Company: HFFG
Filing Date: 2025-03-17
Form Type: 10-K
Source: 0001680873-25-000006
Chunk: 14

Company: HF Foods Group Inc.
Filing Date: 2025-03-17
Form: 10-K
Item: Item 7A
Chunk 14
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 discount rate.  The comparable public company and comparable acquisition analysis methods apply a market multiple assumption to the Company’s EBITDA to calculate fair value.  The fair value of the Company’s reporting unit exceeded the carrying value as of September 30, 2024.  The results of the impairment testing as of December 31, 2024 concluded that the fair value of the Company’s reporting unit did not exceed the carrying value, and therefore the Company recorded a goodwill impairment charge of $46.3 million during the year ended December 31, 2024.

We identified certain assumptions used in the valuation of goodwill for the reporting unit for both the September 30, 2024 and December 31, 2024 impairment tests as a critical audit matter.  Management’s determination of the fair value of the reporting unit required the use of significant judgment due to the subjectivity and uncertainty of the gross profit margins, DS&A expenses and discount rate assumptions used in the income approach, and the EBITDA multiple assumption used in the comparable public company analysis and comparable acquisition analysis approaches.  Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

•Evaluating the reasonableness of the gross profit margins and DS&A expenses by: i) evaluating the consistency of the gross profit margins and DS&A expenses with historical results, ii) evaluating the consistency of the gross profit margins, and DS&A expenses with the Company’s objectives and strategies, and iii) comparing the forecasted gross profit margins and DS&A expenses with external market data and evidence obtained in other areas of the audit.

•Utilizing personnel with specialized knowledge and skill with valuation to assist in assessing the reasonableness of the concluded fair value of the Company’s reporting unit, as well as the discount rate incorporated in the income approach and the EBITDA multiples incorporated in the comparable public company analysis and comparable acquisition analysis approaches.

/s/  BDO USA, P.C.

We have served as the Company’s auditor since 2021.

Troy, Michigan

March 17, 2025

35

HF Foods Group Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

December 31, 2024December 31, 2023ASSETSCURRENT ASSETS:Cash$14,467 $15,232