased a warehouse to Asahi Food, Inc. under a commercial lease agreement which was rescinded March 1, 2020. A new commercial lease agreement for a period of one year was entered into, expiring February 28, 2021, with a total of four renewal periods with each term being one year. Rental income was $36 thousand for the three months ended March 31, 2024 and 2023, which is included in other income in the condensed consolidated statements of operations and comprehensive loss.

Related Party Balances

Accounts Receivable - Related Parties, Net

Below is a summary of accounts receivable with related parties recorded as of March 31, 2024 and December 31, 2023, respectively:

(In thousands)March 31, 2024December 31, 2023
(a)ABC Food Trading, LLC$125 $94 
(b)Asahi Food, Inc.111 69 
(a)Conexus Food Solutions (formerly known as Best Food Services, LLC)— 84 
(c)Enson Seafood GA, Inc. (formerly known as GA-GW Seafood, Inc.)59 59 
(d)Union Food LLC— 2 
Total$295 $308 
_______________
(a)An equity interest is held by three Irrevocable Trusts for the benefit of Mr. Zhang's children.
(b)The Company, through its subsidiary Mountain Food, LLC, owns an equity interest in this entity.
(c)Mr. Zhou Min Ni owns an equity interest in this entity.
(d)Tina Ni, one of Mr. Zhou Min Ni’s family members, owns an equity interest in this entity.

The Company had reserved for 100% of the accounts receivable for Union Food LLC as of December 31, 2023 and wrote-off the receivable during the three months ended March 31, 2024. The Company has reserved for 100% of the accounts receivable for Enson Seafood GA, Inc. as of March 31, 2024 and December 31, 2023. All other accounts receivable from these related parties are current and considered fully collectible. No additional allowance is deemed necessary as of March 31, 2024 and December 31, 2023.

Accounts Payable - Related Parties

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 March 31, 2024 and December 31, 2023, respectively:

(In thousands)March 31, 2024December 31, 2023
(a)Conexus Food Solutions (formerly as Best Food Services, LLC)$126 $379 
Others17 18 
Total$143 $397 
_______________
(a)An equity interest is held by three Irrevocable Trusts for the benefit of Mr. Zhang's children.


Note 12 - Stock-Based Compensation

In 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 March 31, 2024, the Company had 808,807 time-based vesting restricted stock units unvested, 627,803 performance-based restricted stock units unvested, 531,222 shares of common stock vested and 1,032,168 shares remaining available for future awards under the 2018 Incentive Plan.

Stock-based compensation expense was $0.7 million and $1.1 million for the three months ended March 31, 2024 and 2023, respectively. Stock-based compensation expense was included in distribution, selling and administrative expenses in the Company's unaudited condensed consolidated statements of income and comprehensive loss.
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As of March 31, 2024, there was $3.5 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 1.65 years.

Note 13 - 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 potential claim, it assesses the likelihood of any 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.

Noteor exposure. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. 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 its pending litigation and revises its estimates when additional information becomes available. Adverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against the Company that could adversely affect its ability to conduct business. There also exists the possibility of a material adverse effect on the Company’s financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable. Legal costs associated with loss contingencies are expensed as incurred.

On October 13, 2023, the Company received a “Wells Notice” from the staff of the SEC (the “Wells Notice”) relating to the previously disclosed formal, non-public SEC investigation of allegations that the Company and certain of its current and former directors and officers violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements. A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law and invites recipients to submit a response if they wish. The Company made a submission in response to the Wells Notice explaining why an enforcement action would not be appropriate. Following that submission, the staff of the SEC determined that it would no longer be recommending that the SEC file an enforcement action against the Company at this time pending a potential agreed-upon resolution between the Company and the SEC. The Company is in negotiations with the SEC over a potential resolution, which could include fines and penalties, but the terms of that settlement are not final. The Company has made no formal offer of settlement to the SEC as of this filing, and therefore, a reasonable estimate of the contingency cannot be made.

AnHeart Lease Guarantee

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. The Company has determined that AnHeart is a VIE as a result of the guarantee. However, the Company concluded it is not the primary beneficiary of AnHeart and therefore does not consolidate, because it does not have the power to direct the activities of AnHeart that most significantly impact AnHeart's economic performance.

On February 10, — Subsequent Events

2021, the Company entered into an Assignment and Assumption of Lease Agreement (“Assignment”), dated effective as of January 21, 2021, with AnHeart and Premier 273 Fifth, LLC, pursuant to which it assumed the lease of the premises at 273 Fifth Avenue (the “273 Lease Agreement”). At the same time, the closing documents were delivered to effectuate the amendment of the 273 Lease Agreement pursuant to an Amendment to Lease (the “Lease Amendment”). The Assignment and the Lease Amendment were negotiated in light of the Company’s management reviewedguarantee obligations as guarantor under the Lease Agreement. The Company agreed to observe all material events that have occurred after the covenants and conditions of the Lease Agreement, as amended, including the payment of all rents due. Under the terms of the Lease Agreement and the Assignment, the Company has undertaken to construct, at its own expense, a building on the premises at a minimum cost of $2.5 million. The Lease Amendment permits subletting of the premises, and the Company intends to sublease the newly constructed premises to defray the rental expense undertaken pursuant to its guaranty obligations. In March 2024, the Company began construction of a multi-use facility on 273 Fifth Avenue and committed $7.0 million for the completion of the construction project. The Company incurred $1.3 million in construction costs which was recorded in construction in progress within property and equipment, net in the Company’s condensed consolidated balance sheet date throughas of March 31, 2024. The Company expects to complete construction in the date which these financial statements were issued. Based upon this review,first quarter of 2025.

15


On January 17, 2022, the Company did not identify any subsequent eventsreceived notice that would have required adjustment or disclosureAnHeart had defaulted on its obligations as tenant under the lease for 275 Fifth Avenue. On February 7, 2022, the Company undertook its guaranty obligations by assuming responsibility for payment of monthly rent and other tenant obligations, including past due rent as well as property tax obligations beginning with the January 2022 rent due. On February 25, 2022, the Company instituted a legal action to pursue legal remedies against AnHeart and Minsheng. In March 2022, the Company agreed to stay that 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. AnHeart subsequently defaulted on these obligations. On October 25, 2023, the Company commenced a new legal action by filing a complaint in New York County Supreme Court to pursue legal remedies against AnHeart and Minsheng. As of the filing of the new summons and complaint, AnHeart and Minsheng are indebted to the Company in the financial statements.

17

amount of $474,000.


Item

In accordance with ASC Topic 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 10 years. The Company elected a policy to apply the discounted cash flow method to loss contingencies with more than 18 months of payments. AnHeart is obligated to pay all costs associated with the properties, including taxes, insurance, utilities, maintenance and repairs. During the year ended December 31, 2022, the Company recorded a lease guarantee liability of $5.9 million. The Company determined the discounted value of the lease guarantee liability using a discount rate of 4.55%. As of March 31, 2024, the Company had a lease guarantee liability of $5.4 million. The current portion of the lease guarantee liability of $0.4 million is recorded in accrued expenses and other liabilities, while the long-term portion is recorded in other long-term liabilities on the consolidated balance sheet. The Company's monthly rental payments range from approximately $42,000 per month to $63,000 per month, with the final payment due in 2034. See Note 14 - Subsequent Events for additional information regarding the 275 Fifth Avenue lease.

The estimated future minimum lease payments as of March 31, 2024 are presented below:
(In thousands)Amount
Year Ending December 31,
2024 (remaining nine months)$442 
2025604 
2026621 
2027638 
2028656 
Thereafter3,822 
Total6,783 
Less: imputed interest(1,390)
Total minimum lease payments$5,393 

Note 14 - Subsequent Events

Shareholder Rights Plan Amendment
On April 11, 2024, the Company entered into Amendment No. 1 to the Preferred Stock Rights Agreement (the “Rights Agreement”), dated as of April 11, 2023, between the Company and Equiniti Trust Company, LLC (f/k/a American Stock Transfer & Trust Company, LLC), as rights agent, to extend the expiration date of the rights under the Rights Agreement from April 11, 2024 to April 11, 2025.

Assumption of Lease
Effective April 30, 2024, the Company through its subsidiary assumed the lease of a building located on the premises of 275 Fifth Avenue, New York, New York. The Company was the guarantor of this lease under a lease guarantee agreement dated July 2018, and in February 2022, upon receiving notice of default, the Company undertook its lease guarantee obligations. The assumption of the lease had no impact on the Company’s obligations as guarantor. See Note 13 - Commitments and Contingencies for disclosures pertaining to the lease guarantee obligation.

The lease covers certain portions of the ground floor, lower lever, and second floor of the building. The lease term ends on April 30, 2034 and is renewable at the option of the Company for up to two additional five-year terms. The Company shall pay rent of approximately $45,000 per month with provisions for yearly increases.
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ITEM 2.    Management’sManagement's Discussion and Analysis.

Forward-Looking Statements

Analysis of Financial Condition and Results of Operations.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY

This Quarterly Report on Form 10-Q includesfor HF Foods Group Inc. (“HF Foods”, the “Company,” “we,” “us,” or “our”) contains forward-looking statements. We have based theseForward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our current expectationsassumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and projections about future events. Theseit is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are subject to knownrisks and unknown risks, uncertainties and assumptions about us that may cause our actual results levelsto differ materially from those that we expected. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include without limitation:
•Low margins in the foodservice distribution industry and periods of activity, performancesignificant or achievementsprolonged inflation or deflation;
•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;
•The effects of the COVID-19 pandemic or other pandemics;
•The steps taken by the governments where our suppliers are located, including the People’s Republic of China, to be materially differentaddress the COVID-19 pandemic or other pandemics;
•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, President and COO, CFO and General Counsel and CCO;
•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, regulatory investigations and potential enforcement actions;
•Increases in commodity prices;
•U.S. government tariffs on products imported into the United States, particularly from anyChina;
•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 results, levelsfinancing;
•Failure to acquire other distributors or wholesalers and enlarge our customer base;
•Scarcity of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases,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;
17

•Difficulties in integrating operations, personnel, and assets of acquired businesses that may disrupt our business, dilute stockholder value, and adversely affect our operating results;
•The impact on the price and demand for our common stock resulting from the relative illiquidity of the market for our common stock;
•Significant stockholders’ ability to significantly influence the Company; and
•The impact of state anti-takeover laws and related provisions in our governance documents.

We caution you can identifythat the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by terminology suchthese cautionary statements as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” orwell as other cautionary statements that are made from time to time in our other filings with the negativeSecurities and Exchange Commission (the "SEC") and public communications. We caution you that the important factors referenced above may not contain all of such termsthe risks, uncertainties (some of which are beyond our control) or other similar expressions. Factorsassumptions that might cause or contributeare important to such a discrepancyyou. These risks and uncertainties include, but are not limited to, those factors described under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC.

In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. Except as otherwise required by law, we undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise.

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 Securitiesfoodservice customers throughout the United States. HF Foods was formed through a merger between two complementary market leaders, HF Foods Group Inc. and Exchange Commission (“SEC”) filings. ReferencesB&R Global. In 2022, HF Foods acquired two frozen seafood suppliers, expanding its distribution network in Illinois, Texas and along the eastern seaboard, from Massachusetts to “we”Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

We aim to supply the increasing demand for Asian American restaurant cuisine, leveraging our nationwide network of distribution centers and our strong relations with growers and suppliers of fresh, high-quality specialty restaurant food products and supplies in the US, South America, and China. Capitalizing on our deep understanding of the Chinese culture, we have become a trusted partner serving Asian restaurants and other foodservice customers throughout the United States, providing 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 restaurants in need of high-quality and specialized food ingredients at competitive prices.
Transformation Plan
To position the business for long-term success, we have initiated a comprehensive, operational transformation plan in an effort to drive growth and cost savings. Our transformation is focused on four key areas, each of which we expect will positively impact future growth or cost savings. The components of our transformation are as follows:
•Centralized Purchasing: We began the roll out of our centralized purchasing program with seafood products and have yielded significant positive results with respect to margin expansion for the product category. We are now focusing on expanding the program to other categories.
•Fleet and Transportation: We have established a national fleet maintenance program. Within this, we plan to define new truck specifications, initiate a replacement program for 50% of our current fleet, implement a national fuel savings program to maximize efficiency, and outsource domestic inbound freight logistics to a third-party partner to adopt a cohesive national approach to its supply chain. This is expected to deliver substantial improvements to our transportation system.
•Digital Transformation: We will be implementing a modern ERP solution across all of our distribution centers. This is expected to deliver enhanced operational efficiency and responsiveness, streamlined processes, and greater data driven decision-making.
•Facility Upgrades: We will be reorganizing and upgrading our facilities and distribution centers to efficiently streamline costs, and to capitalize on cross-selling opportunities with both new and existing customers.
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Financial Overview
Three Months Ended March 31,Change
($ in thousands)20242023Amount%
Net revenue$295,654 $293,855 $1,799 0.6 %
Net loss$(559)$(5,797)$5,238 NM
Adjusted EBITDA$8,702 $5,749 $2,953 51.4 %
_________________
NM    Not meaningful    

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

How to Assess HF Foods’ 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” arecustomer 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 whereuse 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 readsame industry, many of which present similar non-GAAP financial measures to investors. We present EBITDA and Adjusted EBITDA in conjunction withorder 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 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, interest income, 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.

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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 Foods’ results as reported under GAAP. For example, Adjusted EBITDA:

•excludes certain tax payments that may represent a reduction in cash available;
•does not reflect any cash capital expenditure requirements for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Our effortsassets being depreciated and amortized that may have 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 minoritiesreplaced in the United States, especially within Asian-American communities. We intendfuture;
•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 utilize cash derived from the proceedsservice our debt.

For additional information on EBITDA and Adjusted EBITDA and a reconciliation to their most directly comparable U.S. GAAP financial measures, see “Results of Operations — EBITDA and Adjusted EBITDA” below.

Results of Operations

Comparison of Three Months Ended March 31, 2024 to Three Months Ended March 31, 2023

The following table sets forth a summary 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 noconsolidated results of 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 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.

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), as well as for due diligence expenses. We expect our expenses to increase substantially after this period.

For the three months ended September 30, 2017, we hadMarch 31, 2024and 2023. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

Three Months Ended March 31,
($ in thousands)20242023Change
Net revenue$295,654 $293,855 $1,799 
Cost of revenue245,243 243,683 1,560 
Gross profit50,411 50,172 239 
Distribution, selling and administrative expenses50,496 52,929 (2,433)
Loss from operations(85)(2,757)2,672 
Interest expense2,834 2,868 (34)
Other income(94)(228)134
Change in fair value of interest rate swap contracts(1,970)2,746 (4,716)
Lease guarantee income(115)(120)5
Loss before income taxes(740)(8,023)7,283 
Income tax benefit(181)(2,226)2,045
Net loss and comprehensive loss(559)(5,797)5,238 
Less: net income attributable to noncontrolling interests135 136 (1)
Net loss and comprehensive loss attributable to HF Foods Group Inc.$(694)$(5,933)$5,239 

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The following table sets forth the components of our consolidated results of operations expressed as a percentage of net loss of $1,037, which was comprised 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. Forrevenue for the periods indicated:
Three Months Ended March 31,
20242023
Net revenue100.0 %100.0 %
Cost of revenue82.9 %82.9 %
Gross profit17.1 %17.1 %
Distribution, selling and administrative expenses17.1 %18.0 %
Loss from operations— %(0.9)%
Interest expense0.9 %1.0 %
Other income— %(0.1)%
Change in fair value of interest rate swap contracts(0.7)%0.9 %
Lease guarantee income— %— %
Loss before income taxes(0.3)%(2.7)%
Income tax benefit(0.1)%(0.8)%
Net loss and comprehensive loss(0.2)%(1.9)%
Less: net income attributable to noncontrolling interests— %0.1 %
Net loss and comprehensive loss attributable to HF Foods Group Inc.(0.2)%(2.0)%

Net Revenue

Net revenue for the three months ended September 30, 2016, we hadMarch 31, 2024 increased by $1.8 million, or 0.6%, compared to the same period in 2023. This increase was primarily attributable to product cost inflation and improved pricing in certain categories, partially offset by the $2.7 million loss in revenue resulting from the exit of our chicken processing businesses.

Gross Profit

Gross profit was $50.4 million for three months ended March 31, 2024 compared to $50.2 million in the same period in 2023, an increase of $0.2 million, or 0.5%. Gross profit margin for the three months ended March 31, 2024 was flat at 17.1% in the same period in 2023.

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses decreased by $2.4 million, or 4.6%, for the three months ended March 31, 2024 primarily due to a decrease of $2.8 million in professional fees, partially offset by higher payroll and related labor costs. Distribution, selling and administrative expenses as a percentage of net revenue decreased to 17.1% for the three months ended March 31, 2024 from 18.0% in the same period in 2023, primarily due to lower professional fees and increased net revenue, partially offset by increased headcount.

Interest Expense

Interest expense for the three months ended March 31, 2024 of $2.8 million remained consistent compared to the three months ended March 31, 2023, having decreased slightly from $2.9 million. Average floating interest rates on our floating-rate debt for the three months ended March 31, 2024 increased by approximately 0.8% on our line of credit and 0.8% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2023. Our average daily line of credit balance increased by $2.0 million, or 4.8%, to $44.7 million for the three months ended March 31, 2024 from $42.6 million for the three months ended March 31, 2023, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5 million, or 4.6%, to $105.5 million for the three months ended March 31, 2024 from $110.5 million for the three months ended March 31, 2023.

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Income Tax Benefit

Income tax benefit was $181,000 for the three months ended March 31, 2024, compared to an income tax benefit of $2.2 million for the three months ended March 31, 2023, primarily due to a decrease in loss before income taxes, permanent differences and state income taxes during the current period.

Net Loss Attributable to HF Foods Group Inc.

Net loss attributable to HF Foods Group Inc. was $0.7 million for the three months ended March 31, 2024, compared to net loss of $100, which was consisted$5.9 million for the three months ended March 31, 2023. The improvement of general$5.2 million, or 88.3%, is primarily due to the impact from changes in the fair value of interest rate swap and the decreased distribution, selling, and administrative expenses.

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costs.


For

EBITDA and Adjusted EBITDA

The following table reconciles EBITDA and Adjusted EBITDA to the nine months ended September 30, 2017, we had net lossmost directly comparable GAAP measure:
Three Months Ended March 31, 
($ in thousands)20242023Change
Net loss$(559)$(5,797)$5,238
Interest expense2,8342,868(34)
Income tax benefit(181)(2,226)2,045
Depreciation and amortization6,6766,689(13)
EBITDA8,7701,5347,236
Lease guarantee income(115)(120)5
Change in fair value of interest rate swap contracts(1,970)2,746(4,716)
Stock-based compensation expense7381,096(358)
Business transformation costs (1)
97344929
Other non-routine expense (2)
306449(143)
Adjusted EBITDA$8,702$5,749$2,953
_________________    
(1)    Represents non-recurring costs associated with the launch of $1,119, which was comprised of $30,560 of generalstrategic projects including supply chain management improvements and administrative expensestechnology infrastructure initiatives.
(2)    Includes contested proxy 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 formationrelated legal and operatingconsulting costs and facility closure costs.



Liquidity and Capital Resources


As of September 30, 2017,March 31, 2024, we had $694,798cash of approximately $18.2 million, checks issued not presented for payment of $8.7 million and access to approximately $40.9 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 outsideflow from operations and bank loans. 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.

We believe that our cash flow generated from operations is sufficient to meet our normal working capital needs for at least the trust account.

Ournext twelve months. However, our ability to repay our current obligations will depend on the future realization of our current assets. Management has considered the historical experience, the economy, the trends in the foodservice distribution industry to determine the expected collectability of accounts receivable and the realization of inventories as of March 31, 2024.


We are party to an amortizing interest rate swap contract with JPMorgan Chase for an initial notional amount of $120.0 million, expiring in March 2028, as a means to partially hedge our existing floating rate loans exposure. Pursuant to the agreement, we will pay the swap counterparty a fixed rate of 4.11% in exchange for floating payments based on CME Term SOFR.

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Management believes we have sufficient funds to meet our working capital requirements and debt obligations in the next twelve months. However, there are a number of factors that could potentially arise which might result in shortfalls in anticipated cash flow, such as the demand for our products, economic conditions, competitive pricing in the foodservice distribution industry, and our bank and suppliers being able to provide continued support. If the future cash flow from operations and other capital resources is insufficient to fund our liquidity needs, we may have been satisfied to date through receiptresort to reducing or delaying our expected acquisition plans, liquidating assets, obtaining additional debt or equity capital, or refinancing all or a portion of $25,000 fromour debt.

As of March 31, 2024, 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 salethree months ended March 31, 2024and 2023:
Three Months Ended March 31,
(In thousands)20242023Change
Net cash provided by operating activities$7,055 $12,570 $(5,515)
Net cash used in investing activities(2,585)(629)(1,956)
Net cash used in financing activities(1,487)(18,753)17,266 
Net increase (decrease) in cash and cash equivalents$2,983 $(6,812)$9,795 

Operating Activities

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, changes in deferred income taxes and others, and includes the insider shares and loans from insiderseffect of working capital changes. Net cash provided by operating activities decreased by $5.5 million, or 44%, primarily due to the timing of working capital outlays partially offset by improved operating loss.

Investing Activities

Net cash used 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 receivedinvesting activities increased by $2.0 million, or 311%, primarily due to increased capital project spend in the IPO and Private Placement that are held outside the trust account.

We intend to use substantially all of the net proceeds of the IPO, including the funds held in the trust account, in connection with our initial business combination and 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 the total gross proceeds raised in the IPO upon consummation of our initial business combination. To the extent that our capital stock isthree months ended March 31, 2024.


Financing Activities

Net cash used in whole orfinancing activities decreased by $17.3 million to $1.5 million used in part as considerationfinancing activities primarily due to effect our initial business combination,checks issued not presented for payment activity for the remaining proceeds held inthree months ended March 31, 2024 compared to the trust accountthree months ended March 31, 2023, as well as any other net proceeds not expended will be used as working capitalline of credit activity.

Critical Accounting Policies and Estimates

We have prepared the financial information in this Quarterly Report in accordance with GAAP. Preparing our condensed consolidated financial statements requires us to financemake estimates and assumptions that affect the operationsreported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the target business. Such working capital funds could be usedfinancial 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 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 2023 Annual Report on Form 10-K includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a varietymaterial impact on our reported amounts of ways including continuingassets, liabilities, revenue, or expandingexpenses during the target business’ operations, for strategic acquisitionsthree months ended March 31, 2024. Additionally, see Note 6 - Goodwill 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 completionAcquired Intangible Assets 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 our trust account will be sufficient to allow us to operate 12 months from the filing date ofunaudited condensed consolidated financial statements on this Form 10-Q 2019, assuming thatfor disclosure regarding the Company’s at risk single reporting unit.


Recent Accounting Pronouncements

For a business combination is not consummated during that time.

If our estimatesdiscussion of the costsrecent accounting pronouncements, see Note 2 - Summary of undertaking due diligence and negotiating our initial business combination are less thanSignificant Accounting Policies to the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to convert a significant number of our public shares upon consummation of our initial business combination,

condensed consolidated financial statements 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 cashthis Quarterly Report 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.

Form 10-Q.

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Item

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 four interest rate swap contracts to hedge the floating rate term loans. See Note 7 - Derivative Financial Instruments to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.

As of September 30, 2017, we were not subjectMarch 31, 2024, our aggregate floating rate debt’s outstanding principal balance without hedging was $57.4 million, or 34.2% of total debt, consisting primarily of our revolving line of credit (see Note 8 - Debt to any marketthe unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q). Our floating rate debt interest is based on the floating 1-month SOFR plus a predetermined credit adjustment rate plus the bank spread. The remaining 65.8% of our debt is on a fixed rate or a floating rate with hedging. In a hypothetical scenario, a 1% change in the applicable rate would cause the interest expense on our floating rate risk. Followingdebt to change by approximately $0.6 million per year.

Fuel Price Risk

We are also exposed to risks relating to fluctuations in the consummationprice 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. Additionally, elevated fuel costs can negatively impact consumer confidence and discretionary spending and thus reduce the net proceedsfrequency and amount spent by consumers for food-away-from-home purchases. We currently are able to obtain adequate supplies of the IPO, including amountsdiesel fuel, and average prices in the trust account, may be investedfirst quarter of 2024 decreased in U.S. government treasury bills, notescomparison to average prices in the same period in 2023, decreasing 9.7% on average. However, it is impossible to predict the future availability or bonds with a maturityprice of 180 days or less ordiesel 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 certain money market funds that invest solelythe cost of diesel fuel could increase our cost of goods sold and operating costs to deliver products to our customers.

We do not actively hedge the price fluctuation of diesel fuel in U.S. treasuries. Duegeneral. 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 improvement.

Item

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, 2023, we identified material weaknesses as were reported previously, which continue to exist as of March 31, 2024. We did not properly design or maintain effective controls over the control environment, risk assessment, control activities, information and communication components and monitoring 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 duringas 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, 2023, our disclosure controls and procedures were effective.

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not effective as of March 31, 2024. 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.


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


Changes in Internal Control overControls Over Financial Reporting

There was and Disclosure Controls


Management remains committed to ongoing efforts to address material weaknesses. Although we will continue to implement measures to remedy our internal control deficiencies, there can be no changeassurance that our efforts will be successful or avoid potential future material weaknesses. In addition, until remediation steps have been completed and operated for a sufficient period of time, and subsequent evaluation of their effectiveness is completed, the material weaknesses previously identified will continue to exist.

Other than the remediation efforts previously disclosed, there have been no changes in our internal controlcontrols over financial reporting for the quarter ended March 31, 2024, that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that hashave materially affected, or isare reasonably likely to materially affect, our internal controlcontrols over financial reporting.

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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 13 - Commitments and Contingencies to our condensed consolidated financial statements.

ITEM 1A.    Risk Factors.
There have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.

Item

ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities.
None.

ITEM 3.    Defaults Upon Senior Securities.
None.

ITEM 4.    Mine Safety Disclosures.
Not applicable.

ITEM 5.    Other Information.
Securities

On August 14, 2017, Trading Plans of Directors and Executive Officers

During 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 timingthree months ended March 31, 2024, none of our obligation to redeem 100%officers or directors adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 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, Item 2 of this Form 10-Q.

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Regulation S-K.


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Item

ITEM 6.    Exhibits.

Exhibits
The following exhibits are incorporated herein by reference or are filed or furnished with this report as indicated below:
Incorporated by Reference
Exhibit NumberDescriptionFormExhibitFiling Date
8-K3.18/11/2017
8-K3.1.28/27/2018
8-K3.0211/4/2022
8-K3.14/26/2023
8-K3.14/11/2023
S-1/A4.27/28/2017
S-1/A4.57/28/2017
8-K10.12/9/2024
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)
4.1Indicates a management contract or compensatory plan or arrangement.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)
10.1Investment 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)
10.2Registration 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)
10.3Stock 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)
10.4Form 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)
31.1Certification 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.
31.2Certification 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.
32Certification 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.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document

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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/ Xiao Mou Zhang
By:/s/ Richard Xu
Richard Xu
Xiao Mou Zhang
Chief Executive Officer
(Principal executive officer)
By: /s/ Cindy Yao
By:/s/ Peiling He
Peiling He
Cindy Yao
Chief Financial Officer

(Principal accounting and financial and accounting officer)
Date: May 10, 2024

Date: November 13, 2017

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