BUSINESS COMBINATION WITH B&R GLOBAL

6 Months Ended

Jun. 30, 2020

Effective November 4, 2019, HF Group acquired 100% of the controlling interest of B&R Global, in exchange for 30,700,000 shares of HF Group Common Stock. HF Group is considered as both the legal and accounting acquirer based on the fact that there was no change of control in connection with this business combination. The aggregate fair value of the consideration paid by HF Group in the business combination was $576,699,494 based upon the closing share price of the Company’s common stock at the date of Closing.

The information included herein has been prepared based on the allocation of the purchase price using estimates of the fair value of assets acquired and liabilities assumed which were determined with the assistance of independent valuations using quoted market prices, discounted cash flow, and estimates made by management. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets and liabilities acquired are fully evaluated by the Company, not to exceed one year as permitted under ASC 805.

The following table presents the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:


Cash	$	7,017,467
Accounts receivable, net	30,934,831
Accounts receivable - related parties, net	3,393,930
Inventories, net	56,451,885
Other current assets	2,332,063
Other current assets - related parties	498,211
Advances to suppliers, net	97,964
Property and equipment, net	11,042,601
Deposit	281,282
Deposit – related parties	591,380
Long-term investments	2,289,389
Right-of-use assets	17,791,681
Total tangible assets acquired	132,722,684

Line of credit	35,567,911
Accounts payable	24,884,247
Accounts payable - related parties	1,528,139
Bank overdraft	12,082,094
Accrued expenses	778,779
Other payables	185,938
Other payables – related party	733,448
Customer deposits	38,510
Long-term debt	3,284,159
Lease liabilities	17,791,680
Deferred tax liabilities arising from acquired intangible assets	51,413,633
Total tangible liabilities assumed	148,288,538
Net tangible liabilities assumed	(15,565,854)

Identifiable intangible assets	188,503,000
Goodwill	406,703,348
Intangible assets acquired	595,206,348

Noncontrolling interests	2,941,000
Total consideration	$	576,699,494

The Company recorded acquired intangible assets of $188,503,000. These intangible assets include tradenames valued at $29,303,000 and customer relationships valued at $159,200,000. The associated goodwill and intangible assets are not deductible for tax purposes.

The amounts of revenue and earnings of B&R Global included in the Company’s consolidated statement of operations for the three and six month periods ended June 30, 2020 are as follows:


	For the three months ended June 30, 2020		For the six months ended June 30, 2020

Net Revenue	$	63,911,411	$	176,809,167

Net Loss	$	(5,541,887)	$	(345,848,729)

The following table presents the Company’s unaudited pro forma results for the three and six month periods ended June 30, 2019, as if the Business Combination had occurred on January 1, 2019. The unaudited pro forma financial information presented includes the effects of adjustments related to the amortization of acquired intangible assets, and excludes other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees. Statutory rates were used to calculate income taxes.


	For the three months ended June 30, 2019			For the six months ended June 30, 2019
Pro forma net revenue	$	208,033,452		$	416,988,818
Pro forma net income	$	1,660,419	(1)	$	4,584,794	(1)
Pro forma net income attributable to HF Group	$	1,370,675	(1)	$	4,049,034	(1)

Pro forma earnings per common share - basic and diluted	$	0.03		$	0.09

Pro forma weighted average shares - basic and diluted	52,867,486			52,867,486

(1)Includes intangibles asset amortization expense of $2,722,575 for the three months ended June 30, 2019 and 5,445,150 for the six months ended June 30, 2019, respectively.