(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Large accelerated filer | ☐ | ☒ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | | ||||||||
Emerging growth company | |
Description | Page | |||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
June 30, 2023 | December 31, 2022 | ||||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Accounts receivable - related parties | |||||||||||
Inventories | |||||||||||
Prepaid expenses and other current assets | |||||||||||
TOTAL CURRENT ASSETS | |||||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Long-term investments | |||||||||||
Customer relationships, net | |||||||||||
Trademarks and other intangibles, net | |||||||||||
Goodwill | |||||||||||
Other long-term assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Checks issued not presented for payment | $ | $ | |||||||||
Line of credit | |||||||||||
Accounts payable | |||||||||||
Accounts payable - related parties | |||||||||||
Current portion of long-term debt, net | |||||||||||
Current portion of obligations under finance leases | |||||||||||
Current portion of obligations under operating leases | |||||||||||
Accrued expenses and other liabilities | |||||||||||
TOTAL CURRENT LIABILITIES | |||||||||||
Long-term debt, net of current portion | |||||||||||
Obligations under finance leases, non-current | |||||||||||
Obligations under operating leases, non-current | |||||||||||
Deferred tax liabilities | |||||||||||
Other long-term liabilities | |||||||||||
TOTAL LIABILITIES | |||||||||||
COMMITMENTS AND CONTINGENCIES (Note 14) | |||||||||||
SHAREHOLDERS’ EQUITY: | |||||||||||
Preferred Stock, $ | |||||||||||
Common Stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC. | |||||||||||
Noncontrolling interests | |||||||||||
TOTAL SHAREHOLDERS’ EQUITY | |||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Net revenue - third parties | $ | $ | $ | $ | |||||||||||||||||||
Net revenue - related parties | |||||||||||||||||||||||
TOTAL NET REVENUE | |||||||||||||||||||||||
Cost of revenue - third parties | |||||||||||||||||||||||
Cost of revenue - related parties | |||||||||||||||||||||||
TOTAL COST OF REVENUE | |||||||||||||||||||||||
GROSS PROFIT | |||||||||||||||||||||||
Distribution, selling and administrative expenses | |||||||||||||||||||||||
(LOSS) INCOME FROM OPERATIONS | ( | ( | |||||||||||||||||||||
Other (income) expenses: | |||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||
Other income | ( | ( | ( | ( | |||||||||||||||||||
Change in fair value of interest rate swap contracts | ( | ( | ( | ( | |||||||||||||||||||
Lease guarantee expense | ( | ( | ( | ||||||||||||||||||||
Total other (income) expenses, net | ( | ||||||||||||||||||||||
(LOSS) INCOME BEFORE INCOME TAXES | ( | ( | |||||||||||||||||||||
Income tax expense (benefit) | ( | ||||||||||||||||||||||
NET (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME | ( | ( | |||||||||||||||||||||
Less: net (loss) income attributable to noncontrolling interests | ( | ( | ( | ( | |||||||||||||||||||
NET (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO HF FOODS GROUP INC. | $ | ( | $ | $ | ( | $ | |||||||||||||||||
(LOSS) EARNINGS PER COMMON SHARE - BASIC | $ | ( | $ | $ | ( | $ | |||||||||||||||||
(LOSS) EARNINGS PER COMMON SHARE - DILUTED | $ | ( | $ | $ | ( | $ | |||||||||||||||||
WEIGHTED AVERAGE SHARES - BASIC | |||||||||||||||||||||||
WEIGHTED AVERAGE SHARES - DILUTED |
Six Months Ended June 30, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization expense | |||||||||||
Asset impairment charges | |||||||||||
Gain from disposal of property and equipment | ( | ||||||||||
Provision for credit losses | |||||||||||
Deferred tax benefit | ( | ( | |||||||||
Change in fair value of interest rate swap contracts | ( | ( | |||||||||
Stock-based compensation | |||||||||||
Non-cash lease expense | |||||||||||
Lease guarantee expense | ( | ||||||||||
Other expense (income) | ( | ||||||||||
Changes in operating assets and liabilities (excluding effects of acquisitions): | |||||||||||
Accounts receivable | ( | ( | |||||||||
Accounts receivable - related parties | ( | ( | |||||||||
Inventories | ( | ||||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Other long-term assets | ( | ( | |||||||||
Accounts payable | ( | ||||||||||
Accounts payable - related parties | ( | ||||||||||
Operating lease liabilities | ( | ( | |||||||||
Accrued expenses and other liabilities | ( | ||||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities: | |||||||||||
Purchase of property and equipment | ( | ( | |||||||||
Proceeds from sale of property and equipment | |||||||||||
Payment made for acquisition of Sealand | ( | ||||||||||
Payment made for acquisition of Great Wall Group | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Checks issued not presented for payment | ( | ||||||||||
Proceeds from line of credit | |||||||||||
Repayment of line of credit | ( | ( | |||||||||
Proceeds from long-term debt | |||||||||||
Repayment of long-term debt | ( | ( | |||||||||
Payment of debt financing costs | ( | ||||||||||
Repayment of obligations under finance leases | ( | ( | |||||||||
Repayment of promissory note payable - related party | ( | ||||||||||
Proceeds from noncontrolling interests shareholders | |||||||||||
Cash distribution to shareholders | ( | ||||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||
Net (decrease) increase in cash | ( | ||||||||||
Cash at beginning of the period | |||||||||||
Cash at end of the period | $ | $ |
Six Months Ended June 30, | |||||||||||
2023 | 2022 | ||||||||||
Supplemental disclosure of cash flow data: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for income taxes | |||||||||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | |||||||||
Property acquired in exchange for finance leases | |||||||||||
Intangible asset acquired in exchange for noncontrolling interests | |||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Total Shareholders’ Equity Attributable to HF Foods Group Inc. | Noncontrolling Interests | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2022 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||
— | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||
Balance at January 1, 2022 | ( | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||||||||||||||
Capital contribution by shareholders | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Distribution to shareholders | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | ( | ||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | ( | |||||||||||||||||||||||||||||||||||||
Distribution to shareholders | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Balance at January 1, 2023 | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Net (loss) income | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Issuance of common stock pursuant to equity compensation plan | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Shares withheld for tax withholdings on vested awards | ( | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | ( | ||||||||||||||||||||||||||||||||||||||||
Net (loss) income | — | — | — | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Issuance of common stock pursuant to equity compensation plan | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Shares withheld for tax withholdings on vested awards | ( | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | $ | $ | $ | ( | $ | $ | $ |
($ in thousands) | Ownership of noncontrolling interest at June 30, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||
HF Foods Industrial, LLC ("HFFI") (a) | $ | ( | $ | |||||||||||||||||
Min Food, Inc. | ||||||||||||||||||||
Monterey Food Service, LLC | ||||||||||||||||||||
Ocean West Food Services, LLC | ||||||||||||||||||||
Syncglobal Inc. | ||||||||||||||||||||
Total | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
($ in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Seafood | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Asian Specialty | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
Meat and Poultry | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
Fresh Produce | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
Packaging and Other | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
Commodity | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | % | $ | % | $ | % | $ | % |
(In thousands) | June 30, 2023 | December 31, 2022 | |||||||||
Accounts receivable | $ | $ | |||||||||
Less: allowance for expected credit losses | ( | ( | |||||||||
Accounts receivable, net | $ | $ |
Six Months Ended June 30, | |||||||||||
(In thousands) | 2023 | 2022 | |||||||||
Beginning balance | $ | $ | |||||||||
Adjustment for adoption of the CECL standard | |||||||||||
Increase (decrease) in provision for expected credit losses | ( | ||||||||||
Bad debt write-offs | ( | ( | |||||||||
Ending balance | $ | $ |
(In thousands) | June 30, 2023 | December 31, 2022 | |||||||||
Automobiles | $ | $ | |||||||||
Buildings | |||||||||||
Building improvements | |||||||||||
Furniture and fixtures | |||||||||||
Land | |||||||||||
Machinery and equipment | |||||||||||
Subtotal | |||||||||||
Less: accumulated depreciation | ( | ( | |||||||||
Property and equipment, net | $ | $ |
(In thousands) | Ownership as of June 30, 2023 | June 30, 2023 | December 31, 2022 | ||||||||||||||
Asahi Food, Inc. ("Asahi") | $ | $ | |||||||||||||||
Pt. Tamron Akuatik Produk Industri ("Tamron") | |||||||||||||||||
Total long-term investments | $ | $ |
(In thousands) | June 30, 2023 | December 31, 2022 | ||||||||||||
Accrued compensation | $ | $ | ||||||||||||
Accrued professional fees | ||||||||||||||
Accrued interest and fees | ||||||||||||||
Self-insurance liability | ||||||||||||||
Accrued other | ||||||||||||||
Total accrued expenses and other liabilities | $ | $ |
June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | ||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Carrying Value | ||||||||||||||||||||||
June 30, 2023 | ||||||||||||||||||||||||||
Fixed rate debt: | ||||||||||||||||||||||||||
Bank of America | $ | $ | $ | $ | ||||||||||||||||||||||
East West Bank | ||||||||||||||||||||||||||
Other finance institutions | ||||||||||||||||||||||||||
Variable rate debt: | ||||||||||||||||||||||||||
JPMorgan Chase & Co. | $ | $ | $ | $ | ||||||||||||||||||||||
Bank of America | ||||||||||||||||||||||||||
East West Bank | ||||||||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||||||||
Fixed rate debt: | ||||||||||||||||||||||||||
Bank of America | $ | $ | $ | $ | ||||||||||||||||||||||
East West Bank | ||||||||||||||||||||||||||
Other finance institutions | ||||||||||||||||||||||||||
Variable rate debt: | ||||||||||||||||||||||||||
JPMorgan Chase & Co. | $ | $ | $ | $ | ||||||||||||||||||||||
Bank of America | ||||||||||||||||||||||||||
East West Bank |
(In thousands) | Amount | ||||
Inventory | $ | ||||
Property plant, and equipment | |||||
Right-of-use assets | |||||
Intangible assets | |||||
Total assets acquired | |||||
Obligations under operating leases | |||||
Total liabilities assumed | |||||
Net assets | |||||
Goodwill | |||||
Total consideration | $ |
(In thousands, except share and per share data) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | |||||||||
Pro forma net revenue | $ | $ | |||||||||
Pro forma net income attributable to HF Group | $ | $ | |||||||||
Pro forma earnings per common share - basic | $ | $ | |||||||||
Pro forma earnings per common share - diluted | $ | $ | |||||||||
Pro forma weighted average shares - basic | |||||||||||
Pro forma weighted average shares - diluted |
June 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||
(In thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||||
Non-competition agreement | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Trademarks | ( | ( | ||||||||||||||||||||||||||||||||||||
Customer relationships | ( | ( | ||||||||||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | $ | ( | $ |
($ in thousands) | ||||||||||||||||||||||||||
Bank Name | Maturity | Interest Rate at June 30, 2023 | June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
Bank of America (a) | October 2026 - December 2029 | $ | $ | |||||||||||||||||||||||
East West Bank (b) | August 2027 - September 2029 | |||||||||||||||||||||||||
JPMorgan Chase & Co. (c) | December 2023 - January 2030 | |||||||||||||||||||||||||
Other finance institutions (d) | December 2023 - March 2024 | |||||||||||||||||||||||||
Total debt, principal amount | ||||||||||||||||||||||||||
Less: debt issuance costs | ( | ( | ||||||||||||||||||||||||
Total debt, carrying value | ||||||||||||||||||||||||||
Less: current portion | ( | ( | ||||||||||||||||||||||||
Long-term debt | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
($ in thousands, except share and per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||
Net (loss) income attributable to HF Foods Group Inc. | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Denominator: | ||||||||||||||||||||||||||
Weighted-average common shares outstanding | ||||||||||||||||||||||||||
Effect of dilutive securities | ||||||||||||||||||||||||||
Weighted-average dilutive shares outstanding | ||||||||||||||||||||||||||
(Loss) earnings per common share: | ||||||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Diluted | $ | ( | $ | $ | ( | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
(In thousands) | Nature | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||
(a) | Best Food Services, LLC | Trade | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(b) | Eastern Fresh NJ, LLC | Trade | |||||||||||||||||||||||||||||||||
(b) | Enson Seafood GA, Inc. (formerly “GA-GW Seafood, Inc.”) | Trade | |||||||||||||||||||||||||||||||||
(c) | First Choice Seafood, Inc. | Trade | |||||||||||||||||||||||||||||||||
(c) | Fujian RongFeng Plastic Co., Ltd | Trade | |||||||||||||||||||||||||||||||||
(d) | North Carolina Good Taste Noodle, Inc. | Trade | |||||||||||||||||||||||||||||||||
(b) | Ocean Pacific Seafood Group, Inc. | Trade | |||||||||||||||||||||||||||||||||
Other | Trade | ||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
(In thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
(a) | ABC Food Trading, LLC | $ | $ | $ | $ | ||||||||||||||||||||||||
(b) | Asahi Food, Inc. | ||||||||||||||||||||||||||||
(c) | Best Food Services, LLC | ||||||||||||||||||||||||||||
(d) | Eagle Food Service, LLC | ||||||||||||||||||||||||||||
(e) | First Choice Seafood, Inc. | ||||||||||||||||||||||||||||
(e) | Fortune One Foods, Inc. | ||||||||||||||||||||||||||||
(f) | N&F Logistics, Inc. | ||||||||||||||||||||||||||||
(g) | Union Food LLC | ||||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
(In thousands) | June 30, 2023 | December 31, 2022 | |||||||||||||||
(a) | ABC Food Trading, LLC | $ | $ | ||||||||||||||
(b) | Asahi Food, Inc. | ||||||||||||||||
(c) | Best Food Services. LLC | ||||||||||||||||
(d) | Eagle Food Service, LLC | ||||||||||||||||
(e) | Enson Seafood GA, Inc. (formerly as GA-GW Seafood, Inc.) | ||||||||||||||||
(f) | Fortune One Foods, Inc. | ||||||||||||||||
(g) | Union Food LLC | ||||||||||||||||
Total | $ | $ |
(In thousands) | June 30, 2023 | December 31, 2022 | |||||||||||||||
(a) | Best Food Services, LLC | $ | $ | ||||||||||||||
(b) | North Carolina Good Taste Noodle, Inc. | ||||||||||||||||
Others | |||||||||||||||||
Total | $ | $ |
(In thousands) | Amount | |||||||
Year Ended December 31, | ||||||||
2023 (remaining six months) | $ | |||||||
2024 | ||||||||
2025 | ||||||||
2026 | ||||||||
2027 | ||||||||
Thereafter | ||||||||
Total | ||||||||
Less: imputed interest | ( | |||||||
Total minimum lease payments | $ |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
($ in thousands) | 2023 | 2022 | Amount | % | 2023 | 2022 | Amount | % | |||||||||||||||||||||||||||||||||||||||
Net revenue | $ | 292,312 | $ | 299,642 | $ | (7,330) | (2.4) | % | $ | 586,167 | $ | 577,857 | $ | 8,310 | 1.4 | % | |||||||||||||||||||||||||||||||
Net (loss) income | $ | (1,560) | $ | 4,494 | $ | (6,054) | (134.7) | % | $ | (7,357) | $ | 7,634 | $ | (14,991) | (196.4) | % | |||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 6,942 | $ | 13,923 | $ | (6,981) | (50.1) | % | $ | 12,198 | $ | 31,836 | $ | (19,638) | (61.7) | % |
Three Months Ended June 30, | Change | ||||||||||||||||||||||
($ in thousands) | 2023 | 2022 | Amount | % | |||||||||||||||||||
Net revenue | $ | 292,312 | $ | 299,642 | $ | (7,330) | (2.4)% | ||||||||||||||||
Cost of revenue | 241,646 | 247,072 | (5,426) | (2.2)% | |||||||||||||||||||
Gross profit | 50,666 | 52,570 | (1,904) | (3.6)% | |||||||||||||||||||
Distribution, selling and administrative expenses | 52,243 | 45,843 | 6,400 | 14.0% | |||||||||||||||||||
(Loss) income from operations | (1,577) | 6,727 | (8,304) | (123.4)% | |||||||||||||||||||
Interest expense | 2,847 | 1,549 | 1,298 | 83.8% | |||||||||||||||||||
Other income | (127) | (163) | 36 | (22.1)% | |||||||||||||||||||
Change in fair value of interest rate swap contracts | (2,856) | (208) | (2,648) | 1,273.1% | |||||||||||||||||||
Lease guarantee expense | (90) | (42) | (48) | 114.3% | |||||||||||||||||||
(Loss) income before income taxes | (1,351) | 5,591 | (6,942) | (124.2)% | |||||||||||||||||||
Income tax expense | 209 | 1,097 | (888) | (80.9)% | |||||||||||||||||||
Net (loss) income and comprehensive (loss) income | (1,560) | 4,494 | (6,054) | (134.7)% | |||||||||||||||||||
Less: net (loss) income attributable to noncontrolling interests | (710) | (70) | (640) | 914.3% | |||||||||||||||||||
Net (loss) income and comprehensive (loss) income attributable to HF Foods Group Inc. | $ | (850) | $ | 4,564 | $ | (5,414) | (118.6)% |
Three Months Ended June 30, | |||||||||||
2023 | 2022 | ||||||||||
Net revenue | 100.0 | % | 100.0 | % | |||||||
Cost of revenue | 82.7 | % | 82.5 | % | |||||||
Gross profit | 17.3 | % | 17.5 | % | |||||||
Distribution, selling and administrative expenses | 17.9 | % | 15.3 | % | |||||||
Income (loss) from operations | (0.5) | % | 2.2 | % | |||||||
Interest expense | 1.0 | % | 0.5 | % | |||||||
Other income, net | — | % | (0.1) | % | |||||||
Change in fair value of interest rate swap contracts | (1.0) | % | (0.1) | % | |||||||
Lease guarantee expense | — | % | — | % | |||||||
(Loss) income before income taxes | (0.5) | % | 1.9 | % | |||||||
Income tax expense | 0.1 | % | 0.4 | % | |||||||
Net (loss) income and comprehensive (loss) income | (0.5) | % | 1.5 | % | |||||||
Less: net (loss) income attributable to noncontrolling interests | (0.2) | % | — | % | |||||||
Net (loss) income and comprehensive (loss) income attributable to HF Foods Group Inc. | (0.3) | % | 1.5 | % |
Three Months Ended June 30, | Change | |||||||||||||||||||||||||
($ in thousands) | 2023 | 2022 | Amount | % | ||||||||||||||||||||||
Net (loss) income | $ | (1,560) | $ | 4,494 | $ | (6,054) | (134.7)% | |||||||||||||||||||
Interest expense | 2,847 | 1,549 | 1,298 | 83.8% | ||||||||||||||||||||||
Income tax expense | 209 | 1,097 | (888) | (80.9)% | ||||||||||||||||||||||
Depreciation and amortization | 6,440 | 6,080 | 360 | 5.9% | ||||||||||||||||||||||
EBITDA | 7,936 | 13,220 | (5,284) | (40.0)% | ||||||||||||||||||||||
Lease guarantee expense | (90) | (42) | (48) | 114.3% | ||||||||||||||||||||||
Change in fair value of interest rate swap contracts | (2,856) | (208) | (2,648) | NM | ||||||||||||||||||||||
Stock-based compensation expense | 752 | 221 | 531 | 240.3% | ||||||||||||||||||||||
Acquisition and integration costs | — | 310 | (310) | NM | ||||||||||||||||||||||
Asset impairment charges | 1,200 | 422 | 778 | 184.4% | ||||||||||||||||||||||
Adjusted EBITDA | $ | 6,942 | $ | 13,923 | $ | (6,981) | (50.1)% | |||||||||||||||||||
Six Months Ended June 30, | Change | ||||||||||||||||||||||
($ in thousands) | 2023 | 2022 | Amount | % | |||||||||||||||||||
Net revenue | $ | 586,167 | $ | 577,857 | $ | 8,310 | 1.4% | ||||||||||||||||
Cost of revenue | 485,329 | 474,560 | 10,769 | 2.3% | |||||||||||||||||||
Gross profit | 100,838 | 103,297 | (2,459) | (2.4)% | |||||||||||||||||||
Distribution, selling and administrative expenses | 105,172 | 86,251 | 18,921 | 21.9% | |||||||||||||||||||
(Loss) income from operations | (4,334) | 17,046 | (21,380) | (125.4)% | |||||||||||||||||||
Interest expense | 5,715 | 2,827 | 2,888 | 102.2% | |||||||||||||||||||
Other income | (355) | (939) | 584 | (62.2)% | |||||||||||||||||||
Change in fair value of interest rate swap contracts | (110) | (566) | 456 | (80.6)% | |||||||||||||||||||
Lease guarantee expense | (210) | 5,889 | (6,099) | (103.6)% | |||||||||||||||||||
(Loss) income before income taxes | (9,374) | 9,835 | (19,209) | (195.3)% | |||||||||||||||||||
Income tax (benefit) expense | (2,017) | 2,201 | (4,218) | (191.6)% | |||||||||||||||||||
Net (loss) income and comprehensive (loss) income | (7,357) | 7,634 | (14,991) | (196.4)% | |||||||||||||||||||
Less: net (loss) income attributable to noncontrolling interests | (574) | (44) | (530) | 1,204.5% | |||||||||||||||||||
Net (loss) income and comprehensive (loss) income attributable to HF Foods Group Inc. | $ | (6,783) | $ | 7,678 | $ | (14,461) | (188.3)% |
Six Months Ended June 30, | |||||||||||
2023 | 2022 | ||||||||||
Net revenue | 100.0 | % | 100.0 | % | |||||||
Cost of revenue | 82.8 | % | 82.1 | % | |||||||
Gross profit | 17.2 | % | 17.9 | % | |||||||
Distribution, selling and administrative expenses | 17.9 | % | 14.9 | % | |||||||
(Loss) income from operations | (0.7) | % | 3.0 | % | |||||||
Interest expense | 1.0 | % | 0.5 | % | |||||||
Other income, net | (0.1) | % | (0.2) | % | |||||||
Change in fair value of interest rate swap contracts | — | % | (0.1) | % | |||||||
Lease guarantee expense | — | % | 1.0 | % | |||||||
(Loss) income before income taxes | (1.6) | % | 1.8 | % | |||||||
Income tax (benefit) expense | (0.3) | % | 0.4 | % | |||||||
Net (loss) income and comprehensive (loss) income | (1.3) | % | 1.4 | % | |||||||
Less: net income attributable to noncontrolling interests | — | % | — | % | |||||||
Net (loss) income and comprehensive (loss) income attributable to HF Foods Group Inc. | (1.3) | % | 1.4 | % |
Six Months Ended June 30, | Change | |||||||||||||||||||||||||
($ in thousands) | 2023 | 2022 | Amount | % | ||||||||||||||||||||||
Net (loss) income | $ | (7,357) | $ | 7,634 | $ | (14,991) | (196.4)% | |||||||||||||||||||
Interest expense | 5,715 | 2,827 | 2,888 | 102.2% | ||||||||||||||||||||||
Income tax (benefit) expense | (2,017) | 2,201 | (4,218) | (191.6)% | ||||||||||||||||||||||
Depreciation and amortization | 13,129 | 11,859 | 1,270 | 10.7% | ||||||||||||||||||||||
EBITDA | 9,470 | 24,521 | (15,051) | (61.4)% | ||||||||||||||||||||||
Lease guarantee expense | (210) | 5,889 | (6,099) | (103.6)% | ||||||||||||||||||||||
Change in fair value of interest rate swap contracts | (110) | (566) | 456 | NM | ||||||||||||||||||||||
Stock-based compensation expense | 1,848 | 511 | 1,337 | 261.6% | ||||||||||||||||||||||
Acquisition and integration costs | — | 1,059 | (1,059) | NM | ||||||||||||||||||||||
Asset impairment charges | 1,200 | 422 | 778 | 184.4% | ||||||||||||||||||||||
Adjusted EBITDA | $ | 12,198 | $ | 31,836 | $ | (19,638) | (61.7)% | |||||||||||||||||||
Six Months Ended June 30, | Change | ||||||||||||||||||||||
($ in thousands) | 2023 | 2022 | Amount | % | |||||||||||||||||||
Net cash provided by operating activities | $ | 8,732 | $ | 13,658 | $ | (4,926) | (36.1)% | ||||||||||||||||
Net cash used in investing activities | (1,522) | (48,655) | 47,133 | (96.9)% | |||||||||||||||||||
Net cash (used in) provided by financing activities | (16,553) | 39,023 | (55,576) | (142.4)% | |||||||||||||||||||
Net (decrease) increase in cash and cash equivalents | $ | (9,343) | $ | 4,026 | $ | (13,369) | NM |
Incorporated by Reference | ||||||||||||||||||||||||||
Exhibit Number | Description | Form | Exhibit | Filing Date | ||||||||||||||||||||||
8-K | 3.1 | 8/11/2017 | ||||||||||||||||||||||||
8-K | 3.1.2 | 8/27/2018 | ||||||||||||||||||||||||
8-K | 3.02 | 11/4/2022 | ||||||||||||||||||||||||
8-K | 3.1 | 4/26/2023 | ||||||||||||||||||||||||
8-K | 3.1 | 4/11/2023 | ||||||||||||||||||||||||
S-1/A | 4.2 | 7/28/2017 | ||||||||||||||||||||||||
S-1/A | 4.5 | 7/28/2017 | ||||||||||||||||||||||||
31.1* | ||||||||||||||||||||||||||
31.2* | ||||||||||||||||||||||||||
32.1** | ||||||||||||||||||||||||||
32.2** | ||||||||||||||||||||||||||
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) |
* | Filed herewith. | |||||||
** | Furnished herewith. | |||||||
† | Indicates a management contract or compensatory plan or arrangement. |
HF Foods Group Inc. | |||||
By: /s/ Xiao Mou Zhang | |||||
Xiao Mou Zhang Chief Executive Officer | |||||
By: /s/ Carlos Rodriguez | |||||
Carlos Rodriguez Chief Financial Officer (Principal accounting and financial officer) | |||||
Date: August 9, 2023 |
Date: August 9, 2023 | By: | /s/ Xiao Mou Zhang | ||||||
Xiao Mou Zhang | ||||||||
Chief Executive Officer |
Date: August 9, 2023 | By: | /s/ Carlos Rodriguez | ||||||
Carlos Rodriguez Chief Financial Officer |
Date: August 9, 2023 | By: | /s/ Xiao Mou Zhang | ||||||
Xiao Mou Zhang | ||||||||
Chief Executive Officer |
Date: August 9, 2023 | By: | /s/ Carlos Rodriguez | ||||||
Carlos Rodriguez Chief Financial Officer |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock. par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, issued (in shares) | 54,086,164 | 53,813,777 |
Common stock, outstanding (in shares) | 54,086,164 | 53,813,777 |
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
TOTAL NET REVENUE | $ 292,312 | $ 299,642 | $ 586,167 | $ 577,857 |
TOTAL COST OF REVENUE | 241,646 | 247,072 | 485,329 | 474,560 |
GROSS PROFIT | 50,666 | 52,570 | 100,838 | 103,297 |
Distribution, selling and administrative expenses | 52,243 | 45,843 | 105,172 | 86,251 |
(LOSS) INCOME FROM OPERATIONS | (1,577) | 6,727 | (4,334) | 17,046 |
Other (income) expenses: | ||||
Interest expense | 2,847 | 1,549 | 5,715 | 2,827 |
Other income | (127) | (163) | (355) | (939) |
Change in fair value of interest rate swap contracts | (2,856) | (208) | (110) | (566) |
Lease guarantee expense | (90) | (42) | (210) | 5,889 |
Total other (income) expenses, net | (226) | 1,136 | 5,040 | 7,211 |
(LOSS) INCOME BEFORE INCOME TAXES | (1,351) | 5,591 | (9,374) | 9,835 |
Income tax expense (benefit) | 209 | 1,097 | (2,017) | 2,201 |
NET (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME | (1,560) | 4,494 | (7,357) | 7,634 |
Less: net (loss) income attributable to noncontrolling interests | (710) | (70) | (574) | (44) |
NET (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO HF FOODS GROUP INC. | $ (850) | $ 4,564 | $ (6,783) | $ 7,678 |
(LOSS) EARNINGS PER COMMON SHARE - BASIC (in USD per share) | $ (0.02) | $ 0.08 | $ (0.13) | $ 0.14 |
(LOSS) EARNINGS PER COMMON SHARE - DILUTED (in USD per share) | $ (0.02) | $ 0.08 | $ (0.13) | $ 0.14 |
WEIGHTED AVERAGE SHARES - BASIC (in shares) | 54,046,328 | 53,706,392 | 53,935,178 | 53,706,392 |
WEIGHTED AVERAGE SHARES - DILUTED (in shares) | 54,046,328 | 53,900,883 | 53,935,178 | 53,927,957 |
Third Party | ||||
TOTAL NET REVENUE | $ 290,364 | $ 298,138 | $ 581,926 | $ 574,289 |
TOTAL COST OF REVENUE | 239,724 | 245,716 | 481,181 | 471,349 |
Related Party | ||||
TOTAL NET REVENUE | 1,948 | 1,504 | 4,241 | 3,568 |
TOTAL COST OF REVENUE | $ 1,922 | $ 1,356 | $ 4,148 | $ 3,211 |
Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands |
Total |
Cumulative Effect, Period of Adoption, Adjustment |
Cumulative Effect, Period of Adoption, Adjusted Balance |
Total Shareholders’ Equity Attributable to HF Foods Group Inc. |
Total Shareholders’ Equity Attributable to HF Foods Group Inc.
Cumulative Effect, Period of Adoption, Adjustment
|
Total Shareholders’ Equity Attributable to HF Foods Group Inc.
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Common Stock |
Common Stock
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Additional Paid-in Capital |
Additional Paid-in Capital
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Retained Earnings (Accumulated Deficit) |
Retained Earnings (Accumulated Deficit)
Cumulative Effect, Period of Adoption, Adjustment
|
Retained Earnings (Accumulated Deficit)
Cumulative Effect, Period of Adoption, Adjusted Balance
|
Noncontrolling Interests |
Noncontrolling Interests
Cumulative Effect, Period of Adoption, Adjusted Balance
|
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2021 | 53,706,392 | 53,706,392 | |||||||||||||
Beginning balance at Dec. 31, 2021 | $ 294,989 | $ (690) | $ 294,299 | $ 290,948 | $ (690) | $ 290,258 | $ 5 | $ 5 | $ 597,227 | $ 597,227 | $ (306,284) | $ (690) | $ (306,974) | $ 4,041 | $ 4,041 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net income | 3,140 | 3,114 | 3,114 | 26 | |||||||||||
Distribution to shareholders | (89) | (89) | |||||||||||||
Stock-based compensation | 290 | 290 | 290 | 0 | |||||||||||
Ending balance (in shares) at Mar. 31, 2022 | 53,706,392 | ||||||||||||||
Ending balance at Mar. 31, 2022 | 298,446 | 293,662 | $ 5 | 597,517 | (303,860) | 4,784 | |||||||||
Beginning balance (in shares) at Dec. 31, 2021 | 53,706,392 | 53,706,392 | |||||||||||||
Beginning balance at Dec. 31, 2021 | 294,989 | $ (690) | $ 294,299 | 290,948 | $ (690) | $ 290,258 | $ 5 | $ 5 | 597,227 | $ 597,227 | (306,284) | $ (690) | $ (306,974) | 4,041 | $ 4,041 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net income | 7,634 | ||||||||||||||
Ending balance (in shares) at Jun. 30, 2022 | 53,706,392 | ||||||||||||||
Ending balance at Jun. 30, 2022 | $ 303,064 | 298,447 | $ 5 | 597,738 | (299,296) | 4,617 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Accounting Standards Update [Extensible Enumeration] | Accounting Standards Update 2016-13 [Member] | ||||||||||||||
Beginning balance (in shares) at Mar. 31, 2022 | 53,706,392 | ||||||||||||||
Beginning balance at Mar. 31, 2022 | $ 298,446 | 293,662 | $ 5 | 597,517 | (303,860) | 4,784 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net income | 4,494 | 4,564 | 4,564 | (70) | |||||||||||
Distribution to shareholders | (97) | (97) | |||||||||||||
Stock-based compensation | 221 | 221 | 221 | 0 | |||||||||||
Ending balance (in shares) at Jun. 30, 2022 | 53,706,392 | ||||||||||||||
Ending balance at Jun. 30, 2022 | 303,064 | 298,447 | $ 5 | 597,738 | (299,296) | 4,617 | |||||||||
Beginning balance (in shares) at Dec. 31, 2022 | 53,813,777 | ||||||||||||||
Beginning balance at Dec. 31, 2022 | 296,249 | 291,813 | $ 5 | 598,322 | (306,514) | 4,436 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net income | (5,797) | (5,933) | (5,933) | 136 | |||||||||||
Capital contribution by shareholders | 806 | 806 | |||||||||||||
Stock-based compensation | 1,096 | 1,096 | 1,096 | 0 | |||||||||||
Issuance of common stock pursuant to equity compensation plan (in shares) | 37,847 | ||||||||||||||
Shares withheld for tax withholdings on vested awards (in shares) | (7,132) | ||||||||||||||
Shares withheld for tax withholdings on vested awards | (34) | (34) | (34) | ||||||||||||
Ending balance (in shares) at Mar. 31, 2023 | 53,844,492 | ||||||||||||||
Ending balance at Mar. 31, 2023 | 291,514 | 286,942 | $ 5 | 599,384 | (312,447) | 4,572 | |||||||||
Beginning balance (in shares) at Dec. 31, 2022 | 53,813,777 | ||||||||||||||
Beginning balance at Dec. 31, 2022 | 296,249 | 291,813 | $ 5 | 598,322 | (306,514) | 4,436 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net income | (7,357) | ||||||||||||||
Ending balance (in shares) at Jun. 30, 2023 | 54,086,164 | ||||||||||||||
Ending balance at Jun. 30, 2023 | 290,600 | 286,738 | $ 5 | 600,030 | (313,297) | 3,862 | |||||||||
Beginning balance (in shares) at Mar. 31, 2023 | 53,844,492 | ||||||||||||||
Beginning balance at Mar. 31, 2023 | 291,514 | 286,942 | $ 5 | 599,384 | (312,447) | 4,572 | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net income | (1,560) | (850) | (850) | (710) | |||||||||||
Stock-based compensation | 752 | 752 | 752 | ||||||||||||
Issuance of common stock pursuant to equity compensation plan (in shares) | 269,113 | ||||||||||||||
Shares withheld for tax withholdings on vested awards (in shares) | (27,441) | ||||||||||||||
Shares withheld for tax withholdings on vested awards | (106) | (106) | (106) | ||||||||||||
Ending balance (in shares) at Jun. 30, 2023 | 54,086,164 | ||||||||||||||
Ending balance at Jun. 30, 2023 | $ 290,600 | $ 286,738 | $ 5 | $ 600,030 | $ (313,297) | $ 3,862 |
Organization and Description of Business |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Description of Business | Note 1 - Organization and Description of Business Organization and General HF Foods Group Inc. and subsidiaries (collectively “HF Group”, or the “Company”) is an Asian foodservice distributor that markets and distributes fresh produce, seafood, frozen and dry food, and non-food products to primarily Asian restaurants and other foodservice customers throughout the United States. The Company's business consists of one operating segment, which is also its one reportable segment: HF Group, which operates solely in the United States. The Company's customer base consists primarily of Chinese and Asian restaurants, and it provides sales and service support to customers who mainly converse in Mandarin or Chinese dialects. On April 29, 2022, the Company completed the acquisition of substantially all of the operating assets of Sealand Food, Inc. ("Sealand") including equipment, machinery and vehicles. The acquisition was completed to expand the Company's territory along the East Coast, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee. See Note 6 - Acquisitions for additional information on the Sealand acquisition.
|
Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information pursuant to the rules and regulations of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements are condensed and should be read in conjunction with the audited financial statements and notes thereto for the fiscal years ended December 31, 2022 and 2021. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The accompanying condensed consolidated financial statements include the accounts of HF Group and a variable interest entity for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interest in its condensed consolidated statements of operations and comprehensive income (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 reporting 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. FUSO Trucking, LLC (“FUSO”) is a VIE for which the Company is the primary beneficiary. Although its operations have wound down and its remaining assets and liabilities are immaterial, FUSO continues to be consolidated by the Company as a VIE. The Company also has a 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 six months ended June 30, 2023. See Note 14 - Commitments and Contingencies for additional information on AnHeart. 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 comprehensive income (loss). As of June 30, 2023 and December 31, 2022, noncontrolling interest equity consisted of the following:
_________________ (a)During the three months ended June 30, 2023, the Company began to wind down HFFI operations. Accordingly, the machinery used in HFFI operations was impaired. See Note 4 - Balance Sheet Components for additional information. Uses 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 each reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, allowance for expected credit losses, inventory reserves, useful lives of property and equipment, lease assumptions, impairment of long-lived assets, impairment of long-term investments, impairment of goodwill, the purchase price allocation and fair value of assets and liabilities acquired with respect to business combinations, realization of deferred tax assets, uncertain income tax positions, the liability for self-insurance and stock-based compensation. Recent Accounting Pronouncements The Company has implemented all new pronouncements that are in effect and that may impact its condensed consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its condensed consolidated financial statements or results of operations.
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Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Note 3 - Revenue For the three and six months ended June 30, 2023 and 2022, revenue recognized from performance obligations related to prior periods was immaterial. Revenue expected to be recognized in any future periods related to remaining performance obligations is immaterial. The following table presents the Company's net revenue disaggregated by principal product categories:
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Balance Sheet Components |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Components | Note 4 - Balance Sheet Components Accounts receivable, net consisted of the following:
Movement of allowance for expected credit losses was as follows:
Property and equipment, net consisted of the following:
Depreciation expense was $2.4 million and $2.2 million for the three months ended June 30, 2023 and 2022, respectively. Depreciation expense was $5.0 million and $4.4 million for the six months ended June 30, 2023 and 2022, respectively. During the three months ended June 30, 2023, the Company impaired machinery and recognized impairment expense of $1.2 million in distribution, selling and administrative expense in the unaudited condensed consolidated statements of income and comprehensive income. See Note 2 - Summary of Significant Accounting Policies for additional information regarding the Company’s operations at HFFI. Long-term investments consisted of the following:
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 the Company has significant influence but does not exercise control over this investee. The Company determined there was no impairment as of June 30, 2023 and December 31, 2022 for these investments. Accrued expenses and other liabilities consisted of the following:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 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:
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 the measurement date. •Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. •Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions about what assumptions market participants would use in pricing the asset or liability based on the best available information. Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized at the end of the reporting period in which the transfer occurs. There were no transfers between fair value levels in any of the periods presented herein. The carrying amounts reported in the condensed consolidated balance sheets for cash, accounts receivable, advances to suppliers, 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. Please refer to Note 8 - 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 9 - Debt of the Notes to the Unaudited Condensed Consolidated Financial Statements, including the current portion, as of the dates indicated:
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. Please refer to Note 9 - Debt for additional information regarding the Company's debt.
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Acquisitions |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Note 6 - Acquisitions Acquisition of Sealand On April 29, 2022, the Company completed the acquisition of substantially all of the operating assets of Sealand, including equipment, machinery and vehicles. The acquisition was completed to expand the Company's territory along the East Coast, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee. The price for the purchased assets was $20.0 million paid in cash at closing. In addition to the closing cash payment, the Company separately acquired all of the sellers' saleable product inventory, for approximately $14.4 million and additional fixed assets for approximately $0.5 million. The Company finalized its purchase accounting as of December 31, 2022. The Company accounted for this transaction under ASC 805 Business Combinations, by applying the acquisition method of accounting and established a new basis of accounting on the date of acquisition. The assets acquired by the Company were measured at their estimated fair values as of the date of acquisition. Goodwill is calculated as the excess of the purchase price over the net assets recognized and represent synergies and benefits expected as a result from combining operations with an emerging national presence. The transaction costs for the acquisition for the six months ended June 30, 2022 totaled approximately $0.3 million and were reflected in distribution, selling and administrative expenses in the condensed consolidated statement of operations and comprehensive income. The information included herein was prepared based on the allocation of the purchase price using estimates of the fair value of assets acquired and liabilities assumed which were determined using a combination of quoted market prices, discounted cash flows, and other estimates made by management. The Company finalized the valuation of assets acquired and liabilities assumed for the Sealand acquisition as of March 31, 2023. Purchase Price Allocation The total consideration paid to acquire the assets and liabilities of Sealand, as set forth below:
The Company recorded acquired intangible assets of $14.7 million, which were measured at fair value using Level 3 inputs. These intangible assets include tradenames and trademarks of $4.4 million, customer relationships of $8.9 million and non-competition agreements of $1.4 million. The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology and Level 3 inputs including a discount rate. The fair value of tradenames and trademarks was determined by applying the income approach utilizing the relief from royalty methodology and Level 3 inputs including a royalty rate of 1% and a discount rate. The fair value of non-competition agreements was determined by applying the income approach and Level 3 inputs including a discount rate. Discount rates used in determining fair values for customer relationships, tradenames and trademarks, and non-competition agreements ranged from 17.5% to 18.0%. The useful lives of the tradenames and trademarks are ten years, customer relationships are ten years and non-competition agreements are three years, with a weighted average amortization period of approximately nine years. The associated goodwill is deductible for tax purposes. Unaudited Supplemental Pro Forma Financial Information The following table presents the Company’s unaudited pro forma results for the three and six months ended June 30, 2022, as if the acquisition of Sealand had been consummated on January 1, 2022. The unaudited pro forma financial information presented includes the effects of adjustments related to the amortization of acquired intangible assets and excludes other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees. Statutory rates were used to calculate income taxes.
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Goodwill and Acquired Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Acquired Intangible Assets | Note 7 - Goodwill and Acquired Intangible Assets Goodwill Goodwill was $85.1 million as of June 30, 2023 and December 31, 2022. There was no change in the carrying amount of goodwill for the six months ended June 30, 2023. Acquired Intangible Assets The components of the intangible assets are as follows:
Amortization expense for acquired intangible assets was $4.1 million and $4.0 million for the three months ended June 30, 2023 and 2022, respectively. Amortization expense for acquired intangible assets was $8.1 million and $7.6 million for the six months ended June 30, 2023 and 2022, respectively. During the three months ended June 30, 2022, the Company impaired its acquired developed technology and recognized impairment expense of $0.4 million in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive income.
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Derivative Financial Instruments |
6 Months Ended |
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Jun. 30, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Note 8 - 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 9 - Debt). The Company does not use any other derivative financial instruments for trading or speculative purposes. On August 20, 2019, HF Group entered into two IRS contracts with East West Bank (the "EWB IRS") for initial notional amounts of $1.1 million and $2.6 million, respectively. 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 Group entered into an IRS contract with Bank of America (the "BOA IRS") for an initial notional amount of $2.7 million in conjunction with a newly contracted mortgage term loan of corresponding amount. 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. On March 15, 2023, the Company entered into an amortizing IRS contract with J.P. Morgan 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 June 30, 2023, the Company determined that the fair values of the IRS contracts were $0.6 million in an asset position. As of December 31, 2022, the fair values of the IRS contracts were $0.5 million in an asset position. The Company includes these in and , respectively, on the condensed consolidated balance sheets. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in its assessment of fair value. The inputs used to determine the fair value of the IRS are classified as Level 2 on the fair value hierarchy.
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Note 9 - Debt Long-term debt at June 30, 2023 and December 31, 2022 is summarized as follows:
_______________ (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 four 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 $108.8 million as of June 30, 2023 and 111.4 million as of December 31, 2022 is secured by assets held by the Company and has a maturity date of January 2030. Equipment term loan with a principal balance of $0.1 million as of June 30, 2023 and $0.3 million as of December 31, 2022 is secured by specific vehicles and equipment as defined in loan agreements. Equipment term loan matures in December 2023. (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 June 30, 2023, the Company was in compliance with its covenants.
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Earnings (Loss) Per Share |
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Jun. 30, 2023 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260 (“ASC 260”), Earnings per Share. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS, but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, warrants and restricted stock) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There were 92,945 and 100,012 potential common shares related to performance-based restricted stock units and restricted stock units that were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2023, respectively, because their effect would have been anti-dilutive. There were 3,471 and 3,668 potential common shares related to total shareholder return performance-based restricted stock units that were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2022, respectively, because their effect would have been anti-dilutive. |
Income Taxes |
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Jun. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 11 - Income Taxes The Company has computed its provision for income taxes under the discrete method which treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis. The Company believes that, at this time, the use of the discrete method is more appropriate than the estimated annual effective tax rate method as the estimated annual effective tax rate method is not reliable. For the three and six months ended June 30, 2023, the Company's effective income tax rate of (15.5)% and 21.5%, respectively, differed from the federal statutory tax rate primarily as a result of permanent differences and state income taxes. For the three and six months ended June 30, 2022, the Company's effective income tax rate of 19.6% and 22.4%, respectively, differed from the federal statutory tax rate primarily as a result of state income taxes.
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Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | Note 12 - 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 Company 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. Mr. Xiao Mou Zhang (“Mr. Zhang”) became the sole Chief Executive Officer on February 23, 2021. Mr. Xiao Mou Zhang and certain of his immediate family also 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. 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 the beneficial owners of approximately 25% of the Company’s outstanding shares of 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. For the year ended December 31, 2022, North Carolina Good Taste Noodle, Inc. (“NC Noodle”) was a related party due to Mr. Jian Ming Ni's, a former Chief Financial Officer of the Company, continued ownership interest in NC Noodle. As of January 1, 2023, NC Noodle is no longer considered a related party since it has been three years since Mr. Jian Ming Ni resigned. The related party transactions as of June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022 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 and six months ended June 30, 2023 and 2022, respectively:
_______________ (a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (b)Mr. Ni owns an equity interest in this entity. (c)Mr. Ni owns an equity interest in this entity indirectly through its parent company. (d)Mr. Jian Ming Ni, former Chief Financial Officer owns an equity interest in this entity. Mr. Zhou Min Ni previously owned an equity in this entity as of 12/31/2019. The Company has been informed by Mr. Zhou Min Ni that his equity interest was disposed of on 1/1/2020. No longer considered a related party as of 1/1/2023 since it has been three years since Mr. Jian Ming Ni resigned. Sales Below is a summary of sales to related parties recorded for the three and six months ended June 30, 2023 and 2022, respectively:
_______________ (a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (b)The Company, through its subsidiary MF, owns an equity interest in this entity. (c)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (d)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity indirectly through its parent company. (e)Mr. Ni owns an equity interest in this entity indirectly through its parent company. (f)Mr. Ni owns an equity interest in this entity. (g)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity. Lease Agreements The Company leases various facilities to related parties. The Company leased a warehouse to Enson Seafood GA Inc. (formerly GA-GW Seafood, Inc.) under an operating lease agreement expiring on September 21, 2027. On May 18, 2022, the Company sold the warehouse to Enson Seafood GA Inc., a related party, for approximately $7.2 million, recognized a gain of $1.5 million and used a portion of the proceeds to pay the outstanding balance of the Company's $4.5 million loan with First Horizon Bank. Rental income for the three months ended June 30, 2023 and 2022 was nil and $0.1 million, respectively, and is included in other income in the unaudited condensed consolidated statements of operations and comprehensive income (loss). Rental income for the six months ended June 30, 2023 and 2022 was nil and $0.2 million, respectively, which is included in other income in the unaudited condensed consolidated statements of operations and comprehensive income (loss). 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 incurred was $0.1 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively, which is included in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive income (loss). Rent incurred to the related party was $0.2 million and $0.1 million for the six months ended June 30, 2023 and 2022, respectively, which is included in distribution, selling and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive income (loss). Related Party Balances Accounts Receivable - Related Parties, Net Below is a summary of accounts receivable with related parties recorded as of June 30, 2023 and December 31, 2022, respectively:
_______________ (a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (b)The Company, through its subsidiary MF, owns an equity interest in this entity. (c)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (d)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity indirectly through its parent company. (e)Mr. Ni owns an equity interest in this entity. (f)Mr. Ni owns an equity interest in this entity indirectly through its parent company. (g)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity. The Company has reserved for 90% of the accounts receivable for Enson Seafood GA, Inc. as of June 30, 2023. This outstanding balance was reserved for 80% as of December 31, 2022. All other accounts receivable from these related parties are current and considered fully collectible. No additional allowance is deemed necessary as of June 30, 2023 and December 31, 2022. 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 June 30, 2023 and December 31, 2022, respectively:
_______________ (a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefits of Mr. Zhang's children effective November 1, 2020. (b)Mr. Jian Ming Ni, former Chief Financial Officer owns an equity interest in this entity. Mr. Zhou Min Ni previously owned an equity in this entity as of 12/31/2019. The Company has been informed by Mr. Zhou Min Ni that his equity interest was disposed of on 1/1/2020. No longer considered a related party as of 1/1/2023 since it has been three years since Mr. Jian Ming Ni resigned. Promissory Note Payable - Related Party The Company issued a $7.0 million unsecured subordinated promissory note to B&R Group Realty Holding, LLC in January 2020. During the three months ended June 30, 2022, the Company paid the remaining $4.5 million principal balance of this related party promissory note payable. Interest payments paid were $0.1 million for the three and six months ended June 30, 2022.
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Stock-Based Compensation |
6 Months Ended |
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Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Note 13 - Stock-Based Compensation In July 2021, the Company began issuing awards under the HF Foods Group Inc. 2018 Omnibus Equity Incentive Plan (the “2018 Incentive Plan”), which reserves up to 3,000,000 shares of the Company's common stock for issuance of awards to employees, non-employee directors and consultants. As of June 30, 2023, the Company had 909,226 time-based vesting restricted stock units unvested, 678,381 performance-based restricted stock units unvested, 449,619 shares of common stock vested and 962,774 shares remaining available for future awards under the 2018 Incentive Plan. Stock-based compensation expense was $0.8 million and $0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $1.8 million and $0.5 million for the six months ended June 30, 2023 and 2022, 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 income. As of June 30, 2023, there was $5.8 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 2.22 years.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Note 14 - 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 or 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 its 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. As previously disclosed, in March 2020, an analyst report suggested certain improprieties in the Company’s operations, and in response to those allegations, the Company’s Board of Directors appointed a Special Committee of Independent Directors (the “Special Investigation Committee”) to conduct an internal independent investigation with the assistance of counsel. These allegations became the subject of two putative stockholder class actions filed on or after March 29, 2020 in the United States District Court for the Central District of California generally alleging 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 (the “Class Actions”). These Class Actions have since been dismissed and are now closed. In addition, the SEC initiated a formal, non-public investigation of the Company, and the SEC informally requested, and later issued a subpoena for, documents and other information. The subpoena relates to but is not necessarily limited to the matters identified in the Class Actions. The Special Investigation Committee and the Company are cooperating with the SEC. While the SEC investigation is ongoing, the Special Investigation Committee has made certain factual findings based on evidence adduced during its investigation, and made recommendations to management regarding improvements to Company operations and structure, including but not limited to its dealings with related parties. The Company is working to implement those improvements. As with any SEC investigation, there is also the possibility of potential fines and penalties. At this time, however, there has not been a demand made by the SEC nor is it possible at this time to estimate the amount of any such fines and penalties, should they occur. On May 20, 2022, the Board of Directors of HF Foods received a letter from a stockholder, James Bishop (the “Bishop Demand”). The Bishop Demand alleges that certain current and former officers and directors of HF Foods engaged in misconduct and breached their fiduciary duties, and demands that HF Foods investigate the allegations and, if warranted, assert claims against those current or former officers and directors. Many of the allegations contained in the Bishop Demand were the subject of the Class Actions. On June 30, 2022, the Board of Directors of HF Foods resolved to form a special committee (the “Special Litigation Committee”) comprised of independent directors and advised by counsel to analyze and evaluate the allegations in the Bishop Demand to determine whether the Company should assert any claims based on the allegations made in the Bishop Demand against the current or former officers and directors. On August 19, 2022, James Bishop filed a verified stockholder derivative complaint (the “Delaware Action”) in the Court of Chancery of the State of Delaware (the “Court of Chancery”), which asserts similar allegations to those set forth in the Bishop Demand. On September 21, 2022, Bishop and the Company filed a stipulation to stay the Delaware Action for 90 days, which the court granted on September 22, 2022. On December 20, 2022, Bishop and the Company filed a stipulation to extend the stay of the Delaware Action for an additional 60 days, which the court granted on December 21, 2022. On March 15, 2023, the Court of Chancery entered an order approving a joint stipulation submitted by Bishop and HF Foods to stay the case for an additional 60 days. Effective as of April 20, 2023, the Company and certain parties to the Delaware Action reached an agreement to settle the Delaware Action on the terms and conditions set forth in a binding term sheet, which was incorporated into a long-form settlement agreement on May 5, 2023 (the “Settlement Agreement”), which was filed with the Court of Chancery on May 8, 2023. The Settlement Agreement, which is subject to the approval of the Court of Chancery, provided for, among other things, the dismissal of the Delaware Action with prejudice, and releases of claims against all named defendants in the Delaware Action, in exchange for Zhou Min Ni, a former Chairman and Chief Executive Officer of the Company, and Chan Sin Wong, a former President and Chief Operating Officer of the Company, making a payment to the Company in the sum of $9.25 million and the Company adopting certain changes to its bylaws and/or other internal governance policies and procedures. On May 11, 2023, the Court of Chancery scheduled a hearing to be held on September 8, 2023, to consider, among other things, whether to approve the proposed settlement and an application by Bishop’s counsel for an award of attorneys’ fees and expenses. 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, 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 guarantee obligations as guarantor under the Lease Agreement. The Company agreed to observe all the covenants and conditions of the Lease Agreement, as amended, including the payment of all rents due. Under the terms of the Lease Agreement and the Assignment, the Company has undertaken to construct, at its own expense, a building on the premises at a minimum cost of $2.5 million. The Lease Amendment permits subletting of the premises, and the Company intends to sublease the newly constructed premises to defray the rental expense undertaken pursuant to its guaranty obligations. On January 17, 2022, the Company received notice that AnHeart had defaulted on its obligations as tenant under the lease for 275 Fifth Avenue. On February 7, 2022, the Company undertook its guaranty obligations by assuming responsibility for payment of monthly rent and other tenant obligations, including past due rent as well as property tax obligations beginning with the January 2022 rent due. On February 25, 2022, the Company instituted a legal action to pursue legal remedies against AnHeart and Minsheng. In March 2022, the Company agreed to stay litigation against AnHeart in exchange for AnHeart’s payment of certain back rent from January to April 2022 and its continued partial payment of monthly rent. The case remains pending in New York. 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 11 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 three months ended March 31, 2022, the Company recorded a lease guarantee liability of $5.9 million. The Company determined the discounted value of the lease guarantee liability using a discount rate of 4.55%. As of June 30, 2023, the Company had a lease guarantee liability of $5.6 million. The current portion of the lease guarantee liability of $0.3 million is recorded in accrued expenses and other liabilities, while the long-term portion is recorded in other long-term liabilities on the condensed 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. The estimated future minimum lease payments as of June 30, 2023 are presented below:
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 15 - Subsequent Events Other than as disclosed elsewhere, no subsequent events have occurred that would require recognition in the unaudited condensed consolidated financial statements or disclosure in the accompanying notes.
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Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information pursuant to the rules and regulations of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements are condensed and should be read in conjunction with the audited financial statements and notes thereto for the fiscal years ended December 31, 2022 and 2021. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The accompanying condensed consolidated financial statements include the accounts of HF Group and a variable interest entity for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. For consolidated entities where we own or are exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interest in its condensed consolidated statements of operations and comprehensive income (loss) equal to the percentage of the economic or ownership interest retained in such entity by the respective noncontrolling party.
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Noncontrolling Interests | 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 comprehensive income (loss).
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Use of Estimates | Uses 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 each reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s condensed consolidated financial statements include, but are not limited to, allowance for expected credit losses, inventory reserves, useful lives of property and equipment, lease assumptions, impairment of long-lived assets, impairment of long-term investments, impairment of goodwill, the purchase price allocation and fair value of assets and liabilities acquired with respect to business combinations, realization of deferred tax assets, uncertain income tax positions, the liability for self-insurance and stock-based compensation.
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Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company has implemented all new pronouncements that are in effect and that may impact its condensed consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its condensed consolidated financial statements or results of operations.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Noncontrolling Interest | As of June 30, 2023 and December 31, 2022, noncontrolling interest equity consisted of the following:
_________________ (a)During the three months ended June 30, 2023, the Company began to wind down HFFI operations. Accordingly, the machinery used in HFFI operations was impaired. See Note 4 - Balance Sheet Components for additional information.
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Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregation of Revenue | The following table presents the Company's net revenue disaggregated by principal product categories:
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Balance Sheet Components (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts, Notes, Loans and Financing Receivable | Accounts receivable, net consisted of the following:
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Schedule of Financing Receivable, Allowance for Credit Loss | Movement of allowance for expected credit losses was as follows:
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Schedule of Property and Equipment | Property and equipment, net consisted of the following:
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Schedule of Long-Term Investments | Long-term investments consisted of the following:
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Schedule of Accrued Expenses and Other Liabilities | Accrued expenses and other liabilities consisted of the following:
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Fair Value Measurements (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Measurements, Assets and Liabilities | 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:
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Schedule of Debt Securities, Carrying Value and Fair Value | The following table presents the carrying value and estimated fair value of the Company’s outstanding debt as described in Note 9 - Debt of the Notes to the Unaudited Condensed Consolidated Financial Statements, including the current portion, as of the dates indicated:
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. Please refer to Note 9 - Debt for additional information regarding the Company's debt.
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Acquisitions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The total consideration paid to acquire the assets and liabilities of Sealand, as set forth below:
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Schedule of Pro Forma Information | The following table presents the Company’s unaudited pro forma results for the three and six months ended June 30, 2022, as if the acquisition of Sealand had been consummated on January 1, 2022. The unaudited pro forma financial information presented includes the effects of adjustments related to the amortization of acquired intangible assets and excludes other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees. Statutory rates were used to calculate income taxes.
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Goodwill and Acquired Intangible Assets (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | The components of the intangible assets are as follows:
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Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | Long-term debt at June 30, 2023 and December 31, 2022 is summarized as follows:
_______________ (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 four 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 $108.8 million as of June 30, 2023 and 111.4 million as of December 31, 2022 is secured by assets held by the Company and has a maturity date of January 2030. Equipment term loan with a principal balance of $0.1 million as of June 30, 2023 and $0.3 million as of December 31, 2022 is secured by specific vehicles and equipment as defined in loan agreements. Equipment term loan matures in December 2023. (d)Secured by vehicles.
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Earnings (Loss) Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share Basic and Diluted | The following table sets forth the computation of basic and diluted EPS:
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Related Party Transactions (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Purchases With Related Parties | Below is a summary of purchases of goods and services from related parties recorded for the three and six months ended June 30, 2023 and 2022, respectively:
_______________ (a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (b)Mr. Ni owns an equity interest in this entity. (c)Mr. Ni owns an equity interest in this entity indirectly through its parent company. (d)Mr. Jian Ming Ni, former Chief Financial Officer owns an equity interest in this entity. Mr. Zhou Min Ni previously owned an equity in this entity as of 12/31/2019. The Company has been informed by Mr. Zhou Min Ni that his equity interest was disposed of on 1/1/2020. No longer considered a related party as of 1/1/2023 since it has been three years since Mr. Jian Ming Ni resigned.
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Schedule of Revenue With Related Parties | Below is a summary of sales to related parties recorded for the three and six months ended June 30, 2023 and 2022, respectively:
_______________ (a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (b)The Company, through its subsidiary MF, owns an equity interest in this entity. (c)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (d)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity indirectly through its parent company. (e)Mr. Ni owns an equity interest in this entity indirectly through its parent company. (f)Mr. Ni owns an equity interest in this entity. (g)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity.
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Schedule of Accounts Receivable With Related Parties | Below is a summary of accounts receivable with related parties recorded as of June 30, 2023 and December 31, 2022, respectively:
_______________ (a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (b)The Company, through its subsidiary MF, owns an equity interest in this entity. (c)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefit of Mr. Zhang's children effective November 1, 2020. (d)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity indirectly through its parent company. (e)Mr. Ni owns an equity interest in this entity. (f)Mr. Ni owns an equity interest in this entity indirectly through its parent company. (g)Tina Ni, one of Mr. Ni’s family members, owns an equity interest in this entity.
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Schedule of Accounts Payable With 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 June 30, 2023 and December 31, 2022, respectively:
_______________ (a)Mr. Zhang previously owned an equity interest in this entity indirectly through its parent company as of October 31, 2020. This equity interest was transferred to three Irrevocable Trusts for the benefits of Mr. Zhang's children effective November 1, 2020. (b)Mr. Jian Ming Ni, former Chief Financial Officer owns an equity interest in this entity. Mr. Zhou Min Ni previously owned an equity in this entity as of 12/31/2019. The Company has been informed by Mr. Zhou Min Ni that his equity interest was disposed of on 1/1/2020. No longer considered a related party as of 1/1/2023 since it has been three years since Mr. Jian Ming Ni resigned.
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Commitment and Contingencies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operating Lease Maturities | The estimated future minimum lease payments as of June 30, 2023 are presented below:
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Organization and Description of Business (Details) |
6 Months Ended |
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Jun. 30, 2023
segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segments | 1 |
Number of reportable segments | 1 |
Balance Sheet Components - Accounts Receivable (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Less: allowance for expected credit losses | $ (1,474) | $ (1,442) | $ (1,468) | $ (840) |
Nonrelated Party | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Accounts receivable | 47,060 | 45,628 | ||
Less: allowance for expected credit losses | (1,474) | (1,442) | ||
Accounts receivable, net | $ 45,586 | $ 44,186 |
Balance Sheet Components - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
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Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||
Beginning balance | $ 1,442 | $ 840 |
Adjustment for adoption of the CECL standard | 0 | 690 |
Increase (decrease) in provision for expected credit losses | 56 | (54) |
Bad debt write-offs | (24) | (8) |
Ending balance | $ 1,474 | $ 1,468 |
Balance Sheet Components - Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Depreciation | $ 2,400,000 | $ 2,200,000 | $ 5,000,000 | $ 4,400,000 | |
Other than temporary impairment | $ 0 | $ 0 |
Balance Sheet Components - Schedule of Long-Term Investments (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Schedule of Equity Method Investments [Line Items] | ||
Long-term investments | $ 2,414 | $ 2,679 |
Asahi Food, Inc. ("Asahi") | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity method investment, ownership percentage | 49.00% | |
Long-term investments | $ 614 | 879 |
Pt. Tamron Akuatik Produk Industri ("Tamron") | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity method investment, ownership percentage | 12.00% | |
Long-term investments | $ 1,800 | $ 1,800 |
Balance Sheet Components - Schedule of Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accrued compensation | $ 6,007 | $ 6,798 |
Accrued professional fees | 2,077 | 3,866 |
Accrued interest and fees | 1,202 | 1,082 |
Self-insurance liability | 1,413 | 1,286 |
Accrued other | 9,064 | 6,616 |
Total accrued expenses and other liabilities | $ 19,763 | $ 19,648 |
Fair Value Measurements - Schedule of Fair Value Measurements, Assets and Liabilities (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Assets | |||
DerivativeAssetsStatementOfFinancialPositionExtensibleEnumerationNotDisclosedFlag | Interest rate swaps | Interest rate swaps | |
Recurring | |||
Assets | |||
Assets: | $ 640 | $ 530 | |
Recurring | Level 1 | |||
Assets | |||
Assets: | 0 | 0 | |
Recurring | Level 2 | |||
Assets | |||
Assets: | 640 | 530 | |
Recurring | Level 3 | |||
Assets | |||
Assets: | $ 0 | $ 0 |
Acquisitions - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
Apr. 29, 2022 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 85,118 | $ 85,118 | |
Sealand Food Inc Asset Purchase Agreement | |||
Business Acquisition [Line Items] | |||
Inventory | $ 13,846 | ||
Property plant, and equipment | 1,424 | ||
Right-of-use assets | 127 | ||
Intangible assets | 14,717 | ||
Total assets acquired | 30,114 | ||
Obligations under operating leases | 127 | ||
Total liabilities assumed | 127 | ||
Net assets | 29,987 | ||
Goodwill | 4,861 | ||
Total consideration | $ 34,848 |
Acquisitions - Pro Forma Information (Details) - Sealand Food Inc Asset Purchase Agreement - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2022 |
Jun. 30, 2022 |
|
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ||
Pro forma net revenue | $ 307,587 | $ 609,685 |
Pro forma net income attributable to HF Group | $ 3,628 | $ 7,253 |
Pro forma (loss) earnings per common share- basic (in dollars per share) | $ 0.07 | $ 0.14 |
Pro forma (loss) earnings per common share- diluted (in dollars per share) | $ 0.07 | $ 0.13 |
Weighted average shares - basic (in shares) | 53,706,392 | 53,706,392 |
Weighted average shares - diluted (in shares) | 53,900,883 | 53,927,957 |
Goodwill and Acquired Intangible Assets - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Goodwill | $ 85,118 | $ 85,118 | $ 85,118 | ||
Amortization expense | $ 4,100 | $ 4,000 | $ 8,100 | $ 7,600 |
Goodwill and Acquired Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Gross Carrying Amount | $ 233,414 | $ 233,414 | ||
Accumulated Amortization | (47,465) | (39,323) | ||
Net Carrying Amount | 185,949 | 194,091 | ||
Asset impairment charges | $ 400 | 1,200 | $ 422 | |
Non-competition agreement | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Gross Carrying Amount | 3,892 | 3,892 | ||
Accumulated Amortization | (1,781) | (1,132) | ||
Net Carrying Amount | 2,111 | 2,760 | ||
Tradenames | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Gross Carrying Amount | 44,256 | 44,256 | ||
Accumulated Amortization | (12,883) | (10,673) | ||
Net Carrying Amount | 31,373 | 33,583 | ||
Customer relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Gross Carrying Amount | 185,266 | 185,266 | ||
Accumulated Amortization | (32,801) | (27,518) | ||
Net Carrying Amount | $ 152,465 | $ 157,748 |
Earnings (Loss) Per Share - Narrative (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 92,945 | 3,471 | 100,012 | 3,668 |
Earnings (Loss) Per Share - Schedule of Computation of Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Numerator: | ||||
Net (loss) income attributable to HF Foods Group Inc. | $ (850) | $ 4,564 | $ (6,783) | $ 7,678 |
Denominator: | ||||
Weighted-average common shares outstanding (in shares) | 54,046,328 | 53,706,392 | 53,935,178 | 53,706,392 |
Effect of dilutive securities (in shares) | 0 | 194,491 | 0 | 221,565 |
Weighted-average dilutive shares outstanding (in shares) | 54,046,328 | 53,900,883 | 53,935,178 | 53,927,957 |
(Loss) earnings per common share: | ||||
Basic (in dollars per share) | $ (0.02) | $ 0.08 | $ (0.13) | $ 0.14 |
Diluted (in dollars per share) | $ (0.02) | $ 0.08 | $ (0.13) | $ 0.14 |
Income Taxes - Narrative (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax (benefit) provision | (15.50%) | 19.60% | 21.50% | 22.40% |
Related Party Transactions - Summary of Accounts Payable with Related Parties (Details) $ in Thousands |
Jun. 30, 2023
USD ($)
|
Dec. 31, 2022
USD ($)
|
Nov. 01, 2020
trust
|
Oct. 31, 2020
trust
|
---|---|---|---|---|
Related Party | ||||
Related Party Transaction [Line Items] | ||||
Accounts payable | $ 870 | $ 1,529 | ||
B&R Group Realty | Mortgage-Secured Term Loans | ||||
Related Party Transaction [Line Items] | ||||
Other Receivables | 7,000 | |||
Best Food Services, LLC | ||||
Related Party Transaction [Line Items] | ||||
Number of irrecoverable trusts | trust | 3 | 3 | ||
Best Food Services, LLC | Related Party | ||||
Related Party Transaction [Line Items] | ||||
Accounts payable | 836 | 729 | ||
North Carolina Good Taste Noodle, Inc. | Related Party | ||||
Related Party Transaction [Line Items] | ||||
Accounts payable | 0 | 731 | ||
Others | Related Party | ||||
Related Party Transaction [Line Items] | ||||
Accounts payable | $ 34 | $ 69 |
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Number of shares authorized under plan (in shares) | 3,000,000 | 3,000,000 | ||
Shares remaining available for future unvested awards (in shares) | 449,619 | 449,619 | ||
Shares remaining available for future awards (in shares) | 962,774 | 962,774 | ||
Total stock-based compensation expense | $ 0.8 | $ 0.2 | $ 1.8 | $ 0.5 |
Unrecognized compensation cost | $ 5.8 | $ 5.8 | ||
Unrecognized compensation cost, period for recognition | 2 years 2 months 19 days | |||
RSUs | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Equity instruments outstanding (in shares) | 909,226 | 909,226 | ||
PSUs | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Equity instruments outstanding (in shares) | 678,381 | 678,381 |
Commitments and Contingencies - Schedule of Operating Lease Maturities (Details) $ in Thousands |
Jun. 30, 2023
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2023 (remaining six months) | $ 280 |
2024 | 582 |
2025 | 604 |
2026 | 621 |
2027 | 638 |
Thereafter | 4,478 |
Total | 7,203 |
Less: imputed interest | (1,583) |
Total minimum lease payments | $ 5,620 |
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