NOTE

ORGANIZATION AND BUSINESS DESCRIPTION

Organization and General

HF Foods Group Inc. (“HF Group”, or the “Company”) markets and distributes fresh produces, frozen and dry food, and non- food products to primarily Asian restaurants and other foodservice customers throughout the Southeast, Pacific and Mountain West regions region of the United States.

The Company was originally incorporated in Delaware on

May 19, 2016

as a special purpose acquisition company under the name Atlantic Acquisition Corp. (“Atlantic”), in order to acquire, through a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with

one

or more businesses or entities.

Reorganization of HF Holding

HF Group Holding Corporation (“HF Holding”) was incorporated in the State of North Carolina on

October 11, 2017.

Effective

January 1, 2018,

HF Holding entered into a Share Exchange Agreement (the “Agreement”) whereby the controlling shareholders of the following

entities contributed their respective stocks to HF Holding in exchange for all of HF Holding’s outstanding shares. Upon completion of the share exchanges, these entities became either wholly-owned or majority-owned subsidiaries of HF Holding.

●

Han Feng, Inc. (“Han Feng”)

●

Truse Trucking, Inc. (“TT”)

●

Morning First Delivery, Inc. (“MFD”)

●

R&N Holdings, LLC (“R&N Holdings”)

●

R&N Lexington, LLC (“R&N Lexington”)

●

Kirnsway Manufacturing Inc. (“Kirnsway”)

●

Chinesetg, Inc. (“Chinesetg”)

●

New Southern Food Distributors, Inc. (“NSF”)

●

B&B Trucking Services, Inc. (“BB”)

●

Kirnland Food Distribution, Inc. (“Kirnland”)

●

HG Realty LLC (“HG Realty”)

In accordance with Accounting Standards Codification (“ASC”)

805

25,

the transaction consummated through the Agreement has been accounted for as a transaction among entities under common control since the same shareholders controlled all these

entities prior to the execution of the Agreement. The consolidated financial statements of the Company have been prepared to report results of operations for the period in which the transfer occurred as though the transfer of net assets or exchange of equity interests had occurred at the beginning of the period presented, in this case

January 1, 2018.

Results of operations for the period presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period. By eliminating the effects of intra-entity transactions in determining the results of operations for the period before the combination, those results will be on substantially the same basis as the results of operations for the period after the date of combination. The effects of intra-entity transactions on current assets, current liabilities, revenue, and cost of sales for periods presented and on retained earnings at the beginning of the periods presented are eliminated to the extent possible. Furthermore, ASC

805

indicates that the financial statements and financial information presented for prior years also shall be retrospectively adjusted to furnish comparative information.

In accordance with ASC

805

when accounting for a transfer of assets or exchange of shares between entities under common control, the entity that receives the net assets or the equity interests should initially recognize the assets and liabilities transferred at their carrying amounts in the accounts of the transferring entity at the date of the transfer. If the carrying amounts of the assets and liabilities transferred differ from the historical cost of the parent of the entities under common control, then the financial statements of the receiving entity should reflect the transferred assets and liabilities at the historical cost of the parent of the entities under common control. Accordingly, the Company has recorded the assets and liabilities transferred from the above entities at their carrying amount.

The following table summarizes the entities under HF Foods Group Inc. after the above-mentioned reorganization:

Name	Date of incorporation	State of incorporation	Percentage of legal ownership by HF Group	Principal activities
Parent:
HF Holding	October 11, 2017	North Carolina	100%	Holding Company

Subsidiaries:
Han Feng	January 14, 1997	North Carolina	100%	Distributing food and related products
TT	August 6, 2002	North Carolina	100%	Trucking service
MFD	April 15, 1999	North Carolina	100%	Trucking service
R&N Holdings	November 21, 2002	North Carolina	100%	Real estate holding
R&N Lexington	May 27, 2010	North Carolina	100%	Real estate holding
R&N Charlotte	June xx, 2019	North Carolina	100%	Real estate holding
Kirnsway	May 24, 2006	North Carolina	100%	Design and printing services
Chinesetg	July 12, 2011	North Carolina	100%	Design and printing services
NSF	December 17, 2008	Florida	100%	Distributing food and related products
BB	September 12, 2001	Florida	100%	Trucking service
Kirnland	April 11, 2006	Georgia	66.7%	Distributing food and related products
HG Realty	May 11, 2012	Georgia	100%	Real estate holding

Reverse Acquisition of HF Holding

Effective

August 22, 2018,

Atlantic consummated the transactions contemplated by a merger agreement (the “Atlantic Merger Agreement”), dated as of

March 28, 2018,

by and among Atlantic, HF Group Merger Sub Inc., a Delaware subsidiary formed by Atlantic, HF Holding, the stockholders of HF Holding, and Zhou Min Ni, as representative of the stockholders of HF Holding. Pursuant to the Atlantic Merger Agreement, HF Holding merged with HF Merger Sub and HF Holding became the surviving entity (the “Atlantic Merger”) and a wholly-owned subsidiary of Atlantic (the “Atlantic Acquisition”). Additionally, upon the closing of the transactions contemplated by the Atlantic Merger Agreement (the “Atlantic Closing”), (i) the stockholders of HF Holding became the holders of a majority of the shares of common stock of Atlantic, and (ii) Atlantic changed its name to HF Foods Group Inc. (Collectively, these transactions are referred to as the “Atlantic Transactions”).

At closing on

August 22, 2018,

Atlantic issued the HF Holding stockholders an aggregate of

19,969,831

shares of its common stock, equal to approximately

88.5%

of the aggregate issued and outstanding shares of Atlantic’s common stock. The pre- Transaction stockholders of Atlantic owned the remaining

11.5%

of the issued and outstanding shares of common stock of the combined entity.

Following the consummation of the Atlantic Transactions on

August 22, 2018,

there were

22,167,486

shares of common stock issued and outstanding, consisting of (i)

19,969,831

shares issued to HF Holding’s stockholders pursuant to the Atlantic Merger Agreement, (ii)

400,000

shares redeemed by

one

of Atlantic’s shareholders in conjunction with the Atlantic Transactions, (iii)

10,000

restricted shares issued to

one

of Atlantic’s shareholders in conjunction with the Atlantic Transactions, and (iv)

2,587,655

shares originally issued to the pre-Transactions stockholders of Atlantic.

The Atlantic Acquisition was treated as a reverse acquisition under the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). For accounting purposes, HF Holding was considered to be acquiring Atlantic in this transaction. Therefore, the aggregate consideration paid in connection with the business combination was allocated to Atlantic’s tangible and intangible assets and liabilities based on their fair market values. The assets and liabilities and results of operations of Atlantic were consolidated into the results of operations of HF Holding as of the completion of the business combination.

Business Combination with B&R Global

Effective

November 4, 2019,

HF Group consummated the transactions contemplated by a merger agreement (the “B&R Merger Agreement”), dated as of

June 21, 2019,

by and among the Company, B&R Merger Sub Inc., a Delaware corporation (“Merger Sub”), B&R Global, the stockholders of B&R Global (the ”B&R Global Stockholders”), and Xiao Mou Zhang, as representative of the stockholders (the “Business Combination”). Upon the closing of the transactions contemplated by the B&R Merger Agreement (the “Closing”), Merger Sub merged with and into B&R Global, resulting in B&R Global becoming a wholly owned subsidiary of HF Group. HF Group acquired

100%

of the controlling interest of B&R Global, in exchange for

30,700,000

shares of HF Group Common Stock. The aggregate fair value of the consideration paid by HF Group in the business combination is approximately

$576,699,494

and is based on the closing share price of the Company’s common stock at the date of Closing.

Founded in

1999,

B&R Global supplies approximately

6,800

restaurants across

Western states, and combined with HF Group, creates what we believe is the largest food distributors to Asian restaurants in the United States. The combined entity now has

distribution centers strategically located in

nine

states across the East and West Coasts of the United States and a fleet of over

340

refrigerated vehicles. With

960

employees supported by

two

call centers in China, HF Group now serves over

10,000

restaurants in

states and provides round-the-clock sales and service support to its customers, who mainly converse in Mandarin or Chinese dialects.

The following table summarizes the entities under B&R Global in the Business Combination:

Name	Date of formation / incorporation	Place of formation / incorporation	Percentage of legal ownership by B&R Global	Principal activities
Parent:
B&R Global	January 3, 2014	Delaware, USA	—	Holding Company
Subsidiaries:
Rongcheng Trading, LLC (“RC”)	January 31, 2006	California, USA	100%	Food distribution
Capital Trading, LLC (“UT”)	March 10, 2003	Utah, USA	100%	Food distribution
Win Woo Trading, LLC (‘WW”)	January 23, 2004	California, USA	100%	Food distribution
Mountain Food, LLC (“MF”)	May 2, 2006	Colorado, USA	100%	Food distribution
R & C Trading L.L.C. (“RNC”)	November 26, 2007	Arizona, USA	100%	Food distribution
Great Wall Seafood LA, LLC (“GW”)	March 7, 2014	California, USA	100%	Food distribution
B&L Trading, LLC (“BNL”)	July 18, 2013	Washington, USA	100%	Food distribution
Min Food, Inc. (“MIN”)	May 29, 2014	California, USA	60.25%	Food distribution
B&R Group Logistics Holding, LLC (“BRGL”)	July 17, 2014	Delaware, USA	100%	Food distribution
Ocean West Food Services, LLC (“OW”)	December 22, 2011	California, USA	67.5%	Food distribution
Monterey Food Service, LLC (“MS”)	September 14, 2017	California, USA	65%	Food distribution
Irwindale Poultry, LLC (“IP”)	December 27, 2017	California, USA	100%	Poultry processing
Best Choice Trucking, LLC (“BCT”)	January 1, 2011	California, USA	100%	Logistics solutions
KYL Group, Inc. (“KYL”)	April 18, 2014	Nevada, USA	100%	Logistics solutions
American Fortune Foods Inc. (“AF”)	February 19, 2014	California, USA	100%	Logistics solutions and importer
Happy FM Group, Inc. (“HFM”)	April 9, 2014	California, USA	100%	Logistics solutions
GM Food Supplies, Inc. (“GM”)	March 22, 2016	California, USA	100%	Logistics solutions
Lin’s Distribution, Inc., Inc. (“LIN”)	February2, 2010	Utah, USA	100%	Logistics solutions
Lin’s Farms, LLC (“LNF”)	July 2, 2014	Utah, USA	100%	Poultry processing
New Berry Trading, LLC (“NBT”)	September 5, 2012	California, USA	100%	Logistics solutions
Hayward Trucking, Inc. (“HRT”)	September 5, 2012	California, USA	100%	Logistics solutions
Fuso Trucking Corp. (“FUSO”)	January 20, 2015	California, USA	VIE*	Logistics solutions
Yi Z Service LLC (“YZ”)	October2, 2017	California, USA	100%	Logistics solutions
Golden Well Inc. (“GWT”)	November 8, 2011	California, USA	100%	Logistics solutions
Kami Trading Inc. (“KAMI”)	November 20, 2013	California, USA	100%	Importer
Royal Trucking Services, Inc. (“RTS”)	May 19, 2015	Washington, USA	100%	Logistics solutions
Royal Service Inc. (“RS”)	December 29, 2014	Oregon, USA	100%	Logistics solutions
MF Food Services Inc. (“MFS”)	December 21, 2017	California, USA	100%	Logistics solutions

*At the acquisition date and as of

December 31, 2019,

B&R Global consolidates FUSO, which is considered as variable interest entity (“VIE”) under accounting principles generally accepted in the United States of America (“U.S. GAAP”), due to its pecuniary and contractual interest in this entity as a result of the funding arrangements outlined in the entity.