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What changed in HF Foods Group Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HF Foods Group Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+251 added−300 removedSource: 10-K (2025-03-17) vs 10-K (2024-03-26)

Top changes in HF Foods Group Inc.'s 2024 10-K

251 paragraphs added · 300 removed · 165 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

46 edited+18 added−13 removed43 unchanged
Biggest changeThe overall impact was an increase in medical plan enrollment by 50%, dental plan enrollment by 135%, and vision plan enrollment by 103%, from the previous year. Recruiting, Training and Development Our ability to continue to retain, attract, and recruit top talent at all levels is key to our future success.
Biggest changeRecruiting, Training and Development Our ability to continue to retain, attract, and recruit top talent at all levels is key to our future success. In 2024, we implemented a Learning Management System (LMS) to consolidate employee training in the areas of safety, security, and compliance. We continue to transform our operations through new system and process improvements, training and development.
Zhang has well over 20 years of experience in the food distribution industry with extensive experience in sales, marketing, financing, acquisitions, inventory, logistics and distribution. Under Mr. Zhang’s leadership, B&R Global established a large supplier network and maintained long-term relationships with many major suppliers stemming from business relationships that were built up over the years.
Mr. Zhang has well over 20 years of experience in the food distribution industry with extensive experience in sales, marketing, financing, acquisitions, inventory, logistics and distribution. Under Mr. Zhang’s leadership, B&R Global established a large supplier network and maintained long-term relationships with many major suppliers stemming from business relationships that were built up over the years.
The information contained on or accessible through our corporate website or any other website that we may maintain is not incorporated by reference into and is not part of this Annual Report on Form 10-K. 10
The information contained on or accessible through our corporate website or any other website that we may maintain is not incorporated by reference into and is not part of this Annual Report on Form 10-K.
The fragmented nature of the Asian foodservice market creates acquisition opportunities for us to continue to expand our geographic footprint and customer base. Competitive Advantages over New Entrants . Each distribution center requires a large amount of invested capital to support the full temperature-controlled logistics and warehouse operations to help customers grow their sales and profit.
The fragmented nature of the Asian foodservice market creates acquisition opportunities for us to continue to expand our geographic footprint and customer base. 4 Competitive Advantages over New Entrants . Each distribution center requires a large amount of invested capital to support the full temperature-controlled logistics and warehouse operations to help customers grow their sales and profit.
We continue to invest in technological advancements to develop state-of-the-art management information and operating systems, to further improve our operational efficiency, accuracy and customer satisfaction, and to cement our foothold as a leading foodservice distributor to Asian restaurants in the U.S. Features of Chinese and Asian Restaurants Set forth below are the principal characteristics of the Asian/Chinese restaurants we serve.
We continue to invest in technological advancements to develop state-of-the-art management information and operating systems, to further improve our operational efficiency, accuracy and customer satisfaction, and to cement our foothold as a leading foodservice distributor to Asian restaurants in the U.S. Features of Asian Restaurants Set forth below are the principal characteristics of the Asian restaurants we serve.
As COVID-19 restrictions eased in 2021 and into 2022, both full service and fast food/take out restaurants have rebounded, and we believe the long-term trend of increasing food away from home market consumption has resumed and continues to be a key driver of demand for Asian/Chinese restaurants.
As COVID-19 restrictions eased in 2021 and into 2022, both full service and fast food/take out restaurants have rebounded, and we believe the long-term trend of increasing food away from home market consumption has resumed and continues to be a key driver of demand for Asian restaurants.
The recently published and pending rules under the Food Safety Modernization Act ("FSMA") will significantly expand food safety requirements, including those of HF Foods. Among other things, FDA regulations implementing the FSMA require us to establish and maintain comprehensive, prevention-based controls across the food supply chain that are both verified and validated.
The recently published and pending rules under the Food Safety Modernization Act (“FSMA”) will significantly expand food safety requirements, including those of HF Foods. Among other things, FDA regulations implementing the FSMA require us to establish and maintain comprehensive, prevention-based controls across the food supply chain that are both verified and validated.
He also held various other leadership positions within Blue Bird Corporation in the Manufacturing Operations and Supply Chain Departments from 2015 to 2016, the Finance and Accounting Department in 2011 and from 2013 to 2015, and the International Business Development and M&A Departments in 2012. Mr.
He also held various other leadership positions within Blue Bird Corporation in the Manufacturing Operations and Supply Chain Departments from 2015 to 2016, the Finance 8 and Accounting Department in 2011 and from 2013 to 2015, and the International Business Development and M&A Departments in 2012. Mr.
Department of Transportation, as well as its agencies, the Surface Transportation Board, the Federal Highway Administration, the Federal Motor Carrier Safety Administration, and the National Highway Traffic Safety Administration, which collectively regulate our trucking business through the regulation of operations, safety, insurance and hazardous materials.
Department of Transportation, as well as its agencies, the Surface Transportation Board, the Federal Highway Administration, the Federal Motor Carrier Safety Administration, and the National Highway Traffic Safety Administration, which collectively regulate our trucking business through the regulation of operations, safety, insurance and hazardous 7 materials.
We believe our wide range of Asian-centric product offerings is unmatched, as many of the items we offer are unique and specific to the Chinese and Asian restaurant industry.
We believe our wide range of Asian-centric product offerings is unmatched, as many of the items we offer are unique and specific to the Asian restaurant industry.
For the year ended December 31, 2023, the costs of managing our compliance with environmental laws and regulations was nominal. The U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits bribery of public officials to obtain or retain business in foreign jurisdictions.
For the year ended December 31, 2024, the costs of managing our compliance with environmental laws and regulations was nominal. The U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits bribery of public officials to obtain or retain business in foreign jurisdictions.
("B&R Global"), and was promoted to sole Chief Executive Officer on February 23, 2021. From 2014 until the merger, he served as Chairman of the Board and a Director of B&R Global that was co-founded by Mr. Zhang and his partners, to consolidate the shareholdings of various operating entities across the Pacific and Mountain States regions. Mr.
(“B&R Global”), and was promoted to sole Chief Executive Officer on February 23, 2021 until October 24, 2024. From 2014 until the merger, he served as chairman of the board and a director of B&R Global that was co-founded by Mr. Zhang and his partners, to consolidate the shareholdings of various operating entities across the Pacific and Mountain States regions.
Chang previously served as Vice President - Legal Affairs, Labor Relations and Litigation for Boyd Gaming Corp. From 2014 through August 2020, she served in various capacities as Corporate Counsel, Litigation, Senior Corporate Counsel, Litigation, and Vice President and Chief Counsel, Litigation, for Caesars Entertainment, Inc. Ms.
Chang previously served as Vice President - Legal Affairs, Labor Relations and Litigation for Boyd Gaming Corp. (NYSE: BYD). From 2014 through August 2020, she served in various capacities as Corporate Counsel, Litigation, Senior Corporate Counsel, Litigation, and Vice President and Chief Counsel, Litigation, for Caesars Entertainment, Inc. (NASDAQ: CZR). Ms.
We believe that our scale and deep knowledge of our customers’ needs provide a competitive advantage over our direct competitors and have contributed greatly to our success, including the following: • Wide array of Asian specialty products: These are not commonly provided by large distributors serving the mainstream market. • Deep understanding of Asian culture: As our customers are primarily Chinese and Asian restaurants, most of our employees can speak Mandarin as well as the native dialects of our customers.
We believe that our scale and deep knowledge of our customers’ needs provide a competitive advantage over our direct competitors and have contributed greatly to our success, including the following: • Wide array of Asian specialty products: These are not commonly provided by large distributors serving the mainstream market. • Deep understanding of Asian culture: As our customers are primarily Asian restaurants, most of our employees can speak the primary language of our customers.
On April 29, 2022, HF Foods acquired substantially all of the assets of Sealand Food, Inc., one of the largest frozen seafood suppliers servicing the Asian/Chinese restaurant market along the eastern seaboard, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.
On April 29, 2022, HF Foods acquired substantially all of the assets of Sealand Food, Inc., one of the largest frozen seafood suppliers servicing customers along the eastern seaboard, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.
Understanding Chinese cooking culture is important to running a Chinese restaurant, and, therefore, most Chinese restaurants are operated by Chinese Americans. We believe that it is very difficult for mainstream food distributors to serve these restaurants due to various cultural and language barriers. Highly Fragmented Market .
Cultural Barriers to Entry . Understanding Asian cooking culture is important to running an Asian restaurant, and, therefore, most Asian restaurants are operated by Asian Americans. We believe that it is very difficult for mainstream food distributors to serve these restaurants due to various cultural and language barriers. Highly Fragmented Market .
Our customers are Asian/Chinese restaurants, primarily takeout restaurants. These customers are price and quality sensitive with a high demand for great service and mutual trust. Our employees speak their language, understand their culture and build a bond with our customers.
Our customers are primarily Asian restaurants, and other foodservice customers. These customers are price and quality sensitive with a high demand for great service and mutual trust. Our employees speak their language, understand their culture and build a bond with our customers.
We believe this is a key business strength and competitive advantage, as many of the restaurants’ owners/chefs are migrants who feel less comfortable conversing in English. • Lower sales and administrative expenses: We outsource our telephone-based sales and customer service to two call centers located in China with Mandarin and Chinese dialect speaking agents to better serve our customers. • Purchasing power: We capitalize on economies of scale and have strong relationships with both our domestic and foreign suppliers. • Warehouse location: We have strategically located distribution centers and cross-docks, supported by our fleet of delivery vehicles with most routes limited to three to five hours driving time, ensuring on-time delivery and order fill-rate. • Technology: With our customized inventory management system, we are able to manage our customer relationships and inventory efficiently and reduce operating expenses. • Customer-specific marketing: Our employees’ bilingual capabilities provide a competitive advantage against other major providers in the industry.
We believe this is a key business strength and competitive advantage, as many of the restaurants’ owners/chefs are more comfortable speaking in their primary language. • Lower sales and administrative expenses: We outsource our telephone-based sales and customer service to two call centers located in China to better serve our customers around the clock. 3 • Purchasing power: We capitalize on economies of scale and have strong relationships with both our domestic and foreign suppliers. • Warehouse location: We have strategically located distribution centers and cross-docks, supported by our fleet of delivery vehicles with most routes limited to three to five hours driving time, ensuring on-time delivery and order fill-rate. • Technology: With our customized inventory management system, we are able to manage our customer relationships and inventory efficiently and reduce operating expenses. • Customer-specific marketing: Our employees’ bilingual capabilities provide a competitive advantage against other major providers in the industry.
For the purchase of items produced, harvested or manufactured outside of the U.S., we are subject to applicable customs laws regarding the import and export of various products. Certain activities, including working with customs brokers and freight forwarders, are subject to applicable regulation by U.S.
For the purchase of items produced, harvested or manufactured outside of the U.S., we are subject to applicable customs laws regarding the import and export of various products. Certain activities, including working with customs brokers and freight forwarders, are subject to applicable regulation by U.S. Customs and Border Protection, which is a part of the Department of Homeland Security.
The following table sets forth our broad range of products and sales percentage by category for the year ended December 31, 2023: Category Description Percentage Seafood Lobster, shrimp, crab, scallops and fish, such as tuna and Alaskan salmon 31% Asian Specialty Products with an Asian flair or flavor, including specialty noodles, rice, dry goods, such as dried mushrooms or dried beans, specialty sauces/seasonings, spring rolls, and canned products, such as preserved vegetables, bamboo shoots and water chestnuts 27% Meat and Poultry Beef, pork, chicken and duck 19% Fresh Produce Fresh, seasonal fruits and vegetables, such as celery, Chinese cabbage and winter melon which are widely used in Chinese cuisines 11% Packaging and Other Take-out accessories for customers, from bamboo chopsticks to takeout containers, plastic cups and sushi combo boxes 6% Commodity General commodities including oil, flour, salt and sugar 6% We have an extensive supplier network and established long-term relationships with our major suppliers.
The following table sets forth our broad range of products and sales percentage by category for the year ended December 31, 2024: Category Description Percentage Seafood Lobster, shrimp, crab, scallops and fish, such as tuna and Alaskan salmon 33% Asian Specialty Products with an Asian flair or flavor, including specialty noodles, rice, dry goods, such as dried mushrooms or dried beans, specialty sauces/seasonings, spring rolls, and canned products, such as preserved vegetables, bamboo shoots and water chestnuts 25% Meat and Poultry Beef, pork, chicken and duck 21% Fresh Produce Fresh, seasonal fruits and vegetables, such as celery, napa cabbage and winter melon which are widely used in Asian cuisines 11% Packaging and Other Take-out accessories for customers, from bamboo chopsticks to takeout containers, plastic cups and sushi combo boxes 5% Commodity General commodities including oil, flour, salt and sugar 5% Our extensive supplier network and long-standing relationships with key suppliers strengthen our negotiating power, allowing us to procure large quantities efficiently through our centralized inventory system.
Lin also previously served as an independent director of HF Foods from November 2019 to April 2022. Mr. Lin worked in a number of positions at Blue Bird Corporation from 2010 until his resignation on April 1, 2022.
Mr Lin previously served as Chief Operating Officer of the Company from May 1, 2022 to January 1, 2025. Mr. Lin also previously served as an independent director of HF Foods from November 2019 to April 2022. Mr. Lin worked in a number of positions at Blue Bird Corporation (NASDAQ: BLBD) from 2010 until his resignation on April 1, 2022.
Upon receipt of ordered products, the delivery schedule is determined based on the needs of each location. The lead-time for products is dependent on the product category and need. For perishable goods, products are usually delivered by suppliers within seventy-two hours of placing the order. Products that are ordered through import brokers have lead times of up to seven days.
Upon receipt of ordered products, the delivery schedule is determined based on the needs of each location. The lead-time for products is dependent on the product 5 category and need. For perishable goods, products are usually delivered by suppliers within seventy-two hours of placing the order.
Customer Service We employ a two-pronged approach for a complete and cohesive support to both existing and prospective customers; namely, the two outsourced call centers located in Fuzhou, China and the domestic sales team in the U.S.
Customer Service We employ a two-pronged approach for a complete and cohesive support to both existing and prospective customers; namely, the two outsourced call centers located in Fuzhou, China and the domestic sales team in the U.S. Utilizing these outsourced call centers in China, customers embrace and appreciate our personal customer service conducted in their primary language.
These are the value added services that we are able to provide to our customers in our one-stop shopping offering. Continued Consumer Spending on Food Away From Home . Prior to the onset of the COVID-19 pandemic, according to the U.S.
These are the value added services that we are able to provide to our customers in our one-stop shopping offering. Continued Consumer Spending on Food Away From Home .
Most Chinese restaurants serviced by HF Foods are generally family-owned with very few workers, who are usually immigrants from China or first generation Chinese Americans. These restaurant owners, especially the founders, are generally less sophisticated, with limited education and resources and appreciate value-added services from suppliers to help them improve their operational efficiency.
Most restaurants serviced by HF Foods are generally family-owned with very few workers, who are often immigrants or first generation Americans. These small restaurant owners, especially the founders, appreciate value-added services from suppliers to help them improve their operational efficiency. The owners and workers in these Asian restaurants usually prefer to speak their primary language.
Our Business and Products Our business features eighteen strategically positioned distribution centers and cross-docks with over one million square feet of warehouse space and a fleet of over 400 vehicles to provide a wide variety of products with a strong focus on Asian specialty food ingredients essential for Asian cooking.
Our Business and Products Our business features sixteen distribution centers and three cross-docks with a total of approximately 1.3 million square feet of warehouse space and a fleet of over 400 vehicles to provide a wide variety of products with a strong focus on specialty food 2 ingredients essential for Asian cuisine.
Although the dishes they serve cater to the preferences of American mainstream customers and are more simply and quickly prepared as compared to traditional full-service Chinese restaurant cuisine, they still require specialized and distinctive Chinese ingredients used in traditional Chinese cooking styles. Operated by Chinese Individual Families .
Primarily Serving Mainstream Americans . There are tens of thousands of Asian restaurants spread throughout the U.S., primarily serving American customers. Although the dishes they serve are more simply and quickly prepared as compared to traditional full-service Asian restaurant cuisine, they still require specialized and distinctive Asian specialty ingredients used in traditional Asian cooking styles. Operated by Individual Families .
The FSMA also imposes new requirements for food products imported into the U.S. and provides the FDA with mandatory recall authority. 8 HF Foods and our products are also subject to state and local regulation through such measures as the licensing of our facilities; enforcement by state and local health agencies of state and local standards for our products; and regulation of our trade practices in connection with the sale of our products.
HF Foods and our products are also subject to state and local regulation through such measures as the licensing of our facilities; enforcement by state and local health agencies of state and local standards for our products; and regulation of our trade practices in connection with the sale of our products.
We believe that these powerful trends will continue and result in expanded opportunities for Asian/Chinese restaurants. As a leading foodservice distributor to Asian/Chinese restaurants in the U.S., these trends represent a significant growth opportunity for HF Foods. Cultural Barriers to Entry .
In addition, according to the Pew Research Center, the Asian population in the U.S. is the fastest growing population group in the country. We believe that these powerful trends will continue and result in expanded opportunities for Asian restaurants. As a leading foodservice distributor to Asian restaurants in the U.S., these trends represent a significant growth opportunity for HF Foods.
We have an extensive reach to our customers through localized, high frequency deliveries which allows them to reduce their inventory through higher inventory turnover and just-in-time inventory, and to reduce waste, especially in fresh products.
We have an extensive reach to our customers through localized, high frequency deliveries which allows them to reduce their inventory through higher inventory turnover and just-in-time inventory, and to reduce waste, especially in fresh products. Our temperature-controlled trucks deliver both short and medium distance routes daily to ensure on-time delivery and to achieve high fill rates to our customers.
Our temperature-controlled trucks deliver both short and medium distance routes daily to ensure on-time delivery and to achieve high fill rates to our customers. 4 Our Strategy We are differentiated from mainstream food distribution companies, such as Sysco Corporation, US Foods Holding Corp. and Performance Food Group Company, through our strong understanding of Asian culture and cooking essentials, distinctive product portfolio, and resourceful supply chains.
Our Strategy We are differentiated from mainstream food distribution companies, such as Sysco Corporation, US Foods Holding Corp. and Performance Food Group Company, through our strong understanding of Asian culture and cooking essentials, distinctive product portfolio, and resourceful supply chains.
Customs and Border Protection, which is a part of the Department of Homeland Security. 9 Information about our Executive Officers Name Age Position Xiao Mou Zhang 51 Chief Executive Officer Xi Lin 35 President and Chief Operating Officer Carlos Rodriguez 50 Chief Financial Officer Christine Chang 41 General Counsel and Chief Compliance Officer Xiao Mou Zhang (aka Peter Zhang) has served as Co-Chief Executive Officer and director since November 4, 2019 following the merger between HF Foods and B&R Global Holdings Inc.
Information about our Executive Officers as of December 31, 2024 Name Age Position Xiao Mou Zhang 52 Former Chief Executive Officer Xi Lin 36 Chief Executive Officer, President and Chief Operating Officer Cindy Yao 57 Chief Financial Officer Christine Chang 42 General Counsel and Chief Compliance Officer Xiao Mou Zhang (aka Peter Zhang) served as Co-Chief Executive Officer and Director since November 4, 2019 following the merger between HF Foods and B&R Global Holdings Inc.
Rodriguez holds a Bachelor’s degree in Accounting and a Master’s of Business Administration degree from the University of Southern California and is also a Certified Public Accountant in the State of California. Christine Chang has served as General Counsel and Chief Compliance Officer since September 8, 2021. Ms.
Yao holds a Master’s degree in Accounting from the Virginia Polytechnic Institute and State University and an Executive Master’s degree in Business Administration from the Simon Business School of the University of Rochester. Christine Chang has served as General Counsel and Chief Compliance Officer since September 8, 2021. Ms.
We are required to comply, and it is our policy to comply, with all applicable laws in the numerous jurisdictions in which we do business. As a marketer and distributor of food products in the U.S., we are subject to the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the U.S. Food and Drug Administration (the "FDA").
As a marketer and distributor of food products in the U.S., we are subject to the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by the U.S. Food and Drug Administration (the “FDA”).
On January 17, 2020, we acquired 100% equity membership interest in nine subsidiaries under B&R Group Realty Holding, LLC ("BRGR"), which owned warehouse facilities that were being leased to B&R Global for its operations in California, Arizona, Utah, Colorado, Washington, and Montana. 3 On December 30, 2021, HF Foods acquired substantially all of the assets of leading seafood suppliers Great Wall Seafood Supply, Inc., a Texas corporation, Great Wall Restaurant Supplier, Inc., an Ohio corporation, and First Mart Inc., an Illinois corporation (collectively the "Great Wall Group").
On January 17, 2020, we acquired 100% equity membership interest in nine subsidiaries under B&R Group Realty Holding, LLC (“BRGR”), which owned warehouse facilities that were being leased to B&R Global for its operations in California, Arizona, Utah, Colorado, Washington, and Montana.
These services are complemented by our domestic sales teams who make regular on-site visits to customers’ restaurants.
Full sales support from the beginning of a sales order to post-sales service is offered through these call centers. These services are complemented by our domestic sales teams who make regular on-site visits to customers’ restaurants.
Chinese cuisine requires unique cooking techniques such as steaming and stir-frying in a Chinese wok, and requires specialty ingredients and vegetables such as bitter melons, Chinese yams, vine spinach, Chinese cabbage and winter melon.
Asian cuisine requires unique cooking techniques such as steaming and stir-frying in a wok, and requires specialty ingredients and vegetables such as bitter melons, Asian yams, vine spinach, napa cabbage and winter melon. It also requires special seasonings and spices, including peanut oil, cooking wine, vinegar, dark soy source, black bean sauce, pepper oil and chili oil.
None of our suppliers accounted for more than 10% of our aggregate purchases during the years ended December 31, 2023 and 2022.
Products that are ordered through import brokers have lead times of up to seven days. None of our suppliers accounted for more than 10% of our aggregate purchases during the years ended December 31, 2024 and 2023.
A large purchase volume and a centralized procurement process also allowed B&R Global favorable negotiating power with vendors that source high quality products at lower prices than many competitors. Xi Lin (aka Felix Lin) was appointed to serve as President effective February 12, 2024 and has served as Chief Operating Officer since May 1, 2022. Mr.
A large purchase volume and a centralized procurement process also allowed B&R Global favorable negotiating power with vendors that source high quality products at lower prices than many competitors. On October 24, 2024, the Board of Directors of HF Foods terminated Xiao Mou (Peter) Zhang as chief executive officer of the Company, without cause, effective immediately. Mr.
Capitalizing on our deep understanding of the Chinese culture, with over 1,000 employees and subcontractors, and supported by two outsourced call centers in China, we have become a trusted partner serving approximately 15,000 Asian restaurants providing sales and service support to customers who mainly converse in Mandarin or Chinese dialects.
Capitalizing on our deep understanding of Asian cultures, strong relationships with growers and suppliers of food products primarily in North America, South America and Asia, with over 1,000 employees, and supported by two outsourced call centers in China, we have become a trusted partner serving approximately 15,000 customer locations throughout the United States.
With 18 distribution centers and cross-docks and a fleet of over 400 refrigerated vehicles, our distribution network now spans 46 states covering approximately 95% of the contiguous United States.
HF Foods was formed through a merger between two complementary market leaders, HF Foods and B&R Global Holdings, Inc. (“B&R Global”), on November 4, 2019. With sixteen distribution centers and three cross-docks and a fleet of over 400 vehicles, our distribution network now spans 46 states covering approximately 95% of the contiguous United States.
Human Capital One of our primary areas of focus is to continue to strengthen our team by retaining, attracting, and hiring qualified top talent. This includes implementing the right organizational structure with a focus on growing capabilities through training and development of our talent.
Human Capital One of our primary strategic priorities is to continue to enhance the strength of our workforce by retaining, developing, attracting, and recruiting highly qualified and top-performing talent. This effort includes establishing an optimized organizational structure and prioritizing the development of our employees’ capabilities through targeted training and professional development initiatives.
It also requires Chinese and Asian seasonings and spices, including peanut oil, Chinese cooking wine, vinegar, dark soy source, black bean sauce, pepper oil and chili oil. Most of the unique ingredients for Chinese cuisine are staple supplies of HF Foods that are not widely available from mainstream U.S. suppliers.
Most of the unique ingredients for Asian cuisine are staple supplies of HF Foods that are not widely available from mainstream U.S. suppliers. Current Industry Landscape and Opportunities Growing Demand in Asian Cuisines . The demand for Asian cuisines continues to grow in the U.S.
The owners and workers in these Chinese restaurants usually speak Mandarin or other regional dialects of the Chinese language. We believe that understanding their culture and language is paramount to facilitating efficient communications and building trust with customers. Close-Knit Chinese American Community .
We believe that understanding their culture and language is paramount to facilitating efficient communications and building trust with customers. Unique Cooking Style and Ingredients for Asian Cuisines .
ITEM 1. BUSINESS. Overview HF Foods Group Inc., operating through our subsidiaries, is a leading foodservice distributor to Asian restaurants, primarily Chinese restaurants located throughout the United States. HF Foods was formed through a merger between two complementary market leaders, HF Foods and B&R Global Holdings, Inc. ("B&R Global"), on November 4, 2019.
ITEM 1. BUSINESS. Overview HF Foods Group Inc., headquartered in Las Vegas, Nevada, operating through our subsidiaries (collectively “HF Foods” or the “Company”) is a leading marketer and distributor of fresh produce, frozen and dry food, and non-food products to Asian restaurants, as well as other foodservice customers, throughout the United States.
We believe one of the key factors of our success is the commitment and loyalty of our workforce. All of our general managers and distribution level management team have been with the business since our inception.
We attribute a significant portion of our success to the dedication and loyalty of our workforce. Notably, all general managers and distribution-level management personnel have been with the company since its inception. Their comprehensive understanding of our business operations, coupled with the strong relationships they maintain with frontline employees, has contributed to our ability to operate as a union-free organization.
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Our long-term relationships and vast distribution network enable our increased negotiating power given the large quantities, thereby improving our inventory turnover and accounts payable, and reducing our operating costs. Instead of going to fragmented direct store distributors to source their products, customers are consolidating their vendors into our full service, one-stop-shop for most of their purchasing needs.
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On December 30, 2021, HF Foods acquired substantially all of the assets of leading seafood suppliers Great Wall Seafood Supply, Inc., a Texas corporation, Great Wall Restaurant Supplier, Inc., an Ohio corporation, and First Mart Inc., an Illinois corporation (collectively the “Great Wall Group”).
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Primarily Serving Non-Chinese Americans . There are tens of thousands of Chinese and Asian restaurants spread throughout the U.S., primarily serving non-Chinese American customers.
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This strategic approach enhances inventory turnover, optimizes accounts payable, and lowers operating costs. This gives customers the ability to shift away from fragmented direct-stores and turn to us as their full-service, one-stop solution for the majority of their purchasing needs.
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First or second generation Chinese Americans living in the U.S. inherit their traditional cultural values, and ethnic languages, and our experience has been that people in these communities prefer to do business with Chinese Americans that speak their language and share their values. 5 Unique Cooking Style and Ingredients for Chinese Cuisines .
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As of December 31, 2024, we had 1,015 full-time employees, 26 part-time employees and 33 temporary employees through staffing agencies. We offer attractive compensation and benefit packages, and we believe our relationship with our employees is satisfactory.
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Current Industry Landscape and Opportunities Growing Demand in Asian Cuisines . The demand for Chinese and Asian cuisines continues to grow in the U.S. In addition, according to the Pew Research Center, the Asian population in the U.S. is the fastest growing population group in the country.
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Inclusion HF Foods was founded by Asian Americans, and throughout our history, we have continued to maintain inclusion as one of our top priorities by providing opportunities to all employees regardless of background. Four out of five members of our Board of Directors are Asian and three out of five are women.
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Department of Agriculture (“USDA”), the food away from home market grew to surpass spending on the food at home market. The foodservice industry declined sharply when COVID-19 restrictions adversely impacted restaurants’ operations and foot traffic.
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At the corporate level, over 50% of our director and above positions are held by women. Recent Developments CEO Transition On October 24, 2024, the Board of Directors of the Company terminated Xiao Mou (Peter) Zhang as Chief Executive Officer of the Company, without cause, effective immediately. In connection with Mr.
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Utilizing these outsourced call centers in China, customers embrace and appreciate our personal customer service conducted in their native Mandarin and other regional dialects such as Fuzhounese and Cantonese. 6 Full sales support from the beginning of a sales order to post-sales service is offered through these call centers.
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Zhang’s departure, the Company entered into a Severance Agreement and General Release (the “Severance Agreement”) with Mr. Zhang on November 21, 2024. Pursuant to the Severance Agreement, which includes a general release of claims by Mr. Zhang against the Company, Mr.
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Their deep understanding of the business and the strong relationships they maintain with front line employees enable us to be a union free workforce. 7 As of December 31, 2023, we have 1,049 total employees, which includes 925 permanent employees and 124 temporary employees.
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Zhang will be entitled to receive standard severance benefits provided to a Chief Executive Officer under the Company’s Amended and Restated Severance Plan. Mr. Zhang continues to serve as a Director on the Board of Directors.
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Compensation and Benefits We are committed to positively impacting the lives of our employees by offering competitive pay and affordable benefits. In 2023, we rolled out new benefit plan offerings along with education on those benefits in several language options to the employees.
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On October 24, 2024, Xi (Felix) Lin was appointed to serve as Interim Chief Executive Officer, effective immediately, and continued to serve as the Company’s Chief Operating Officer and President.
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In 2023, we implemented learning modules which allow for the assignment of specific learning to employees based on role, compliance, and leadership development. We continue to transform our operations through new system and process improvements, training and development. Diversity and Inclusion HF Foods was founded by Asian Americans.
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On December 17, 2024, the Board of Directors of HF Foods appointed Felix Lin to serve as the Company’s Chief Executive Officer and President, effective January 1, 2025. 6 Credit Facility Amended On February 12, 2025, the Company and certain of its subsidiaries (collectively with the Company, the “Borrowers”) entered into that certain Joinder and Amendment No. 4 to Third Amended and Restated Credit Agreement (the “Amendment”) with the lenders party thereto (the “Lenders”) and JPMorgan Chase Bank, N.A., a national banking association, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).
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Building a successful business based on diversity and inclusion has been part of our DNA since our inception. Throughout our history, we have continued to maintain diversity and inclusion as one of our top priorities. 99% of our total workforce is made up of Hispanic, Black or African American, and Asian employees.
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The Amendment amends the Third Amended and Restated Credit Agreement, dated as of March 31, 2022, by and among the Borrowers, the other loan parties thereto, the Lenders party thereto and the Administrative Agent (as amended, supplemented or otherwise modified, the “Credit Agreement”).
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In recent years, we have strengthened our commitment to diversity and inclusion. Three out of five members of our Board of Directors are Asian and two out of five are women. At the corporate level, nearly 50% of our director and above positions are held by women. Government Regulation Legal compliance is important to our operations.
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The Amendment amends certain terms and conditions of the Credit Agreement by, among other things, (i) increasing the Aggregate Revolving Commitment (as defined in the Credit Agreement) from $100,000,000 to $125,000,000, (ii) joining three new subsidiaries of the Company to the Credit Agreement, each as a “Borrower” thereunder, (iii) joining Wells Fargo Bank, N.A. to the Credit Agreement as a “Lender” thereunder, (iv) amending certain affirmative covenants commensurate with the increase in the Aggregate Revolving Commitment, and (v) amending certain restrictions regarding incurring obligations under real property leases and equipment financings in the ordinary course of business.
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Carlos Rodriguez has served as Chief Financial Officer since August 1, 2022. Mr. Rodriguez brings more than 25 years of finance and accounting experience across various industries, including technology, entertainment, restaurants, and life science. Most recently, Mr. Rodriguez served as Chief Accounting Officer and Vice President Corporate Finance for Generate Life Sciences, Inc., a $300 million high growth company.
Added
Government Regulation Legal compliance is important to our operations. We are required to comply, and it is our policy to comply, with all applicable laws in the numerous jurisdictions in which we do business.
Removed
In that role, he led Accounting, Finance, Financial Reporting, Treasury/Cash Management, Strategic and Financial Planning, M&A Due Diligence, and other financial responsibilities. Prior to Generate Life Sciences, Mr. Rodriguez served as Vice President of Accounting and Corporate Finance for California Pizza Kitchen, Inc. Mr.
Added
The FSMA also imposes new requirements for food products imported into the U.S. and provides the FDA with mandatory recall authority.
Added
Additionally, the new U.S. administration has called for substantial changes to foreign trade policy. Significant new restrictions and tariffs on foreign trade could have a negative impact on our business and could increase the cost of sourcing products and certain equipment and other materials used in our operations that we procure from outside the U.S.
Added
Zhang’s termination was not due to any disagreement with the Company regarding its financial reporting, policies or practices. Mr. Zhang continues to serve as a director on our Board of Directors. Xi Lin (aka Felix Lin) was appointed to serve as Chief Executive Officer, effective January 1, 2025, and has served as President since February 12, 2024.
Added
Cindy Yao has served as Chief Financial Officer since May 1, 2024. Ms. Yao joins HF Foods with over three decades of Finance and Accounting leadership experience. For the past 10 years, Ms.
Added
Yao served as Chief Financial Officer and Executive Vice President for Markel Food Group, a company providing high-quality, innovative automated process solutions, consulting services and technical support to food producers. Prior to that, from 2002 to 2013, Ms.
Added
Yao served as Vice President and Corporate Treasurer for Bausch + Lomb Corporation (NYSE: BLCO), an eye health company with $4.8 billion in annual revenue. Ms. Yao also served in various Finance and Accounting leadership roles with Corning Incorporated (NYSE: GLW), Eastman Kodak Company (NYSE: KODK), and Coopers & Lybrand LLP, (now part of PwC) prior to 2002. Ms.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

56 edited+34 added−83 removed73 unchanged
Biggest changeOur inability to obtain adequate supplies of food items and related products as a result of any of the foregoing factors or otherwise could mean that we are unable to fulfill our obligations to customers, and customers may turn to other distributors.
Biggest changeAccordingly, if we are unable to obtain the specialty food products, produce, meat, poultry or seafood that comprise a significant percentage of our product portfolio in a timely manner and in the quantities and at the prices we request as a result of any of the foregoing factors or otherwise, we may be unable to fulfill our obligations to customers who may, as a result of any such failure, resort to other distributors for their food product needs or change the types of products they buy from us to products that are less profitable for us.
Future economic conditions affecting disposable consumer income, such as employment levels, business conditions, changes in housing market conditions, the availability of consumer credit, inflation, interest rates, tax rates and fuel and energy costs, could reduce overall consumer spending. 11 • Food cost and fuel cost inflation experienced by consumers can lead to reductions in the frequency of and the amount spent by consumers for food away from home purchases, which could negatively impact our business by reducing demand for our products. • Heightened uncertainty in the financial markets negatively affects consumer confidence and discretionary spending, which can cause disruptions with our customers and suppliers. • Liquidity issues and the inability of our customers to consistently access credit markets to obtain cash to support their operations can cause temporary interruptions in our ability to conduct day-to-day transactions involving the collection of funds from such customers. • Liquidity issues and the inability of suppliers to consistently access credit markets to obtain cash to support their operations can cause temporary interruptions in our ability to obtain the foodservice products and supplies needed by us in the quantities and at the prices requested.
Future economic conditions affecting disposable consumer income, such as employment levels, business conditions, changes in housing market conditions, the availability of consumer credit, inflation, interest rates, tax rates and fuel and energy costs, could reduce overall consumer spending. • Food cost and fuel cost inflation experienced by consumers can lead to reductions in the frequency of and the amount spent by consumers for food away from home purchases, which could negatively impact our business by reducing demand for our products. • Heightened uncertainty in the financial markets negatively affects consumer confidence and discretionary spending, which can cause disruptions with our customers and suppliers. • Liquidity issues and the inability of our customers to consistently access credit markets to obtain cash to support their operations can cause temporary interruptions in our ability to conduct day-to-day transactions involving the collection of funds from such customers. 10 • Liquidity issues and the inability of suppliers to consistently access credit markets to obtain cash to support their operations can cause temporary interruptions in our ability to obtain the foodservice products and supplies needed by us in the quantities and at the prices requested.
Competition may increase in the future, which may adversely impact our margins and ability to retain customers, and make it difficult to maintain our market share, growth rate and profitability. The foodservice distribution industry, as a whole, in the U.S. is fragmented and highly competitive, with local, regional, multi-regional distributors, and specialty competitors.
Competition may increase in the future, which may adversely impact our margins and ability to retain customers, and make it difficult to maintain our market share, growth rate and profitability. The foodservice distribution industry, as a whole, in the U.S. is fragmented and highly competitive, with local, regional, multi-regional and national distributors, and specialty competitors.
In addition, in April 2023, we implemented a stockholder rights plan (the Rights Agreement), also called a “poison pill,” that may have the effect of discouraging or preventing a change of control by, among other things, making it uneconomical for a third party to acquire us without the consent of our board of directors.
In addition, in April 2023, we implemented a stockholder rights plan, also called a “poison pill,” that may have the effect of discouraging or preventing a change of control by, among other things, making it uneconomical for a third party to acquire us without the consent of our board of directors.
If more competitors enter this market segment aiming to serve Chinese/Asian restaurants in the future, our operating results may be negatively impacted through a loss of sales, reduction in margins from competitive price changes, and/or greater operating costs, such as marketing costs, due to the increase of competition.
If more competitors enter this market segment aiming to serve Asian restaurants in the future, our operating results may be negatively impacted through a loss of sales, reduction in margins from competitive price changes, and/or greater operating costs, such as marketing costs, due to the increase of competition.
In addition, we believe that the market participants serving Chinese restaurants are also highly fragmented. Currently, we face competition from smaller and/or dispersed competitors focusing on the niche market serving Chinese/Asian restaurants, especially Chinese takeout restaurants. However, with the growing demand for Chinese cuisines, others are operating, or may begin operating in this niche market in the future.
In addition, we believe that the market participants serving Asian restaurants are also highly fragmented. Currently, we face competition from smaller and/or dispersed competitors focusing on the niche market serving Asian restaurants, especially takeout restaurants. However, with the growing demand for Asian cuisines, others are operating, or may begin operating in this niche market in the future.
Further, the appearance of conflicts of interest created by related-party transactions could impair the confidence of our investors. Our Special Transactions Review Committee regularly reviews these transactions. Notwithstanding this, it is possible that a conflict of interest could have an adverse effect on our business, financial condition and results of operations.
The appearance of conflicts of interest created by related-party transactions could impair the confidence of our investors. Our Special Transactions Review Committee regularly reviews these transactions. Notwithstanding this, it is possible that a conflict of interest could have an adverse effect on our business, financial condition and results of operations.
Our financial performance could be materially harmed as a result of any of these factors. Potential labor disputes with employees and increases in labor costs could adversely affect our business. A considerable amount of our operating costs are attributable to labor costs and, therefore, our financial performance is greatly influenced by increases in wage and benefit costs.
Our financial performance could be materially harmed as a result of any of these factors. 14 Potential labor disputes with employees and increases in labor costs could adversely affect our business. A considerable amount of our operating costs are attributable to labor costs and, therefore, our financial performance is greatly influenced by increases in wage and benefit costs.
Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt. 23 Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors.
Anti-takeover provisions contained in our amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt. Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions which could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors.
A significant cybersecurity incident could affect our data framework or cause a failure to protect the personal information of our customers, suppliers or employees, or sensitive and confidential information regarding our business and could give rise to legal liability and regulatory action under data protection and privacy laws.
A significant cybersecurity incident could affect our data framework or cause a failure to protect the personal information of our customers, suppliers or employees, or sensitive and confidential information regarding our business and could give rise to legal 12 liability and regulatory action under data protection and privacy laws.
The loss of a number of customers could adversely affect our business, financial condition, and results of operations. 13 We rely on technology in our business and any cybersecurity incident, other technology disruption or delay in implementing new technology could negatively affect our business and our relationships with customers.
The loss of a number of customers could adversely affect our business, financial condition, and results of operations. We rely on technology in our business and any cybersecurity incident, other technology disruption or delay in implementing new technology could negatively affect our business and our relationships with customers.
Even though they currently offer only a limited selection of Chinese and Asian specialty foods, they may be able to devote greater resources to sourcing, promoting and selling their products if they choose to do so.
Even though they currently offer only a limited selection of Asian specialty foods, they may be able to devote greater resources to sourcing, promoting and selling their products if they choose to do so.
In addition, our existing operations are solely in the U.S. The geographic concentration of our operations creates an exposure to economic conditions in the U.S. and any financial downturn in the U.S. could materially adversely affect our financial condition and results of operations.
In addition, our existing distribution operations are solely in the U.S. The geographic concentration of our operations creates an exposure to economic conditions in the U.S. and any financial downturn in the U.S. could materially adversely affect our financial condition and results of operations.
Such acquisitions also involve numerous operational risks, including: • difficulties in integrating operations, technologies, services and personnel; • the diversion of financial and management resources from existing operations; • the risk of entering new markets; 21 • the potential loss of existing or acquired strategic operating partners following an acquisition; • the potential loss of key employees following an acquisition and the associated risk of competitive efforts from such departed personnel; • possible legal disputes with the acquired company following an acquisition; and • the inability to generate sufficient revenue to offset acquisition or investment costs.
Such acquisitions also involve numerous operational risks, including: • difficulties in integrating operations, technologies, services and personnel; 17 • the diversion of financial and management resources from existing operations; • the risk of entering new markets; • the potential loss of existing or acquired strategic operating partners following an acquisition; • the potential loss of key employees following an acquisition and the associated risk of competitive efforts from such departed personnel; • possible legal disputes with the acquired company following an acquisition; and • the inability to generate sufficient revenue to offset acquisition or investment costs.
Our management has concluded that (1) our internal controls over financial reporting were not effective as of December 31, 2023, (2) there existed material weaknesses in our internal control over financial reporting as of December 31, 2023, and (3) our disclosure controls and procedures were not effective as of December 31, 2023.
Our management has concluded that (1) our internal controls over financial reporting were not effective as of December 31, 2024, (2) there existed material weaknesses in our internal control over financial reporting as of December 31, 2024, and (3) our disclosure controls and procedures were not effective as of December 31, 2024.
Changes in consumer eating habits could materially and adversely affect our business, financial condition, and results of operations. We provide foodservice distribution to Chinese/Asian restaurants, primarily Chinese takeout restaurants, which focus on serving Chinese food to non-Chinese Americans.
Changes in consumer eating habits could materially and adversely affect our business, financial condition, and results of operations. We provide foodservice distribution to Asian restaurants, primarily takeout restaurants, which focus on serving Asian food to American families.
We believe that our intellectual property has substantial value and has contributed significantly to the success of our business. In particular, our “HF” logo trademarks and our trade names including “Han Feng,” "Rong Cheng" and "Great Wall," are valuable assets that reinforce our customers’ favorable perception of our products.
We believe that our intellectual property has substantial value and has contributed significantly to the success of our business. In particular, our “HF” logo trademarks and our trade names including “Han Feng,” “Rong Cheng” and “Great Wall,” are valuable assets that reinforce our customers’ favorable perception of our products.
Even when not merited, the defense of these lawsuits or legal proceedings, including potential securities litigation and/or other legal actions, is expensive and may divert management’s attention, and we may incur significant expenses in defending these lawsuits or legal proceedings.
Legal Proceedings to this Form 10-K. 15 Even when not merited, the defense of these lawsuits or legal proceedings, including potential securities litigation and/or other legal actions, is expensive and may divert management’s attention, and we may incur significant expenses in defending these lawsuits or legal proceedings.
The foodservice distribution industry is labor intensive. Our success depends in part upon our ability to attract, train and retain a sufficient number of employees who understand and appreciate our culture and are able to represent our brand effectively and establish credibility with our business partners and customers.
Our success depends in part upon our ability to attract, train and retain a sufficient number of employees who understand and appreciate our culture and are able to represent our brand effectively and establish credibility with our business partners and customers.
Periods of significant product cost inflation or deflation may adversely affect our results of operations if we are unable to pass on all or a portion of such product cost increases to our customers in a timely manner.
Volatile food costs have a direct impact on our industry. Periods of significant product cost inflation or deflation may adversely affect our results of operations if we are unable to pass on all or a portion of such product cost increases to our customers in a timely manner.
Please refer to the discussion of these conclusions below, under Item 9A. “Controls and Procedures” of this Annual Report on Form 10-K.
Refer to the discussion of these conclusions below, under Item 9A. Controls and Procedures of this Annual Report on Form 10-K.
Rising interest rates may cause credit market dislocations which can impact funding costs. Additionally, our borrowings bear interest at variable rates and expose us to interest rate risk. Although we monitor and manage this exposure, changes in interest rates cannot always be predicted, hedged, or offset with price increases to eliminate earnings volatility.
Additionally, our borrowings bear interest at variable rates and expose us to interest rate risk. Although we monitor and manage this exposure, changes in interest rates cannot always be predicted, hedged, or offset with price increases to eliminate earnings volatility.
These executives have been primarily responsible for determining the strategic direction of our business and for executing our growth strategy and are integral to our brand and culture, and our reputation with suppliers and consumers.
Our senior management, directors and other key personnel have been primarily responsible for determining the strategic direction of our business and for executing our growth strategy, and are integral to our brand, culture and reputation with suppliers and consumers.
In addition, periods of rapidly increasing inflation may adversely affect our business due to the impact of such inflation on discretionary spending by consumers and our limited ability to increase prices in the current, highly competitive environment.
In addition, periods of rapidly increasing inflation may adversely affect our business due to the impact of such inflation on discretionary spending by consumers and our limited ability to increase prices in the current, highly competitive environment. Changes to U.S. trade policy, tariff and import/export regulations may adversely affect our operating results.
These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from our assessments and estimates.
These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from our assessments and estimates. For more information related to our litigation and regulatory proceedings, see Part I, Item 3.
Any or all of these factors and conditions could negatively impact our growth and profitability. Failure to retain our senior management and other key personnel may adversely affect our operations. Our success is substantially dependent on the continued service of our senior management and other key personnel.
Any or all of these factors and conditions could negatively impact our growth and profitability. Turnover among our senior management, directors and other key personnel may create uncertainty and adversely affect our operations. Our success is substantially dependent on our senior management, directors and other key personnel.
Such a shortage would also likely lead to higher wages for employees (or higher costs to purchase the services of such third parties) and a corresponding reduction in our results of operations. Unfavorable macroeconomic conditions in the U.S. may adversely affect our business, financial condition and results of operations.
Such a shortage would also likely lead to higher wages for employees (or higher costs to purchase the services of such third parties) and a corresponding reduction in our results of operations.
Our operating results are substantially affected by the operating and economic conditions in the regions in which we operate. Economic conditions can affect us in the following ways: • A reduction in discretionary spending by consumers could adversely impact sales of Chinese/Asian restaurants, and their purchases from us.
Economic conditions can affect us in the following ways: • A reduction in discretionary spending by consumers could adversely impact sales of Asian restaurants, and their purchases from us.
Any one of these occurrences may have a material adverse effect on our business, results of operations and financial condition. 15 If we are unable to renew or replace our current leases on favorable terms, or any of our current leases are terminated prior to expiration of their stated terms, and we cannot find suitable alternate locations, our operations and profitability could be negatively impacted.
If we are unable to renew or replace our current leases on favorable terms, or any of our current leases are terminated prior to expiration of their stated terms, and we cannot find suitable alternate locations, our operations and profitability could be negatively impacted.
We may be required to record a significant charge in our consolidated financial statements during the period in which any impairment of our goodwill, amortizable intangible assets, or other long-lived assets is determined, which would negatively affect our results of operations. 19 Impairment analysis requires significant judgment by management and the fair value of goodwill, amortizable intangible assets or other long-lived assets are sensitive to changes in key assumptions used in the projected cash flows, which include forecasted revenues and perpetual growth rates, among others, as well as current market conditions in both the United States and globally.
Impairment analysis requires significant judgment by management and the fair value of goodwill, amortizable intangible assets or other long-lived assets are sensitive to changes in key assumptions used in the projected cash flows, which include forecasted revenues and perpetual growth rates, among others, as well as current market conditions in both the United States and globally.
Such proceedings may be protracted with no certainty of success, and an adverse outcome could subject us to liability, force us to cease use of certain trademarks or other intellectual property or force us to enter into licenses with others.
Such proceedings may be protracted with no certainty of success, and an adverse outcome could subject us to liability, force us to cease use of certain trademarks or other intellectual property or force us to enter into licenses with others. Any one of these occurrences may have a material adverse effect on our business, results of operations and financial condition.
Any work stoppages or labor disturbances as a result of employee dissatisfaction with their current employment terms could have a material adverse effect on our financial condition, results of operations and cash flows.
Any work stoppages or labor disturbances as a result of employee dissatisfaction with their current employment terms could have a material adverse effect on our financial condition, results of operations and cash flows. We also expect that in the event of a work stoppage or labor disturbance, we could incur additional costs and face increased competition.
There can be no assurance that we will be able to identify, acquire or profitably manage businesses or successfully integrate our acquired businesses without substantial costs, delays or other operational or financial problems.
A core component of our business plan is to acquire businesses and assets in the food distribution industry. There can be no assurance that we will be able to identify, acquire or profitably manage businesses or successfully integrate our acquired businesses without substantial costs, delays or other operational or financial problems.
Further, the possibility that Mr. Ni may sell all or a large portion of his common stock in a short period of time could adversely affect the trading price of our common stock. The interests of Mr. Ni may not align with the interests of other holders of our common stock. Mr.
The Cooperation Agreement is limited to Despite the settlement with the SEC and the Cooperation Agreement, the possibility that Mr. Ni may sell all or a large portion of his common stock in a short period of time could adversely affect the trading price of our common stock. Further, upon the expiration of the Cooperation Period, the interests of Mr.
Legal Proceedings to this Form 10-K for more information. We evaluate these claims and proceedings to assess the likelihood of unfavorable outcomes and to estimate, if probable and estimable, the amount of potential losses. Based on these assessments and estimates, we may establish reserves, as appropriate.
From time to time, we may be party to various claims and legal proceedings, as well as governmental and regulatory investigations and proceedings. We evaluate these claims and proceedings to assess the likelihood of unfavorable outcomes and to estimate, if probable and estimable, the amount of potential losses. Based on these assessments and estimates, we may establish reserves, as appropriate.
The conflict in Ukraine led to a significant increase in fuel prices. If fuel costs remain elevated or increase further in the future, we may experience difficulties in passing all or a portion of these costs along to our customers, which may have a negative impact on our results of operations.
If fuel costs remain elevated or increase further in the future, we may experience difficulties in passing all or a portion of these costs along to our customers, which may have a negative impact on our results of operations. We rely on third-party suppliers, and our business may be affected by interruption of supplies or increases in product costs.
Some of these changes may increase our obligations for compliance and oversight, which could subject us to additional costs and make our hiring process more cumbersome or reduce the availability of potential employees.
Federal and state governments from time to time implement immigration laws, regulations or programs that regulate our ability to attract or retain qualified foreign employees. Some of these changes may increase our obligations for compliance and oversight, which could subject us to additional costs and make our hiring process more cumbersome or reduce the availability of potential employees.
To the extent that business conditions may deteriorate, or if changes in key assumptions and estimates differ significantly from management’s expectations, it may be necessary to record impairment charges, which could be material.
To the extent that business conditions may deteriorate, or if changes in key assumptions and estimates differ significantly from management’s expectations, it may be necessary to record impairment charges, which could be material. The Company completed its most recent annual impairment assessment for goodwill as of the last day of the fourth quarter of fiscal year 2024.
We also expect that in the event of a work stoppage or labor disturbance, we could incur additional costs and face increased competition. 16 If we fail to comply with requirements imposed by applicable law and other governmental regulations, we could become subject to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.
If we fail to comply with requirements imposed by applicable law and other governmental regulations, we could become subject to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.
We may determine to increase our sales prices in order to pass these increased costs to our customers. In the event we determine to take such action, our customers may reduce their orders from us, which could negatively affect our profitability and operating results.
In the event we determine to take such action, our customers may reduce their orders from us, which could negatively affect our business, profitability and operating results. We are closely monitoring these developments and evaluating strategies to mitigate potential impacts.
An increase in interest rates could adversely affect our cash flow and financial condition. Central bank policy interest rates continued to increase in 2023. Rising interest rates could have a dampening effect on overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect customer demand for our products and industry demand generally.
Rising interest rates could have a dampening effect on overall economic activity and/or the financial condition of our customers, either or both of which could negatively affect customer demand for our products and industry demand generally. Rising interest rates may cause credit market dislocations which can impact funding costs.
The Company’s former Chairman and Co-CEO Zhou Min Ni, directly and indirectly through the trustee of the trusts established for the benefit of his family, beneficially owns approximately 22% of our common stock. As a result, Mr. Ni has sufficient voting power to significantly influence matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions.
Zhou Min Ni has significant influence over the Company and may have interests that conflict with those of our other shareholders. The Company’s former Chairman and Co-CEO Zhou Min Ni, directly and indirectly through the trustee of the trusts established for the benefit of his family, beneficially owns approximately 22% of our common stock. As a result, Mr.
If we do not have adequate insurance or contractual indemnification available, product liability relating to defective products could materially adversely affect our results of operations and financial condition. We may incur significant costs to comply with environmental laws and regulations, and we may be subject to substantial fines, penalties and/or third-party claims for non-compliance.
If we do not have adequate insurance or contractual indemnification available, product liability relating to defective products could materially adversely affect our results of operations and financial condition. Litigation may materially adversely affect our business, financial condition and results of operations.
In addition, recruiting talent for our management team may increase operational costs substantially and may require longer hiring periods than ordinary employees. 22 We have identified material weaknesses in our internal control over financial reporting, which could affect our ability to ensure timely and reliable financial reports, affect the ability of our auditors to attest to the effectiveness of our internal controls, and weaken investor confidence in our financial reporting.
Risk Factors Relating to our Common Stock We have identified material weaknesses in our internal control over financial reporting, which could affect our ability to ensure timely and reliable financial reports, affect the ability of our auditors to attest to the effectiveness of our internal controls, and weaken investor confidence in our financial reporting.
As a result, if we fail to properly evaluate and execute any acquisitions or investments, our business and prospects may be seriously harmed. Risk Factors Relating to our Common Stock A trading market for our common stock may not be sustained and our common stock prices could decline.
As a result, if we fail to properly evaluate and execute any acquisitions or investments, our business and prospects may be adversely affected.
ITEM 1A. RISK FACTORS. The following are significant factors known to us that could materially adversely affect our business, reputation, operating results, industry, financial position and/or future financial performance. The risks set forth in this Section 1A are presented as of December 31, 2023 and the period then ended.
ITEM 1A. RISK FACTORS. The following are significant factors known to us that could materially adversely affect our business, reputation, operating results, industry, financial position and/or future financial performance. This information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes contained in this report.
The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could negatively impact our financial position, cash flows or results of operations. Increased commodity prices and availability may impact profitability.
The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us. While we maintain insurance, insurance coverage may not be adequate, and the cost to defend against future litigation may be significant.
We may experience difficulties in integrating the operations, personnel and assets of acquired businesses that may disrupt our business, dilute stockholder value and adversely affect our operating results. A core component of our business plan is to acquire businesses and assets in the food distribution industry.
There could be circumstances in which our ability to obtain additional debt financing could be constrained if we are unable to secure such consent. We may experience difficulties in integrating the operations, personnel and assets of acquired businesses that may disrupt our business, dilute stockholder value and adversely affect our operating results.
Ni’s significant beneficial ownership may also adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise. We do not currently intend to pay dividends on our common stock and, consequently, investors’ ability to achieve a return on investment will depend on appreciation in the price of our common stock.
Ni may not align with the interests of other holders of our common stock, and he may vote against the Company’s interests. Mr. Ni’s significant beneficial ownership may also adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.
We cannot make any assurances regarding our ability to effectively respond to changes in consumer culture preference, health perceptions or resulting new laws or regulations or to adapt our product offerings to trends in eating habits. 14 We engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect on us.
Compliance with these laws and regulations, as well as others regarding the ingredients and nutritional content of food products, may be costly and time-consuming. We cannot make any assurances regarding our ability to effectively respond to changes in consumer culture preference, health perceptions or resulting new laws or regulations or to adapt our product offerings to trends in eating habits.
For more information on our related party transactions, see Note 13 - Related Party Transactions in our consolidated financial statements in this Annual Report on Form 10-K.
For more information on our related party transactions, see Note 13 - Related Party Transactions in our consolidated financial statements in this Annual Report on Form 10-K. 13 We may be unable to protect or maintain our intellectual property, which could result in customer confusion, a negative perception of our brand and adversely affect our business.
In addition, any such departure could be viewed in a negative light by investors and analysts, which may cause our stock price to decline. The loss of key employees could negatively affect our business. If we are unable to attract, train and retain employees, we may not be able to grow or successfully operate our business.
Any departure of senior management, directors and other key personnel could be viewed in a negative light by investors and analysts, which may cause our stock price to decline. Changes in and enforcement of immigration laws could increase our costs and adversely affect our ability to attract and retain qualified employees.
We may not be able to identify operating companies that complement our strategy, and even if we identify a company that does so, we may be unable to complete an acquisition of such a company for many reasons, including: • failure to agree on necessary terms, such as the purchase price; • incompatibility between our operational strategies and management philosophies with those of the potential acquiree; • competition from other acquirers of operating companies; • lack of sufficient capital to acquire a profitable company; and • unwillingness of a potential acquiree to work with our management. 20 Risks related to acquisition financing.
We may not be able to identify operating companies that complement our strategy, and even if we identify a company that does so, we may be unable to complete a successful acquisition of such a company. Risks related to acquisition financing.
The loss of the services of any of these executives and other key personnel could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all.
The loss of the services of any senior management, directors or other key personnel could have a material adverse effect on our business and prospects. We have recently appointed four new members to our board of directors as part of our continuous efforts to enhance our corporate governance and our future strategies and plans.
Although our purchasing volume can provide benefits when dealing with suppliers, suppliers may not provide the products and supplies needed by us in the quantities and at the prices requested. The cancellation of our supply arrangement with any of our suppliers or the disruption, delay and/or inability to supply the requested products by our suppliers could adversely affect our sales.
Although our purchasing volume can provide leverage when dealing with suppliers, particularly smaller suppliers for whom we may be their largest customer, suppliers may not provide or may be unable to provide the specialty food products, produce or center-of-the-plate products we need in the quantities and at the times and prices we request.
The Company completed its most recent annual impairment assessment for goodwill as of the last day of the fourth quarter of fiscal year 2023 with no impairments noted. Risk Factors Relating to our Acquisition Strategy Our continued growth depends on future acquisitions of other distributors or wholesalers and enlarging our customer base.
If, in future periods, the financial performance of the reporting unit does not meet forecasted expectations, or a prolonged further decline occurs in the market price of our common stock, it may cause a change in the results of the impairment assessment and, as such, could result in further impairment of goodwill. 16 Risk Factors Relating to our Acquisition Strategy Our continued growth depends on future acquisitions of other distributors or wholesalers and enlarging our customer base.
Removed
Volatile food costs have a direct impact on our industry. During 2023, we experienced significantly elevated commodity and supply chain costs including the cost of labor, sourced goods, energy, fuel and other inputs necessary for the distribution of our products, and elevated levels of inflation may continue or worsen.
Added
The following discussion of risks is not all inclusive, but is designed to highlight what we believe are the most significant factors to consider when evaluating our business. The risks set forth in this Section 1A are presented as of December 31, 2024 and the period then ended.
Removed
For example, the combination of deflation on chicken pricing and elevated direct labor costs with respect to our chicken processing business contributed to loss of revenue and gross profit margin in that product category.
Added
Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, development and investment in the territories or countries where we currently conduct our business, as well as any negative sentiment toward the U.S. as a result of such changes, could adversely affect our business.
Removed
Global health developments and economic uncertainty resulting from pandemics such as the COVID-19 pandemic, and governmental action related thereto, have adversely affected, and may continue to adversely affect, our business, financial condition and results of operations. Through early 2021, we saw the impact of COVID-19 in our operations, including significant decreases in sales.
Added
The U.S. has instituted or proposed changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher 9 tariffs on imports into the U.S., economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the U.S. and other countries where we conduct our business.
Removed
While COVID-19 did not significantly impact our operations in 2022 and 2023, the impact of pandemics may have an adverse impact on numerous aspects of our business, financial condition and results of operations including, our growth, product costs, supply chain disruptions, labor shortages, logistics constraints, customer demand for our products and industry demand generally, consumer spending, our liquidity, the price of our securities and trading markets with respect thereto, and the global economy and financial markets generally.
Added
As a result of policy changes and government proposals, there may be greater restrictions and economic disincentives on international trade. The new tariffs and other changes in U.S. trade policy could trigger retaliatory actions by affected countries, and foreign governments have instituted or are considering imposing trade sanctions on U.S. goods.
Removed
We cannot predict the duration of future pandemics or future governmental regulations or legislation that may be passed as a result of ongoing or future outbreaks.
Added
Such changes have the potential to adversely impact the U.S. economy or sectors thereof, our industry and the global demand for our products, and as a result, could have a negative impact on our business, financial condition and results of operations.
Removed
The impact of pandemics and the enactment of additional governmental regulations and restrictions may further adversely impact the global economy, the restaurant industry, and our business specifically, despite prior or future actions taken by us. A shortage of qualified labor could negatively affect our business and materially reduce earnings.
Added
If the U.S. continues to impose such tariffs, this may cause supply chain disruptions and could further escalate our costs. We may determine to increase our sales prices in order to pass these increased costs to our customers.
Removed
Disruption of relationships with vendors could negatively affect our business. Suppliers may increase product prices, which could increase our product costs. We purchase our food items and related products primarily from third-party suppliers.
Added
A shortage of qualified labor or an inability to attract, train or retain employees could negatively affect our business and materially reduce earnings. The foodservice distribution industry is labor intensive.
Removed
If our suppliers fail to comply with food safety or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. We cannot assure you that we would be able to find replacement suppliers on commercially reasonable terms. 12 In addition, we purchase seasonal Chinese vegetables and fruits from farms and other vendors.
Added
Unfavorable macroeconomic conditions in the U.S. may adversely affect our business, financial condition and results of operations. Our operating results are substantially affected by the operating and economic conditions in the regions in which we operate.
Removed
Increased frequency or duration of extreme weather conditions could impair production capabilities, disrupt our supply chain or impact demand for our products. Input costs could increase at any point in time for a large portion of the products that we sell for a prolonged period.
Added
We purchase our food items and related products primarily from third-party suppliers. Our profitability and operating margins are dependent upon, among other things, our ability to anticipate and react to any interruptions in our distribution network and changes to food costs and availability.
Removed
The purchase prices of our products vary from time to time, which is subject to market conditions and negotiation with our suppliers. The prices of some of our products, especially seasonal products, such as vegetables and fruits, have significant fluctuation.
Added
We generally do not enter into long-term contracts with our suppliers, whereby they would be committed to provide products to us for any appreciable duration of time.
Removed
We may not always be able to mitigate the impact of these price fluctuations, and our performance results could be adversely affected by such fluctuations.
Added
The cancellation of our supply arrangements with any of our suppliers or the disruption, delay and/or inability to supply the requested products by our suppliers could adversely affect our sales. Failure to identify an alternate source of supply for these items or comparable products on commercially reasonable terms that meet our customers’ expectations may result in significant cost increases.
Removed
As a foodservice distributor, it is necessary for us to maintain an inventory of products that may have declines in product pricing levels between the time we purchase the product from suppliers and the time we sell the product to customers, which could reduce the margin on that inventory, adversely affecting our results of operations.
Added
Moreover, we do not currently use financial instruments to hedge our risk exposure to market fluctuations in the price of food products.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur information security program is managed by a dedicated Head of Information Technology, who has over twenty years of experience in IT application management, infrastructure and security across a variety of industries including Financial Services, Defense Contracting, Manufacturing and Distribution, whose team is responsible for maintaining our enterprise-wide cybersecurity strategy, policies, standards, architecture and processes.
Biggest changeOur information security program is managed by our Senior Vice President of People and Technology, who has twenty-five years of experience in IT leadership across a variety of industries including manufacturing, distribution, defense, and financial services, whose team is responsible for maintaining our enterprise-wide cybersecurity strategy, policies, standards, architecture and processes.
The reports provided include updates on our cyber risks and threats, key updates to our information security systems and programs as well as the current threat environment.
The reports provided include updates on our cyber risks and threats, and key updates to our information security systems and programs as well as the current threat environment.
A significant cybersecurity incident may result from actions by our employees, suppliers, third-party administrators, or unknown third parties or through cyber-attacks and could affect our data framework or cause a failure to protect the personal information of our customers, suppliers or employees, or sensitive and confidential information regarding our business and could give rise to legal liability and regulatory action under data protection and privacy laws.
A significant cybersecurity incident may result from actions by our employees, suppliers, third-party administrators, or unknown third parties or through cyber-attacks and could affect our data framework or cause a failure to protect the personal information of our customers, suppliers or employees, or sensitive and confidential information regarding our business and 19 could give rise to legal liability and regulatory action under data protection and privacy laws.
To date, there have not been any cybersecurity threats or incidents that have materially affected, or are reasonably likely to materially affect, the Company, including its financial condition, results of operations, or business strategies. 24 Governance Our Board of Directors oversees our overall risk management strategy.
To date, there have not been any cybersecurity threats or incidents that have materially affected, or are reasonably likely to materially affect, the Company, including its financial condition, results of operations, or business strategies. Governance Our Board of Directors oversees our overall risk management strategy.
Our program is assessed both internally and externally by third parties, including our virtual Chief Information Security Officer (“vCISO”) partner. Our Head of Information Technology provides reports at least quarterly to our Audit Committee, as well as our Disclosure Committee, which comprises senior management and key stakeholders, as appropriate.
Our program is assessed both internally and externally by third parties, including our virtual Chief Information Security Officer (“vCISO”) partner. Our Senior Vice President of People and Technology provides reports at least quarterly to our Audit Committee, as well as our Disclosure Committee, which comprises senior management and key stakeholders, as appropriate.
Added
We also have processes in place to stay informed of and monitor prevention, detection, mitigation, and remediation of cybersecurity risks, including: • Any cybersecurity breach, unauthorized access, data loss, or ransomware attack must be immediately escalated to the Disclosure Committee, General Counsel, Internal Audit, and Audit Committee. • On a quarterly basis, the Disclosure Committee, in coordination with the SVP of People and Technology, Internal Audit, and vCISO, shall assess the Company’s cybersecurity risk exposure, including potential vulnerabilities in IT systems and data security.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Number of Facilities Total Square Feet Arizona 1 51,000 California 5 295,500 Colorado 1 53,000 Florida 1 136,200 Georgia 1 123,000 Illinois 1 135,000 North Carolina 2 236,000 Texas 2 65,000 Utah 2 81,000 Washington 1 65,000 Virginia 1 43,000 Totals 18 1,283,700 We lease our corporate headquarters located in Las Vegas, Nevada, consisting of approximately 5,000 square feet with a term of 6.5 years that began on March 17, 2021.
Biggest changeAdditionally, we own a 118,000 square foot distribution facility in North Carolina which we are preparing for operations to commence in 2025. 20 We lease our corporate headquarters located in Las Vegas, Nevada, consisting of approximately 5,000 square feet with a term of 6.5 years that began on March 17, 2021.
We also lease office space for a corporate location in Los Angeles, California. We believe that, in the aggregate, our real estate is suitable and adequate to serve the needs of our business.
We believe that, in the aggregate, our real estate is suitable and adequate to serve the needs of our business.
ITEM 2. PROPERTIES. As of the date of this report, we owned and/or operated eighteen distribution centers and cross-docks with a total of approximately 1.3 million square feet of warehouse space including approximately 400 thousand square feet of refrigerated storage utilizing a mix of leased (31%) and owned (69%) facilities for distribution, warehousing inventory, service and administrative functions.
ITEM 2. PROPERTIES. We operate sixteen distribution centers with a total of approximately 1.3 million square feet of warehouse space, including approximately 400,000 square feet of cold storage, for distribution, warehousing inventory, service and administrative functions.
Removed
The table below lists the aggregate square footage, by state for these operating facilities as of December 31, 2023.
Added
We own approximately 907,000 square feet of our distribution centers (or 71% of the total square feet), and the remainder (or 29% of the total square feet) is occupied under leasing arrangements. The following table sets forth the approximate aggregate square footage by state for these distribution facilities as of December 31, 2024.
Added
Location Number of Facilities Total Square Feet Arizona 1 68,000 California 4 351,000 Colorado 1 56,000 Florida 1 130,000 Georgia 1 100,000 Illinois 1 140,000 North Carolina 1 172,000 Texas 2 60,000 Utah 2 94,000 Washington 1 70,000 Virginia 1 44,000 Total 16 1,285,000 We also operate three cross-docks which are located in Nevada, Ohio and Oregon.
Added
We also lease office space for a corporate location in Los Angeles, California. The Company entered into a lease on September 30, 2024 for a new Atlanta, Georgia based distribution center which commenced on February 1, 2025 for a term of 10 years and five months, exclusive of renewal options.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAdverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against us that could adversely affect our ability to conduct our business.
Biggest changeAdverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against us that could adversely affect our ability to conduct our business. There also exists the possibility of a material adverse effect on our financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.
On October 13, 2023, the Company received a “Wells Notice” from the staff of the SEC (the “Wells Notice”) relating to the previously disclosed formal, non-public SEC investigation of allegations that the Company and certain of its current and former directors and officers violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements.
On October 13, 2023, the Company received a “Wells Notice” from the staff of the SEC (the “Wells Notice”) relating to the previously disclosed formal, non-public SEC investigation (the “SEC Investigation”) of allegations that the Company and certain of its current and former directors and officers violated the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and misleading statements.
Removed
There also exists the possibility of a material adverse effect on our financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable. 25 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.
Added
On June 6, 2024, the SEC announced that it had accepted an Offer of Settlement submitted by the Company in order to resolve the SEC Investigation.
Removed
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”).
Added
Under the settlement, without admitting or denying the SEC’s findings in this matter, the Company consented to the entry of an administrative civil cease-and-desist order by the SEC (the “Order”) with respect to violations of Sections 17(a) of the Securities Act, and of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934, as amended, and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13a-15(a), and 14a-9 thereunder, resulting from the materially false and misleading disclosures and other fraudulent conduct implemented by its former Chairman and Chief Executive Officer Zhou Min Ni and former Chief Financial Officer Jian Ming “Jonathan” Ni.
Removed
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.
Added
During the quarter ended June 30, 2024 the Company agreed to and paid a civil monetary penalty of $3.9 million, which was recorded in other income (expense), net in the Company’s condensed consolidated statements of operations and comprehensive income (loss).
Removed
The Special Investigation Committee and the Company have been cooperating with the SEC. Certain factual findings based on evidence adduced by the Special Investigation Committee during its internal investigation were incorporated into the Company’s restatement filed on January 31, 2023.
Added
The Order states that, in determining to accept the Company’s Offer of Settlement, the SEC considered the numerous remedial actions promptly undertaken by the Company and its cooperation during the investigation. The Company’s resolution follows charges brought by the SEC against the two former executives in a District Court action filed on June 3, 2024.
Removed
After the conclusion of its internal investigation, the Special Investigation Committee made recommendations to management regarding improvements to Company operations and structure, including but not limited to its dealings with related parties. The Company has implemented numerous improvements and continues to improve its compliance program.
Added
As a result of the SEC’s district court complaint against them, the two former executives agreed to pay civil fines and disgorgement, and agreed to be subject to officer and director bars.
Removed
The Company has also instituted structural changes including the appointment of an independent Chairman of the Board to replace the former Co-Chief Executive Officer and Chairman of the Board. In addition, as of January 31, 2023, three other independent directors serve on the Company’s Board of Directors.
Added
Zhou Min Ni also agreed to a conduct-based injunction which enjoins him from directly or indirectly participating in the management of, or otherwise exercising any control of influence over the Company. The Special Litigation Committee of the Board of Directors previously obtained a monetary settlement from the former executives that was ratified by the Delaware Chancery Court. ITEM 4.
Removed
Our senior executive team now includes a General Counsel and Chief Compliance Officer, a Chief Operations Officer who was hired in May 2022, and a new Chief Financial Officer who joined the Company in August 2022.
Added
MINE SAFETY DISCLOSURES. Not applicable. 21 PART II.
Removed
We also hired a Vice President and Head of Internal Audit in April 2022 who reports directly to the Chief Financial Officer and to the Audit Committee Chair. In November 2022, we hired a Vice President of Compliance and Associate General Counsel, who reports directly to the General Counsel and Chief Compliance Officer.
Removed
The Company also created a Special Litigation Committee which determined to pursue claims against certain former officers and directors.
Removed
As a result, pursuant to the previously disclosed settlement agreement (as amended on November 1, 2023, the “Settlement Agreement”) between the Company and certain parties to the verified stockholder derivative complaint filed by James Bishop in the Court of Chancery of the State of Delaware, on October 16, 2023, the Company received $1.5 million on behalf of 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 (together, the “Ni Defendants”).
Removed
Subsequently, on December 1, 2023, the Company received 1,997,423 shares (valued at $7.75 million) of the Company’s common stock, based on the closing price of $3.88 on October 13, 2023, plus a cash payment of approximately $0.1 million of accrued interest through the date of payment, in satisfaction of the Ni Defendant’s payment obligations totaling $9.25 million under the Settlement Agreement.
Removed
Pursuant to the terms of the Settlement Agreement, Mr. Ni, Ms. Wong and Jonathan Ni, the former Chief Financial Officer of the Company, agreed to give up any rights to indemnification or the advancement of fees in connection with the SEC investigation and any actions the SEC might take against them relating to the SEC investigation.
Removed
A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law and invites recipients to submit a response if they wish. The Company made a submission in response to the Wells Notice explaining why an enforcement action would not be appropriate.
Removed
Following that submission, the staff of the SEC determined that it would no longer be recommending that the SEC file an enforcement action against the Company at this time pending a potential agreed-upon resolution between the Company and the SEC.
Removed
The Company is in negotiations with the SEC over a potential resolution, which could include fines and penalties, but the terms of that settlement are not set and the Company has made no formal offer of settlement to the SEC as of this filing. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 26 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe cumulative total return on our common stock as presented is not necessarily indicative of future performance. 27 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/30/2022 12/29/2023 HF Foods Group Inc. $100 $147 $57 $64 $31 $40 S&P 500 $100 $131 $156 $200 $164 $207 S&P Food and Staples Retailing Index $100 $127 $148 $185 $166 $192 ITEM 6. [RESERVED] 28
Biggest changeThe cumulative total return on our common stock as presented is not necessarily indicative of future performance. 12/31/2019 12/31/2020 12/31/2021 12/30/2022 12/29/2023 12/31/2024 HF Foods Group Inc. $100 $39 $43 $21 $27 $16 S&P 500 $100 $118 $152 $125 $158 $197 S&P 500 Food and Staples Retailing Index $100 $116 $146 $131 $151 $204 ITEM 6. [RESERVED] 23
The graph assumes an investment of $100 in our common stock and each of the indices on December 31, 2018 and the reinvestment of dividends, as applicable.
The graph assumes an investment of $100 in our common stock and each of the indices on December 31, 2019.
Stock Performance Graph The following graph compares the cumulative total return on our common stock with the cumulative total returns on the Standard & Poor’s 500 Composite Stock Price Index (“S&P 500”), and the Standard and Poor’s Food and Staples Retailing Index from December 31, 2018 to December 31, 2023.
Issuer Purchases of Equity Securities None. 22 Stock Performance Graph The following graph compares the cumulative total return on our common stock with the cumulative total returns on the Standard & Poor’s 500 Composite Stock Price Index (“S&P 500”), and the Standard and Poor’s 500 Food & Staples Retailing Industry Index from December 31, 2019 to December 31, 2024.
Holders of Record As of March 22, 2024, there were 52,155,968 shares of our common stock outstanding held by 41 shareholders of record.
Holders of Record As of March 12, 2025, there were 52,737,650 shares of our common stock outstanding held by 33 shareholders of record.
Removed
Issuer Purchases of Equity Securities On December 1, 2023, pursuant to the settlement agreement (as amended, the “Settlement Agreement”) between the Company and certain parties to the verified stockholder derivative complaint (the “Delaware Action”) filed by James Bishop in the Court of Chancery of the State of Delaware, the Company received 1,997,423 shares of the Company’s common stock (the “Settlement Shares”), from 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 (together with Mr.
Removed
Ni, the “Ni Defendants”), in addition to cash. All of the Settlement Shares received as consideration from the Ni Defendants have been placed by the Company in treasury. See Note 16 - Commitments and Contingencies to the consolidated financial statements and Part I – Item 3. – Legal Proceeding s in this Annual Report on Form 10-K for more information.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

45 edited+23 added−21 removed33 unchanged
Biggest changeThe decrease of $2.6 million was primarily driven by a decrease in our income from operations of $1.6 million, an increase in interest expense of $4.0 million, a change in fair value of interest rate swap contracts of $2.4 million, and a change in other income of $0.7 million, partially offset by a favorable change in lease guarantee expense of $6.1 million. 32 EBITDA and Adjusted EBITDA The following table reconciles EBITDA and Adjusted EBITDA to the most directly comparable GAAP measure: Year Ended December 31, Change ($ in thousands) 2023 2022 Amount Net (loss) income $ (2,662) $ 235 $ (2,897) Interest expense 11,478 7,457 4,021 Income tax expense (benefit) 41 (231) 272 Depreciation and amortization 25,918 24,936 982 EBITDA 34,775 32,397 2,378 Lease guarantee (income) expense (377) 5,744 (6,121) Change in fair value of interest rate swap contracts 1,580 (817) 2,397 Stock-based compensation expense 3,352 1,257 2,095 Business transformation costs (1) 929 — 929 Acquisition-related costs — 1,130 (1,130) Other non-routine expense (2) 3,124 — 3,124 Asset impairment charges 1,200 422 778 Adjusted EBITDA $ 44,583 $ 40,133 $ 4,450 _________________ (1) Represents non-recurring costs associated with the launch of strategic projects including supply chain management improvements and technology infrastructure initiatives.
Biggest changeEBITDA and Adjusted EBITDA The following table reconciles EBITDA and Adjusted EBITDA to the most directly comparable GAAP measure: Year Ended December 31, ($ in thousands) 2024 2023 Change Net loss $ (48,102) $ (2,662) $ (45,440) Interest expense 11,425 11,478 (53) Income tax expense 1,965 41 1,924 Depreciation and amortization 26,677 25,918 759 EBITDA (8,035) 34,775 (42,810) Lease guarantee income (5,548) (377) (5,171) Change in fair value of interest rate swap contracts (1,693) 1,580 (3,273) Stock-based compensation expense 2,088 3,352 (1,264) SEC settlement 3,900 — 3,900 Goodwill impairment charges 46,303 — 46,303 Settlement gain (1) — (10,000) 10,000 Other asset impairment charges — 1,200 (1,200) Business transformation costs (2) 1,223 929 294 Other non-routine expense (3) 874 3,124 (2,250) Executive transition and organizational redesign (4) 2,929 — 2,929 Adjusted EBITDA $ 42,041 $ 34,583 $ 7,458 _________________ (1) As discussed in Note 17 - Commitments and Contingencies to the consolidated financial statements in this Annual Report on Form 10-K, the Company recovered approximately $10.0 million related to the Settlement Agreement.
(the “Sealand Acquisition”), one of the largest frozen seafood suppliers servicing the Asian/Chinese restaurant market along the eastern seaboard, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee. See Note 7 - Acquisitions to the consolidated financial statements in this Annual Report on Form 10-K for additional information regarding recent acquisitions.
(the “Sealand Acquisition”), one of the largest frozen seafood suppliers servicing the Asian restaurant market along the eastern seaboard, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee. See Note 7 - Acquisitions to the consolidated financial statements in this Annual Report on Form 10-K for additional information regarding recent acquisitions.
Overview We market and distribute Asian specialty food products, seafood, fresh produce, frozen and dry food, and non-food products primarily to Asian restaurants and other foodservice customers throughout the United States. HF Foods was formed through a merger between two complementary market leaders, HF Foods Group Inc. and B&R Global.
Business Overview We market and distribute Asian specialty food products, seafood, fresh produce, frozen and dry food, and non-food products primarily to Asian restaurants and other foodservice customers throughout the United States. HF Foods was formed through a merger between two complementary market leaders, HF Foods Group Inc. and B&R Global.
As of December 31, 2023, we have no off balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial position, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
As of December 31, 2024, we have no off balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial position, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “ Part II – Item 7. – Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 31, 2023.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “ Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 26, 2024.
If the quantitative analysis indicates the carrying value of a reporting unit exceeds its fair value, we measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. 35 As a result of our 2023 financial performance in comparison to previous forecasts, combined with our level of stock price, we performed a quantitative impairment assessment.
If the quantitative analysis indicates the carrying value of a reporting unit exceeds its fair value, we measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. 30 As a result of our 2023 financial performance in comparison to previous forecasts, combined with our level of stock price, we performed a quantitative impairment assessment as of December 31, 2023.
The income approach requires detailed forecasts of cash flows, including significant assumptions such as revenue growth rates, gross profit margin, and an estimate of weighted-average cost of capital which we believe approximate the assumptions from a market participant’s perspective. The market approaches are primarily impacted by an enterprise value multiple of EBITDA.
The income approach requires detailed forecasts of cash flows, including significant assumptions such as revenue growth rates, gross profit margins, distribution, selling and administrative expenses, among other assumptions, and an estimate of weighted-average cost of capital which we believe approximate the assumptions from a market participant’s perspective. The market approaches are primarily impacted by an enterprise value multiple of EBITDA.
Average floating interest rates on our floating-rate debt for the year ended December 31, 2023 increased by approximately 3.4% on the line of credit and 3.4% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2022.
Average floating interest rates on our floating-rate debt for the year ended December 31, 2024 increased by approximately 0.2% on the line of credit and 0.1% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2023.
Net (Loss) Income Attributable to HF Foods Group Inc. Net loss attributable to HF Foods Group Inc. was $2.2 million for the year ended December 31, 2023 , compared to net income of $0.5 million for the year ended December 31, 2022.
Net Loss Attributable to HF Foods Group Inc. Net loss attributable to HF Foods Group Inc. was $48.5 million for the year ended December 31, 2024 , compared to net loss of $2.2 million for the year ended December 31, 2023.
Liquidity and Capital Resources As of December 31, 2023, we had cash of approximately $15.2 million, checks issued not presented for payment of $4.5 million and access to approximately $37.6 million in additional funds through our $100.0 million line of credit, subject to a borrowing base calculation.
Liquidity and Capital Resources As of December 31, 2024, we had cash of approximately $14.5 million, checks issued not presented for payment of $5.7 million and access to approximately $36.1 million in additional funds through our $100.0 million line of credit, subject to a borrowing base calculation.
We performed sensitivity analyses on the key inputs and assumptions used in determining the estimated fair value of our reporting unit by utilizing changes in assumptions that would reasonably likely occur.
Additionally, these assumptions are generally interdependent and do not change in isolation. We performed sensitivity analyses on the key inputs and assumptions used in determining the estimated fair value of our reporting unit by utilizing changes in assumptions that would reasonably likely occur.
Our average daily line of credit balance decreased by $10.2 million, or 18.5%, to $44.9 million for the year ended December 31, 2023 from $55.0 million for the year ended December 31, 2022, and our average daily JPMorgan Chase mortgage-secured term loan balance increased by $6.5 million, or 6.4%, to $108.6 million for the year ended December 31, 2023 from $102.1 million for the year ended December 31, 2022.
Our average daily line of credit balance increased by $10.6 million, or 23.7%, to $55.5 million for the year ended December 31, 2024 from $44.9 million for the year ended December 31, 2023, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5.1 million, or 4.7%, to $103.6 million for the year ended December 31, 2024 from $108.6 million for the year ended December 31, 2023. 27 Income Tax Expense Income tax expense was $2.0 million for the year ended December 31, 2024, compared to $41,000 for the year ended December 31, 2023.
To the extent that there are material differences between these estimates and the actual results, future financial statements will be affected. 34 We believe that among our significant accounting policies, which are described in Note 2 - Summary of Significant Accounting Policies to the consolidated financial statements in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity.
We believe that among our significant accounting policies, which are described in Note 2 - Summary of Significant Accounting Policies to the consolidated financial statements in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity.
Gross profit margin of 17.8% for 2023 increased from 17.6% in the prior year. • Distribution, selling and administrative expenses : Distribution, selling and administrative expenses increased by $0.1 million, or 0.1%, mainly due to settlement amounts received partially offset by an increase in payroll and related labor costs as well as insurance costs.
Gross profit margin of 17.1% for 2024 decreased from 17.8% in the prior year. • Distribution, selling and administrative expenses : Distribution, selling and administrative expenses increased by $3.0 million, or 1.5%, in 2024 compared to 2023, mainly due to an increase in payroll and related labor costs of $4.3 million as well as insurance costs of $1.1 million partially offset by a reduction in professional fees of $2.8 million.
If property and equipment and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair value.
If property and equipment and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair value. No impairment of long-lived assets was recognized during the year ended December 31, 2024.
Assuming all other assumptions and inputs used in the fair value analysis are held constant, a 100 basis point increase in the discount rate assumption, a 1x decrease in the respective EBITDA multiple assumptions, a 25 basis point decrease in the gross profit margin assumption, and a 50 basis point decrease in the long-term revenue growth rate assumption would result in a decrease in the fair value of our reporting unit of approximately $14.8 million, $36.9 million, $8.4 million, and $22.6 million, respectively.
Assuming all other assumptions and inputs used in the fair value analysis are held constant, for the December 31, 2024 impairment test, a 100 basis point increase in the discount rate assumption, a 1x decrease in the respective EBITDA multiple assumptions, a 25 basis point decrease in the gross profit margin assumption, and a 50 basis point decrease in the revenue growth rate assumption would result in a decrease in the fair value of our reporting unit of approximately $11.6 million, $31.0 million, $7.3 million, and $5.5 million, respectively, which would likely result in further impairment.
How to Assess HF Foods’ Performance In assessing our performance, we consider a variety of performance and financial measures, including principal growth in net revenue, gross profit, distribution, selling and administrative expenses, as well as certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA.
We are dedicated to serving the vast array of Asian restaurants in need of high-quality and specialized food ingredients at competitive prices. 24 How to Assess HF Foods’ Performance In assessing our performance, we consider a variety of performance and financial measures, including principal growth in net revenue, gross profit, distribution, selling and administrative expenses, as well as certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA.
Management has considered the historical experience, the economy, the trends in the foodservice distribution industry to determine the expected collectability of accounts receivable and the realization of inventories as of December 31, 2023.
However, our ability to repay our current obligations will depend on the future realization of our current assets. Management has considered the historical experience, the economy, the trends in the foodservice distribution industry to determine the expected collectability of accounts receivable and the realization of inventories as of December 31, 2024.
A quantitative goodwill impairment analysis requires valuation of the respective reporting unit, which requires complex analysis and judgment. We use a combination of discounted cash flow (“DCF”) model and market approaches, such as public company comparable analysis and comparable acquisitions analysis to determine fair value. The income approach and market approaches were weighted equally to estimate fair value.
For the December 31, 2024, September 30, 2024 and December 31, 2023 impairment tests, we used a combination of discounted cash flow (“DCF”) model and market approaches, such as public company comparable analysis and comparable acquisitions analysis to determine fair value of the reporting unit. The income approach and market approaches were weighted equally to estimate fair value.
For additional information on EBITDA and Adjusted EBITDA, see the section entitled “EBITDA and Adjusted EBITDA” below. Financial Review Highlights for 2023 included: • Net revenue: Net revenue was $1,148.5 million in 2023, compared to $1,170.5 million in 2022, a decrease of $22.0 million, or 1.9%.
For additional information on EBITDA and Adjusted EBITDA, see the section entitled “EBITDA and Adjusted EBITDA” below. 25 Financial Review Highlights for 2024 included: • Net revenue: Net revenue was $1,201.7 million in 2024, compared to $1,148.5 million in 2023, an increase of $53.2 million, or 4.6%.
Cost of revenue generally changes as we incur higher or lower costs from suppliers and as the customer and product mix changes. 29 Distribution, Selling and Administrative Expenses Distribution, selling and administrative expenses consist primarily of salaries, stock-based compensation and benefits for employees and contract laborers, trucking and fuel expenses, utilities, maintenance and repair expenses, insurance expenses, depreciation and amortization expenses, selling and marketing expenses, professional fees and other operating expenses.
Distribution, Selling and Administrative Expenses Distribution, selling and administrative expenses consist primarily of salaries, stock-based compensation and benefits for employees and contract laborers, trucking and fuel expenses, utilities, maintenance and repair expenses, insurance expenses, depreciation and amortization expenses, selling and marketing expenses, professional fees and other operating expenses.
Income Tax Expense (Benefit) Income tax expense (benefit) was an income tax expense of approximately $41,000 for the year ended December 31, 2023, compared to income tax benefit of $0.2 million for the year ended December 31, 2022, primarily due to the impact of non-deductible items, change in valuation allowance, and state taxes, partially offset by the expiration of the statute of limitations in relation to unrecognized tax benefits, tax credits, and other tax adjustments during the year ended December 31, 2023.
The increase in income tax expense of $1.9 million was due to non-deductible items including the impact of the Company’s goodwill impairment charges, SEC settlement, and state taxes, partially offset by the change in valuation allowance, tax credits, the expiration of the statute of limitations in relation to unrecognized tax benefits, and other tax adjustments during the year ended December 31, 2024.
We impaired our acquired developed technology attributable to Syncglobal, Inc. and recognized impairment expense of $0.4 million in distribution, selling and administrative expenses in the consolidated statements of operations during the year ended December 31, 2022. 36 Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies to the consolidated financial statements in this Annual Report on Form 10-K.
We impaired our acquired developed technology attributable to Syncglobal, Inc. and recognized impairment expense of $0.4 million in distribution, selling and administrative expenses in the consolidated statements of operations during the year ended December 31, 2022.
If, in future periods, the financial performance of the reporting unit does not meet forecasted expectations, or a prolonged decline occurs in the market price of our common stock, it may cause a change in the results of the impairment assessment and, as such, could result in an impairment of goodwill.
If, in future periods, the financial performance of the reporting unit does not meet forecasted expectations, or a prolonged decline occurs in the market price of our common stock, it may cause a change in the results of the impairment assessment and, as such, could result in further impairment of goodwill. 31 Impairment of Long-lived Assets We assess our long-lived assets such as property and equipment and intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.
We have grown our distribution network to eighteen distribution centers and cross-docks servicing forty-six states and covering approximately 95% of the contiguous United States with a fleet of over 400 refrigerated vehicles.
With sixteen distribution centers and three cross-docks and a fleet of over 400 vehicles, our distribution network now spans 46 states covering approximately 95% of the contiguous United States.
Distribution, selling and administrative expenses as a percentage of net revenue increased to 17.0% for the year ended December 31, 2023 from 16.7% in the same period in 2022, primarily due to the costs disclosed above combined with the decrease in revenue year over year.
Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.5% for the year ended December 31, 2024 from 17.0% in the same period in 2023, primarily due to lower professional fees and increased net revenue, partially offset by increased payroll and related labor costs and insurance costs.
These estimates incorporate many uncertain factors which could be impacted by changes in market conditions, interest rates, growth rate, tax rates, costs, customer behavior, regulatory environment and other macroeconomic changes. We categorize the fair value determination as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.
These estimates incorporate many uncertain factors which could be impacted by changes in market conditions, interest rates, growth rate, tax rates, costs, customer behavior, regulatory environment and other macroeconomic changes.
Cost of revenue primarily includes inventory costs (net of supplier consideration), inbound freight, customs clearance fees and other miscellaneous expenses.
Cost of revenue primarily includes inventory costs (net of supplier consideration), inbound freight, customs clearance fees and other miscellaneous expenses. Cost of revenue generally changes as we incur higher or lower costs from suppliers and as the customer and product mix changes.
Distribution, selling and administrative expenses as a percentage of net revenue increased to 17.0% in 2023 from 16.7% in 2022, primarily due to the costs disclosed above combined with the decrease in revenue year over year. 30 • Net (loss) income attributable to HF Foods Group Inc .: Net loss attributable to HF Foods Group Inc. was $2.2 million in 2023 compared to net income of $0.5 million in 2022.
Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.5% in 2024 from 17.0% in 2023, primarily due to lower professional fees and increased net revenue, partially offset by increased payroll and related labor costs and insurance costs. • Net loss attributable to HF Foods Group Inc .: Net loss attributable to HF Foods Group Inc. was $48.5 million in 2024 compared to net loss of $2.2 million in 2023.
Year Ended December 31, Change ($ in thousands) 2023 2022 Amount Net revenue $ 1,148,493 $ 1,170,467 $ (21,974) Cost of revenue 944,462 964,955 (20,493) Gross profit 204,031 205,512 (1,481) Distribution, selling and administrative expenses 195,062 194,953 109 Income from operations 8,969 10,559 (1,590) Interest expense 11,478 7,457 4,021 Other income (1,091) (1,829) 738 Change in fair value of interest rate swap contracts 1,580 (817) 2,397 Lease guarantee (income) expense (377) 5,744 (6,121) (Loss) income before income taxes (2,621) 4 (2,625) Income tax expense (benefit) 41 (231) 272 Net (loss) income and comprehensive (loss) income (2,662) 235 (2,897) Less: net loss attributable to noncontrolling interests (488) (225) (263) Net (loss) income and comprehensive (loss) income attributable to HF Foods Group Inc. $ (2,174) $ 460 $ (2,634) The following table sets forth the components of our consolidated results of operations expressed as a percentage of net revenue for the periods indicated: Year Ended December 31, 2023 2022 Net revenue 100.0 % 100.0 % Cost of revenue 82.2 % 82.4 % Gross profit 17.8 % 17.6 % Distribution, selling and administrative expenses 17.0 % 16.7 % Income from operations 0.8 % 0.9 % Interest expense 1.0 % 0.6 % Other income (0.1) % (0.2) % Change in fair value of interest rate swap contracts 0.1 % (0.1) % Lease guarantee expense — % 0.5 % (Loss) income before income taxes (0.2) % — % Income tax expense (benefit) — % — % Net (loss) income and comprehensive (loss) income (0.2) % — % Less: net loss attributable to noncontrolling interests — % — % Net (loss) income and comprehensive (loss) income attributable to HF Foods Group Inc.
Year Ended December 31, ($ in thousands) 2024 2023 Change Net revenue $ 1,201,667 $ 1,148,493 $ 53,174 Cost of revenue 996,473 944,462 52,011 Gross profit 205,194 204,031 1,163 Distribution, selling and administrative expenses 198,026 195,062 2,964 Goodwill impairment charges 46,303 — 46,303 (Loss) income from operations (39,135) 8,969 (48,104) Interest expense 11,425 11,478 (53) Other expense (income), net 2,818 (1,091) 3,909 Change in fair value of interest rate swap contracts (1,693) 1,580 (3,273) Lease guarantee income (5,548) (377) (5,171) Loss before income taxes (46,137) (2,621) (43,516) Income tax expense 1,965 41 1,924 Net loss and comprehensive loss (48,102) (2,662) (45,440) Less: net income (loss) attributable to noncontrolling interests 409 (488) 897 Net loss and comprehensive loss attributable to HF Foods Group Inc. $ (48,511) $ (2,174) $ (46,337) 26 The following table sets forth the components of our consolidated results of operations expressed as a percentage of net revenue for the periods indicated: Year Ended December 31, 2024 2023 Net revenue 100.0 % 100.0 % Cost of revenue 82.9 % 82.2 % Gross profit 17.1 % 17.8 % Distribution, selling and administrative expenses 16.5 % 17.0 % Goodwill impairment charges 3.9 % — % (Loss) income from operations (3.3) % 0.8 % Interest expense 0.9 % 1.0 % Other expense (income), net 0.2 % (0.1) % Change in fair value of interest rate swap contracts (0.1) % 0.1 % Lease guarantee income (0.5) % — % Loss before income taxes (3.8) % (0.2) % Income tax expense 0.2 % — % Net loss and comprehensive loss (4.0) % (0.2) % Less: net income (loss) attributable to noncontrolling interests — % — % Net loss and comprehensive loss attributable to HF Foods Group Inc.
We have funded working capital and other capital requirements primarily by cash flow from operations and bank loans. Cash is required to pay purchase costs for inventory, salaries, fuel and trucking expenses, selling expenses, rental expenses, income taxes, other operating expenses and to service debts.
Cash is required to pay purchase costs for inventory, salaries, fuel and trucking expenses, selling expenses, rental expenses, income taxes, other operating expenses and to service debts. 28 We believe that our cash flow generated from operations is sufficient to meet our normal working capital needs for at least the next twelve months.
The following table summarizes cash flow data for the years ended December 31, 2023 and 2022: Years Ended December 31, (In thousands) 2023 2022 Change Net cash provided by operating activities $ 15,804 $ 31,284 $ (15,480) Net cash used in investing activities (1,514) (50,786) 49,272 Net cash (used in) provided by financing activities (23,347) 28,999 (52,346) Net (decrease) increase in cash and cash equivalents $ (9,057) $ 9,497 $ (18,554) Operating Activities Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, changes in deferred income taxes and others, and includes the effect of working capital changes.
The following table summarizes cash flow data for the years ended December 31, 2024 and 2023: Year Ended December 31, (In thousands) 2024 2023 Change Net cash provided by (used in) operating activities $ 22,636 $ (1,648) $ 24,284 Net cash used in investing activities (12,548) (1,514) (11,034) Net cash used in financing activities (10,853) (5,895) (4,958) Net decrease in cash and cash equivalents $ (765) $ (9,057) $ 8,292 Operating Activities Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, asset impairment charges, changes in deferred income taxes and others, and includes the effect of working capital changes.
Gross Profit Gross profit was $204.0 million for the year ended December 31, 2023 compared to $205.5 million in the same period in 2022 , a decrease of $1.5 million, or 0.7% .
Gross Profit Gross profit was $205.2 million for the year ended December 31, 2024 compared to $204.0 million in the same period in 2023 , an increase of $1.2 million, or 0.6% . The gross profit increase was primarily attributable to increased net revenue partially offset by increased costs.
Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, cash flow and related disclosure of contingent assets and liabilities.
These principles require management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, cash flow and related disclosure of contingent assets and liabilities.
Assumptions used in impairment testing are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each impairment test date. Additionally, these assumptions are generally interdependent and do not change in isolation.
See Note 8 - Goodwill and Acquired Intangible Assets to the consolidated financial statements in this Annual Report on Form 10-K for additional information. Assumptions used in impairment testing are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each impairment test date.
Pursuant to the agreement, we will pay the swap counterparty a fixed rate of 4.11% in exchange for floating payments based on CME Term SOFR.
Pursuant to the agreement, we will pay the swap counterparty a fixed rate of 4.11% in exchange for floating payments based on CME Term SOFR. Our liquidity is also affected by the entry of an administrative civil cease-and-desist order by the SEC, whereby we agreed to payment of a civil monetary penalty of $3.9 million.
Results of Operations Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2022 The following table sets forth a summary of our consolidated results of operations for the years ended December 31, 2023 and 2022 . The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
Capitalizing on our deep understanding of the Chinese culture, with over 1,000 employees and subcontractors and supported by two call centers in China, we have become a trusted partner serving approximately 15,000 Asian restaurants, providing sales and service support to customers who mainly converse in Mandarin or other Chinese dialects.
Capitalizing on our deep understanding of Asian cultures, strong relationships with growers and suppliers of food products primarily in North America, South America, and Asia, with over 1,000 employees, and supported by two outsourced call centers in China, we have become a trusted partner serving approximately 15,000 customer locations throughout the United States.
The results of testing as of December 31, 2023, concluded that the estimated fair value exceeded carrying value, and no impairment existed as of that date. In addition, we corroborated the reasonableness of the total fair value of the reporting unit by assessing the implied control premium based on our market capitalization.
A quantitative goodwill impairment analysis requires valuation of the respective reporting unit, which requires complex analysis and judgment. The results of the testing as of December 31, 2023, concluded that the estimated fair value exceeded carrying value by approximately 10%, and no impairment existed as of that date.
Interest Expense Interest expense for the year ended December 31, 2023 increased by $4.0 million or 53.9% , compared to the year ended December 31, 2022, primarily due to a sharply higher interest-rate environment.
(4.0) % (0.2) % Net Revenue Net revenue for the year ended December 31, 2024 increased by $53.2 million, or 4.6%, compared to the same period in 2023.
Legal Proceedings in this Annual Report on Form 10-K and Note 16 - Commitments and Contingencies to the consolidated financial statements herein for additional information. Management believes we have sufficient funds to meet our working capital requirements and debt obligations in the next twelve months.
We made this payment during the year ended December 31, 2024. Management believes we have sufficient funds to meet our working capital requirements and debt obligations in the next twelve months.
During the year ended December 31, 2023, poultry pricing came down from the elevated levels we benefited from during the same period in 2022. Gross profit margin for 2023 of 17.8% increased from 17.6% in the prior year.
Gross profit margin for the year ended December 31, 2024 decreased to 17.1% compared to 17.8% in the same period in 2023.
Financing Activities Net cash (used in) provided by financing activities decreased by $52.3 million to $23.3 million used in financing activities primarily due to the reduction in proceeds from long-term debt for the year ended December 31, 2023.
Investing Activities Net cash used in investing activities increased by $11.0 million primarily due to increased capital project spend in the year ended December 31, 2024.
For 2023, there was a decrease in professional fees as a result of the net settlement amounts received totaling $10.0 million, partially offset by increases of $7.3 million in payroll and related labor costs, inclusive of the additional costs due to the Sealand Acquisition, and $2.0 million in insurance related costs.
Distribution, Selling and Administrative Expenses Distribution, selling and administrative expenses of $198.0 million for the year ended December 31, 2024 increased compared to prior year expenses of $195.1 million primarily due to an increase of $4.3 million in payroll and related labor costs and an increase of $1.1 million in insurance costs, partially offset by a decrease of $2.8 million in professional fees.
This decrease was primarily attributable to deflationary pricing in imported frozen seafood, Asian Specialty, poultry, and, to a lesser extent, the exit of our chicken processing businesses. • Gross profit : Gross profit was $204.0 million in 2023 compared to $205.5 million in 2022, a decrease of $1.5 million, or 0.7%. The decrease was primarily attributable to lower revenue.
This increase was primarily attributable to volume growth associated with new wholesale accounts, case count growth, product cost inflation and improved pricing in certain categories, partially offset by the $13.3 million loss in revenue from the exit of our chicken processing businesses during the second half of 2023. • Gross profit : Gross profit was $205.2 million in 2024 compared to $204.0 million in 2023, an increase of $1.2 million, or 0.6%.
Removed
We are dedicated to serving the vast array of Asian and Chinese restaurants in need of high-quality and specialized food ingredients at competitive prices.
Added
Recent Developments CEO Transition On October 24, 2024, the Board of Directors of the Company terminated Xiao Mou (Peter) Zhang as Chief Executive Officer of the Company, without cause, effective immediately. In connection with Mr. Zhang’s departure, the Company entered into a Severance Agreement and General Release (the “Severance Agreement”) with Mr. Zhang on November 21, 2024.
Removed
During 2023, we received legal settlements amounts totaling $9.25 million and $1.7 million, of which we paid $0.9 million, for a net settlement totaling $10.0 million. These net settlement amounts were recorded as a reduction of distribution, selling and administrative expenses.
Added
Pursuant to the Severance Agreement, which includes a general release of claims by Mr. Zhang against the Company, Mr. Zhang will be entitled to receive standard severance benefits provided to a Chief Executive Officer under the Company’s Amended and Restated Severance Plan. Mr. Zhang continues to serve as a Director on the Board of Directors.
Removed
The decrease of $2.6 million was primarily driven by a decrease in our income from operations of $1.6 million, an increase in interest expense of $4.0 million, a change in fair value of interest rate swap contracts of $2.4 million, and a change in other income of $0.7 million, partially offset by a favorable change in lease guarantee expense of $6.1 million. • Exit of chicken processing businesses: During the second half of 2023, we exited both of our low margin chicken processing businesses on the east and west coast as part of our commitment to refocusing on our core business.
Added
On October 24, 2024, Xi (Felix) Lin was appointed to serve as Interim Chief Executive Officer, effective immediately, and continued to serve as the Company’s Chief Operating Officer and President. On December 17, 2024, the Board of Directors of HF Foods Group Inc. appointed Felix Lin to serve as the Company’s Chief Executive Officer and President, effective January 1, 2025.
Removed
(0.2) % — % 31 Net Revenue Net revenue for the year ended December 31, 2023 decreased by $22.0 million, or 1.9%, compared to the same period in 2022. This decrease was primarily attributable to deflationary pricing product categories such as frozen seafood, poultry, Asian Specialty and packaging.
Added
Credit Facility Amended On February 12, 2025, the Company amended certain terms and conditions of the JPM Credit Agreement, by, among other things, (i) increasing the Revolving Commitment (as defined in the Credit Agreement) from $100.0 million to $125.0 million, (ii) joining three new subsidiaries of the Company to the Credit Agreement, each as a “Borrower” thereunder, (iii) joining Wells Fargo Bank, N.A. to the JPM Credit Agreement as a “Lender” thereunder, (iv) amending certain affirmative covenants commensurate with the increase in the Revolving Facility, and (v) amending certain restrictions regarding incurring obligations under real property leases and equipment financings in the ordinary course of business.
Removed
The revenue decrease due to pricing was partially offset by higher volume and the Seafood revenue generated due to the Sealand Acquisition which has a full year of revenue in 2023 compared to a partial year in 2022.
Added
The increase was primarily attributable to increased net revenue partially offset by increased costs.
Removed
The gross profit decrease was primarily attributable to decreases in revenue from Meat and Poultry, and to a lesser extent, Packaging and Other, partially offset by the increased revenue from Asian Specialty, the additional Seafood revenue generated due to the Sealand Acquisition and the successful execution of our Seafood centralized purchasing program.
Added
The increase of $46.3 million was primarily driven by goodwill impairment charges of $46.3 million in 2024. Results of Operations Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023 The following table sets forth a summary of our consolidated results of operations for the years ended December 31, 2024 and 2023.
Removed
Distribution, Selling and Administrative Expenses Distribution, selling and administrative expenses of $195.1 million for the year ended December 31, 2023 remained consistent with prior year expenses of $195.0 million.
Added
This increase was primarily attributable to volume growth associated with new wholesale accounts, case count growth, product cost inflation and improved pricing in certain categories, partially offset by the $13.3 million loss in revenue resulting from the exit of our chicken processing businesses during the second half of 2023.
Removed
Professional fees decreased $12.9 million, or $2.9 million net of the settlement amounts received, to $13.9 million for the year ended December 31, 2023 , from $26.8 million for the year ended December 31, 2022. In addition, we recognized an asset impairment of $1.2 million related to the exit of our chicken processing facility.
Added
Interest Expense Interest expense for the year ended December 31, 2024 decreased by $0.1 million or 0.5% , compared to the year ended December 31, 2023, primarily due to a decrease in our average daily JPMorgan Chase mortgage-secured term loan balance of $5.1 million, partially offset by an increase in our average daily line of credit balance of $10.6 million combined with a slightly higher interest-rate environment.
Removed
(2) Includes contested proxy and related legal and consulting costs and facility closure costs.
Added
The increase in loss of $46.3 million was primarily driven by goodwill impairment charges of $46.3 million recorded during the year ended December 31, 2024.
Removed
We believe that our cash flow generated from operations is sufficient to meet our normal working capital needs for at least the next twelve months. However, our ability to repay our current obligations will depend on the future realization of our current assets.
Added
The Company accounted for the settlement as a recovery of previously recorded expenses related to the litigation. The Company has adjusted for the $10.0 million recovery. (2) Represents costs associated with the launch of strategic projects including supply chain management improvements and technology infrastructure initiatives. (3) Includes contested proxy and related legal and consulting costs and facility closure costs.
Removed
Effective as of April 20, 2023, we 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 (the “Binding Term Sheet”), which was incorporated into a long-form settlement agreement on May 5, 2023 and filed with the Court of Chancery on May 8, 2023.
Added
(4) Includes severance and related expenses for the Company’s transition of executive officers and organizational redesign.
Removed
The Binding Term Sheet provided for, among other things, the dismissal of the Delaware Action with prejudice, thereby resolving all existing and potential liability 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 (the “Settlement Amount”).
Added
We have funded working capital and other capital requirements primarily by cash flow from operations and bank loans.
Removed
The full terms of the settlement of the Delaware Action were incorporated into the long-form settlement agreement, which was subject to approval of the Court of Chancery (as amended on November 1, 2023, the “Settlement Agreement”).
Added
Checks issued not presented for payment was reclassified from financing to operating activities for both the current and prior year which resulted in a $1.2 million increase to net cash provided by operating activities in the current year and a $17.5 million decrease in the prior year.
Removed
On September 8, 2023, the Court of Chancery approved the proposed settlement and an application by Bishop’s counsel for an award of attorneys’ fees and expenses. 33 On October 16, 2023, after approval of the settlement had become final, the Ni Defendants paid the Company $1.5 million of the Settlement Amount.
Added
Net cash provided by operating activities increased by $24.3 million primarily due to the timing of working capital outlays such as the increase of $18.6 million resulting from checks issued not presented for payment and was partially offset by decreased operating income (excluding the $46.3 million non-cash goodwill impairment charge) and the $3.9 million SEC settlement payment.
Removed
On December 1, 2023, the Company received 1,997,423 shares of the Company’s common stock as consideration for the remaining $7.75 million balance due under the Settlement Agreement. All of the shares of Company common stock received as consideration for the Settlement have been placed by the Company in treasury. Please refer to Part I. Item 3.
Added
Financing Activities Net cash used in financing activities increased by $5.0 million to $10.9 million during the year ended December 31, 2024 primarily due to the change in line of credit activity from net proceeds for the year ended December 31, 2023 to net payments for the year ended December 31, 2024. 29 Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.
Removed
Net cash provided by operating activities decreased by $15.5 million, or 49%, primarily due to the timing of working capital outlays. During the year ended December 31, 2023, we implemented new enterprise accounting and finance applications, which modified our accounts receivable, accounts payable and treasury processes.
Added
Actual results may differ from these estimates. To the extent that there are material differences between these estimates and the actual results, future financial statements will be affected.
Removed
As a result of this transformation, we significantly paid down our accounts payable, which negatively impacted our net cash provided by operating activities. Investing Activities Net cash used in investing activities decreased by $49.3 million, or 97%, primarily due to payments related to acquisitions in the year ended December 31, 2022.
Added
As of September 30, 2024, the Company concluded that a triggering event occurred due to a sustained decline in the Company’s stock price since December 31, 2023, which required interim testing for goodwill impairment in accordance with ASC 350. Accordingly, the Company performed a quantitative assessment as of September 30, 2024.
Removed
In addition, checks issued not presented for payment decreased significantly for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to the reduction in checks issued as a result of our new enterprise accounting and finance applications.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe currently are able to obtain adequate supplies of diesel fuel, and average prices in 2023 decreased in comparison to average prices in 2022, decreasing 15.5% on average. However, it is impossible to predict the future availability or price of diesel fuel.
Biggest changeWe currently are able to obtain adequate supplies of diesel fuel, and average prices in 2024 decreased in comparison to average prices in the same period in 2023, decreasing 10.8% on average. However, it is impossible to predict the future availability or price of diesel fuel.
Our floating rate debt interest is based on the floating 1-month SOFR plus a predetermined credit adjustment rate plus the bank spread. The remaining 64.8% of our debt is on a fixed rate or a floating rate with hedging.
Our floating rate debt interest is based on the floating 1-month SOFR plus a predetermined credit adjustment rate plus the bank spread. The remaining 64.1% of our debt is on a fixed rate or a floating rate with hedging.
We do not actively hedge the price fluctuation of diesel fuel in general. Instead, we seek to minimize fuel cost risk through delivery route optimization and fleet utilization improvement. 37
We do not actively hedge the price fluctuation of diesel fuel in general. Instead, we seek to minimize fuel cost risk through delivery route optimization and fleet utilization improvement. 32
As of December 31, 2023, our aggregate floating rate debt’s outstanding principal balance without hedging was $60.8 million, or 35.2% of total debt, consisting primarily of our revolving line of credit (see Note 10 - Debt to the consolidated financial statements in this Annual Report on Form 10-K).
As of December 31, 2024, our aggregate floating rate debt’s outstanding principal balance without hedging was $59.7 million, or 35.9% of total debt, consisting primarily of our revolving line of credit (see Note 10 - Debt to the consolidated financial statements in this Annual Report on Form 10-K).

Other HFFG 10-K year-over-year comparisons