Core Insights - Yoshiharu Global Co. has opened its 15th restaurant location in Menifee, California, with one additional location under development in Ontario, CA [1][3][4] - The new Menifee location is strategically situated in a rapidly growing city that has invested over $100 million in traffic and infrastructure improvements [2] - The company aims to expand its presence through corporate-owned restaurants and a franchise program to accelerate national and international growth [3][4] Company Overview - Yoshiharu specializes in authentic Japanese ramen and has gained recognition as a leading ramen restaurant in Southern California since its debut in 2016 [4] - The company currently operates 15 restaurants across Southern California and Las Vegas [4]

Core Points - Yoshiharu Global Co. has received a notice of delisting from Nasdaq due to non-compliance with Listing Rule 5550(b)(1) which requires a minimum stockholders' equity of $2,500,000 [2][3] - The company was previously notified of its non-compliance on August 23, 2024, and was given until February 17, 2025, to regain compliance, which it failed to do [3] - Yoshiharu intends to appeal the delisting decision and has until February 25, 2025, to request a hearing [4] Company Overview - Yoshiharu Global Co. specializes in authentic Japanese ramen and rolls, and has expanded to operate 14 restaurants in Southern California and Las Vegas since its debut in 2016 [5]

Financing and Securities Purchase Agreement - The company entered into a securities purchase agreement with Crom Structured Opportunities Fund I, LP, issuing a senior unsecured convertible promissory note with an original principal amount of $1.1 million [2] - The company also established an equity line of credit (ELOC) with the same investor, allowing the company to issue and sell up to $10.0 million in shares of its common stock [2] - The conversion price for the note is set at the lesser of $5.00 or 90% of the lowest dollar volume weighted average price during the five trading days preceding the conversion date [3] - The company agreed to pay the investor a commitment fee of 31,948 shares of Class A Common Stock for entering into the purchase agreement [4] - The note was issued at a 10% original issue discount (OID), with a purchase price of $1,000,000 for the $1,100,000 principal amount, and carries a one-time interest charge of 5% [5] - The ELOC allows the company to issue and sell shares at 93% of the lowest VWAP during the five trading days following the clearing date of the respective advance shares [6] Use of Proceeds and Corporate Strategy - The company intends to use the net proceeds from the note and ELOC for working capital and general corporate purposes to support future growth [1] - The financing provides additional operating liquidity and financial flexibility to support the company's U.S. and international expansion plans [2] Company Overview - Yoshiharu Global Co. is a fast-growing restaurant operator specializing in authentic Japanese ramen and rolls [10] - The company has gained recognition as a leading ramen restaurant in Southern California and currently owns and operates 14 restaurants across Southern California and Las Vegas [10] Regulatory and Disclosure Information - The company agreed to file a registration statement with the SEC covering the resale of all Class A Common Stock that the investor may acquire [1] - Further details on the securities purchase agreement will be disclosed in a Current Report on Form 8-K to be filed with the SEC on January 13, 2025 [7]

Core Insights - Yoshiharu Global Co. reported a significant revenue increase of 49% in Q3 2024, reaching $3.0 million compared to $2.0 million in the same period last year, driven by new restaurant openings and acquisitions [8][10] - The company is expanding its international presence through strategic partnerships in China and plans to enter the growing Korean BBQ segment, which is expected to complement its existing ramen business [2][6] Financial Performance - For the first nine months of 2024, revenues increased by 36.3% to $9.2 million, up from $6.7 million in the prior year [10] - Restaurant-level contribution margin improved to 11.0% from 8.1% in the previous year, indicating better cost management alongside revenue growth [10] - Operating loss for Q3 2024 was $1.0 million, an increase from a loss of $0.8 million in the prior year, primarily due to higher general and administrative expenses related to acquisitions [9][12] Operational Highlights - The company opened its 15th restaurant in San Clemente, CA, with two additional locations under construction, expected to open in December 2024 and January 2025 [2][7] - Partnerships with Chengdu Octaday Entertainment Group and Xing Sheng Group aim to establish flagship restaurants in Sichuan and Liaoning provinces in China, targeting a combined population of over 126 million [5][6] - The company plans to leverage a $1.0 million investment to expand into the Korean BBQ segment, capitalizing on synergies with its ramen offerings [6][7] Strategic Initiatives - The company is focusing on optimizing operating expenses while maintaining strong average unit volumes despite challenges from rising input costs and consumer price sensitivity [3][4] - Future growth strategies include the addition of kiosks and the use of cooking robots to reduce labor costs, aiming for profitability in the near term [7]

Financial Performance - Total revenue for the nine months ended September 30, 2024, was $9,152,530, a 36.2% increase from $6,714,429 in the same period of 2023[20] - Net loss for the nine months ended September 30, 2024, was $(3,203,137), compared to a net loss of $(3,048,961) for the same period in 2023[20] - Loss from operations for the nine months ended September 30, 2024, was $(2,768,309), slightly improved from $(2,856,710) in the same period of 2023[20] - Basic and diluted loss per share for the nine months ended September 30, 2024, was $(2.39), compared to $(2.29) for the same period in 2023[20] - EBITDA for the nine months ended September 30, 2024, was $(2,132,849), an improvement from $(2,436,628) in the prior year[210] - Adjusted EBITDA for the same period was $(1,937,234), compared to $(2,014,476) in 2023, indicating a reduction in losses[210] Assets and Liabilities - Total current assets increased to $1,837,923 as of September 30, 2024, from $1,535,349 as of December 31, 2023, representing a 19.7% growth[17] - Total liabilities rose to $17,711,882 as of September 30, 2024, compared to $10,365,885 as of December 31, 2023, indicating a 70.5% increase[17] - Total non-current assets reached $15,474,153 as of September 30, 2024, up from $11,484,015 as of December 31, 2023, marking a 35.0% increase[17] - Total stockholders' equity (deficit) as of September 30, 2024, was $(399,806), a decrease from $2,653,479 as of December 31, 2023[17] - Total stockholders' equity (deficit) as of September 30, 2024, was $(399,806), a decrease from $(9,349,370) as of September 30, 2023[23] Cash Flow - Cash provided by operating activities was $1,164,719 for the nine months ended September 30, 2024, compared to cash used of $3,311,317 in 2023[26] - Cash balance increased to $1,712,064 as of September 30, 2024, from $1,462,326 as of December 31, 2023, reflecting a 17.0% increase[17] - Cash at the end of the period for September 30, 2024, was $1,712,064, down from $2,155,057 at the end of September 30, 2023[26] Expenses - Restaurant operating expenses totaled $8,746,360 for the nine months ended September 30, 2024, compared to $6,568,160 for the same period in 2023, a 32.9% increase[20] - Depreciation expense increased to $596,701 for the nine months ended September 30, 2024, from $396,388 in 2023[26] - Operating lease expense for the nine months ended September 30, 2024, was $942,945, compared to $683,947 for the same period in 2023, indicating an increase of approximately 37.8%[141] - General and administrative expenses for the nine months ended September 30, 2024, were $2.95 million, an increase of $254 thousand or 9.4% compared to the same period in 2023, with a decrease in percentage of sales to 32.2%[200] Growth and Expansion - The company plans to open new ramen stores in Ontario and Menifee, California[29] - The Company operates 14 restaurant stores with an additional 3 under construction as of September 30, 2024, aiming for over 100% annual unit growth over the next three to five years[162][168] - Positive comparable restaurant sales growth has been achieved, with future growth expected through increased brand awareness and new menu offerings[170] - The Company plans to initiate franchise sales in 2025 to further expand its market presence[170] - Recent developments include the opening of a new restaurant in San Clemente, CA, increasing the total number of locations to 15[174] Financing Activities - The company acquired LV entities for $1,800,000 during the nine months ended September 30, 2024[26] - Proceeds from borrowings for the acquisition of LV entities amounted to $900,000[26] - The company executed a loan of $150,000 on September 13, 2023, for working capital, with a remaining balance of $122,705 as of September 30, 2024[93] - The company has a loan of $650,000 secured on January 30, 2024, with a balance of $650,000 as of September 30, 2024, indicating full utilization of the loan[101] - A loan of $900,000 was executed on June 4, 2024, for acquiring assets of three restaurants in Las Vegas, with a balance of $865,151 as of September 30, 2024[103] Stock and Securities - The Company completed its initial public offering (IPO) in September 2022, selling 2,940,000 shares at $4.00 per share, generating gross proceeds of $11.76 million[38] - The Company entered into a Securities Purchase Agreement to sell up to $5,000,000 in Class A common stock, with shares sold at either 85% or 96% of the lowest trading price over the five days prior to closing[150] - The Company issued 34,846 additional shares of Class A common stock due to rounding up fractional shares from the reverse stock split[33] Management and Strategy - The management team is led by CEO James Chae, who founded the Company in 2016 and has extensive experience in financial and operational management[173] - The company has invested in infrastructure and personnel to drive higher profitability at both restaurant and corporate levels[171] - The Company has a disciplined growth strategy focused on new restaurant development and optimizing labor costs as the restaurant base matures[168][171] Tax and Compliance - Total current income tax provision for the nine months ended September 30, 2024, was $33,437, compared to $6,988 for the same period in 2023, representing a significant increase[130] - The company reported cumulative net operating loss carryforwards of approximately $10,052,000 for federal tax purposes as of September 30, 2024[135] - The company is in compliance with non-financial covenants imposed by the line of credit agreement[73]

Company Overview - Yoshiharu Global Co. specializes in authentic Japanese ramen and rolls, and has expanded to 15 locations with 2 more under construction [1][3] - The company aims to introduce a modernized Japanese dining experience globally and has gained recognition as a leading ramen restaurant in Southern California since its debut in 2016 [4] New Location Details - The new restaurant in San Clemente, CA, opens on October 31, 2024, and is located at 638 Camino De Los Mares in Ocean View Plaza, a prime coastal area [2][3] - This location is expected to attract approximately 8,300 visits daily and over 3 million annually, benefiting from high visibility and access to I-5 [2] Expansion Plans - The company plans to open additional locations in Menifee, CA, in December 2024 and Ontario, CA, in January 2025 [3] - Yoshiharu is also expanding its international presence with new partnerships in China and the acquisition of three restaurants in Las Vegas, along with entering the Korean BBQ segment [3]

Core Viewpoint - Yoshiharu Global Co. has entered a non-binding Memorandum of Understanding with Chengdu Octaday Entertainment Group to expand its presence in Sichuan Province, China, aiming to introduce its cuisine in multiple hotel locations [1][4]. Company Overview - Yoshiharu Global Co. specializes in authentic Japanese ramen and rolls, having gained recognition as a leading ramen restaurant in Southern California since its debut in 2016, currently operating 14 restaurants [7]. - Chengdu Octaday Entertainment Group operates in the entertainment and cultural industries, managing large-scale projects such as theme parks and cultural tourism in Chengdu, China [2][6]. Strategic Partnership - The partnership with Chengdu Octaday aims to open locations within the 30 corporate-owned hotels managed by Chengdu Octaday in Sichuan Province, enhancing Yoshiharu's international growth momentum [3][4]. - This announcement follows Yoshiharu's recent partnership to open a flagship restaurant in Shenyang, indicating a strategic focus on expanding in key Chinese cities and provinces [3][4].

Core Viewpoint - Yoshiharu Global Co. has entered into a non-binding Memorandum of Understanding with Xing Sheng Group to establish its first international restaurant location in Shenyang, China, marking a significant step in the company's global expansion strategy [1][4]. Group 1: Partnership and Location - The partnership with Xing Sheng Group allows Yoshiharu to develop a flagship restaurant within a water park currently under construction in Shenyang, which has a population of over 43 million [2]. - Shenyang is identified as a dynamic transportation and commercial hub in northeast China, providing a strategic location for the new restaurant to cater to both local residents and tourists [2]. Group 2: Growth Strategy - This new location in Shenyang is part of Yoshiharu's broader growth strategy following its recent expansion into Las Vegas, aiming to introduce the brand and its culinary offerings to new markets [3]. - The company plans to explore further collaborative opportunities with Xing Sheng Group to support its expansion across other important Chinese cities and provinces [4]. Group 3: Company Background - Yoshiharu Global Co. specializes in authentic Japanese ramen and has gained recognition as a leading ramen restaurant in Southern California since its debut in 2016, currently operating 14 restaurants [5].

Core Viewpoint - Yoshiharu Global Co. reported significant growth in revenue and operational improvements in the second quarter of 2024, driven by the acquisition of three Las Vegas restaurants and effective cost management strategies [2][3][4]. Financial Performance - Second quarter revenues increased by 50.5% to $3.3 million compared to $2.2 million in the prior year period, primarily due to the new Las Vegas restaurants [4]. - For the first six months of 2024, revenues rose by 30.9% to $6.1 million from $4.7 million in the same period last year [7]. - Restaurant-level contribution margin for the second quarter was 12.1%, remaining stable despite challenging market conditions [4]. - Total restaurant operating expenses increased to $3.1 million from $2.0 million in the prior year period, attributed to higher costs in food, labor, rent, and utilities [5]. - The operating loss improved to $0.9 million from a loss of $1.0 million in the prior year [6]. Operational Highlights - The acquisition of three Las Vegas restaurants is expected to boost annual revenues by $6 million [2]. - The company is focused on integrating the Yoshiharu brand into the Las Vegas market, leveraging a strong residential customer base [3]. - Plans are underway to open another restaurant in California, expanding the total to 14 locations [3][11]. Management Commentary - The CEO expressed optimism about achieving profitability soon, despite challenges in the food and beverage markets [3]. - The company is implementing cost-saving measures, including the addition of kiosks and cooking robots to reduce labor costs [3].

[Part I](index=7&type=section&id=PART%20I) [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Yoshiharu Global Co. operates Japanese ramen restaurants, focusing on expansion and high-quality cuisine while managing industry risks [Overview of Yoshiharu](index=7&type=section&id=Overview%20of%20Yoshiharu) Yoshiharu is a rapidly expanding Southern California-based Japanese ramen operator with ten restaurants and plans for significant growth, managing supply chain and inflation risks - The company operates ten restaurants in Southern California, with three new stores under construction/development and an agreement to acquire three existing restaurants in Las Vegas, expected to close in Q2 2024[19](index=19&type=chunk) - In September 2022, the company completed its IPO, raising net proceeds of approximately **$10.3 million**[22](index=22&type=chunk) - A 1-for-10 reverse stock split was effected on November 27, 2023, resulting in **1,230,246 shares of Class A Common Stock outstanding** as of December 31, 2023[24](index=24&type=chunk)[25](index=25&type=chunk) [Our Strengths and Growth Strategies](index=9&type=section&id=Our%20Strengths%20and%20Growth%20Strategies) The company leverages an experienced team, strong value, and attractive economics to drive growth through new restaurant development, comparable sales, profitability, and brand awareness - The company's Average Unit Volume (AUV) was **$1.1 million in 2023**, down from $1.2 million in 2022[31](index=31&type=chunk) - The company aims for an annual unit growth rate exceeding **100%** over the next three to five years by opening new corporate-owned restaurants[33](index=33&type=chunk) - Future growth initiatives include exploring a larger restaurant format with a sake bar concept and initiating franchise sales in 2024[34](index=34&type=chunk) [Properties and Expansion](index=10&type=section&id=Properties%20and%20Expansion) Yoshiharu operates ten leased restaurants in California with plans for new builds and acquisitions, focusing on disciplined site selection and multi-faceted expansion Restaurant Locations and Status | Location | Status | | :--- | :--- | | **California (11)** | 10 operating as of 12/31/23, 1 opened in 1Q 2024 | | **California (2)** | Under construction (Menifee, San Clemente) | | **Las Vegas, NV (3)** | Acquisition under closing process | - The company anticipates spending approximately **$350,000 per new location** in development costs[43](index=43&type=chunk) - The estimated cash build-out cost for a new standard restaurant is between **$350,000 and $550,000**, net of tenant allowances[52](index=52&type=chunk) [Operations, Marketing, and Industry](index=13&type=section&id=Operations%2C%20Marketing%2C%20and%20Industry) The company manages operations with a senior team and remote monitoring, focusing on fresh food and digital marketing within the competitive U.S. restaurant industry - The senior operations team monitors restaurants in real-time from headquarters using a system of approximately eight cameras installed in each location[54](index=54&type=chunk) - The company utilizes systems from Toast, Inc. for point of sale, online ordering, delivery, marketing, and payroll management[66](index=66&type=chunk) U.S. Restaurant Industry Sales | Year | Total Industry Sales | | :--- | :--- | | 2022 | $966 billion | | 2023 | Over $1.0 trillion | | 2024 (forecast) | $1.1 trillion | [Employees, Regulation, and Intellectual Property](index=15&type=section&id=Employees%2C%20Regulation%2C%20and%20Intellectual%20Property) The company employs approximately 180 individuals, operates under extensive government regulations, and protects its brand through key trademarks, with no material legal proceedings - As of December 31, 2023, the company had approximately **180 employees**, with 20 being exempt[75](index=75&type=chunk) - The company is subject to numerous regulations, including the Americans with Disabilities Act, Fair Labor Standards Act, and menu labeling laws under the ACA[78](index=78&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk) - The company's subsidiary, Yoshiharu Holdings Co., owns registered trademarks for "YOSHIHARU RAMEN" (Reg. No. 5030823) and its design mark (Reg. No. 5045588)[87](index=87&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including operating losses, expansion challenges, geographic concentration, intense competition, supply chain disruptions, and internal control weaknesses [Risks Related to Our Business](index=18&type=section&id=Risks%20Related%20to%20Our%20Business) The company's history of operating losses and dependence on successful, capital-intensive expansion, coupled with California geographic concentration, pose significant business risks Net Loss History | Year Ended Dec 31 | Net Loss | | :--- | :--- | | 2023 | $3.0 million | | 2022 | $3.5 million | - The company's restaurant base is geographically concentrated in California, making it susceptible to adverse conditions specific to that state[99](index=99&type=chunk) - The estimated cash build-out cost for a new restaurant is approximately **$350,000-$550,000**, making the company's results sensitive to the performance and timing of new openings[106](index=106&type=chunk) [Risks Related to Our Brand, Operations, and Supply Chain](index=25&type=section&id=Risks%20Related%20to%20Our%20Brand%2C%20Operations%2C%20and%20Supply%20Chain) The company's brand is vulnerable to negative publicity, operations are burdened by fixed long-term leases, and profitability is exposed to supply chain disruptions and cost inflation - The company's success depends on maintaining its brand value, which is vulnerable to negative publicity from various sources, amplified by social media[130](index=130&type=chunk)[131](index=131&type=chunk) - As of December 31, 2023, the company had an outstanding balance of **$24,720** in unsecured, non-interest-bearing borrowings from its CEO and his affiliate, which are repayable on demand[134](index=134&type=chunk) - The company is subject to risks associated with long-term, non-cancelable leases, which account for a significant portion of operating expenses and create obligations even if a restaurant is closed[135](index=135&type=chunk) [Risks Related to People, Regulation, and Litigation](index=28&type=section&id=Risks%20Related%20to%20People%2C%20Regulation%2C%20and%20Litigation) The company's success relies on key management, faces rising labor costs, navigates extensive regulations, and is susceptible to delays in construction permits impacting profitability - The company's success is highly dependent on key executives, including founder and CEO James Chae[145](index=145&type=chunk) - The minimum wage in California, where the company is concentrated, increased to **$15.50 per hour** on January 1, 2023, and further increases could materially impact labor costs[148](index=148&type=chunk) - Significant delays in obtaining construction permits have caused the company to incur lease payments before new locations can generate revenue, adversely affecting profitability[157](index=157&type=chunk) [Risks Related to Our Organizational Structure & Ownership](index=34&type=section&id=Risks%20Related%20to%20Our%20Organizational%20Structure%20%26%20Ownership) The company acknowledges material weaknesses in internal controls, benefits from reduced reporting as an "emerging growth company," but faces challenges due to management's limited public company experience - The company warns that if it fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report financial results, which could harm investor confidence[173](index=173&type=chunk) - The company is an "emerging growth company" and can take advantage of reduced reporting and disclosure requirements, including an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act[177](index=177&type=chunk) - The management team does not have prior experience managing a U.S. public company, and current resources may be insufficient to fulfill all public company obligations[178](index=178&type=chunk) [Item 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - The company has no unresolved staff comments from the SEC[182](index=182&type=chunk) [Item 1C. Cybersecurity](index=36&type=section&id=Item%201C.%20Cybersecurity) The company manages cybersecurity risks through an information security program overseen by the Audit Committee, with no material incidents reported to date - The Board of Directors has delegated oversight of cybersecurity risk to the Audit Committee, which receives periodic reports from management[186](index=186&type=chunk)[187](index=187&type=chunk) - Management is responsible for the daily execution of the cybersecurity risk management program, supervising internal personnel and external consultants[188](index=188&type=chunk) - As of the date of the report, no cybersecurity incidents have had a materially adverse effect on the company's business or financial condition[185](index=185&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) The company's executive offices are in Buena Park, CA, with detailed restaurant property information cross-referenced in Item 1 - The company's principal executive offices are located in Buena Park, CA. Detailed information on restaurant properties is cross-referenced to Item 1[190](index=190&type=chunk) [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no material litigation currently pending or contemplated against it or its management - There is no current or contemplated litigation pending against the company or its management[191](index=191&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[192](index=192&type=chunk) [Part II](index=36&type=section&id=PART%20II) [Item 5. Market for Registrant's Ordinary Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Ordinary%20Shares%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A Common Stock trades on Nasdaq, with no cash dividends paid or planned, and no recent unregistered sales or equity repurchases - The company's Class A Common Stock trades on Nasdaq under the ticker symbol "YOSH"[195](index=195&type=chunk) - As of April 1, 2024, there were **25 holders of record of Class A Common Stock** and one holder of Class B Common Stock[196](index=196&type=chunk) - The company has never paid cash dividends and does not anticipate paying any in the foreseeable future[197](index=197&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue increased 11.3% to $9.2 million in 2023, but comparable sales declined, resulting in a $3.0 million net loss, with liquidity supported by IPO proceeds and cash from operations [Results of Operations](index=41&type=section&id=Results%20of%20Operations) For 2023, revenues increased 11.3% to $9.2 million due to new openings, while net loss improved to $3.0 million, aided by RRF loan forgiveness, despite rising labor and G&A costs Consolidated Statements of Operations (Years ended December 31) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenue** | **$9,214,779** | **$8,282,368** | **11.3%** | | Food, beverages and supplies | $2,376,961 | $2,163,085 | 9.9% | | Labor | $4,234,905 | $3,670,681 | 15.4% | | General and administrative | $3,419,036 | $2,884,770 | 18.5% | | Loss from operations | ($3,515,254) | ($3,784,230) | -7.1% | | RRF loan forgiveness | $700,454 | $0 | N/A | | **Net loss** | **($3,040,364)** | **($3,487,367)** | **-12.8%** | - The **11.3% increase in annual sales** was driven by **$0.3 million** from a restaurant opened in July 2022 and **$0.7 million** from a restaurant opened in April 2023, offset by a slight decrease at other locations[222](index=222&type=chunk) - Related party compensation to CEO James Chae decreased significantly to **$340k in 2023** from $917k in 2022, as the prior year included a large success bonus related to the IPO[230](index=230&type=chunk) [Key Performance Indicators](index=45&type=section&id=Key%20Performance%20Indicators) Adjusted EBITDA was negative $2.4 million in 2023, AUVs decreased to $1.07 million, and comparable restaurant sales growth was negative 0.8%, reflecting operational challenges Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net loss | $(3,040) | $(3,487) | | Interest, Taxes, D&A | $812 | $766 | | **EBITDA** | **$(2,228)** | **$(2,721)** | | Adjustments (Loan forgiveness, opening costs, etc.) | $(163) | $482 | | **Adjusted EBITDA** | **$(2,391)** | **$(2,239)** | Key Operational Metrics (Years ended December 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Average Unit Volumes (AUV) | $1,067,726 | $1,182,032 | | Comparable Restaurant Sales Growth | -0.8% | 9.9% | | Restaurant Count (End of Period) | 10 | 8 | [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by IPO proceeds and cash from operations, with $4.6 million used in operating activities and $1.5 million in investing activities in 2023 Summary of Cash Flows (in millions) | (in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4.6) | $(3.8) | | Net cash used in investing activities | $(1.5) | $(1.5) | | Net cash provided by financing activities | $1.4 | $10.7 | - The company believes cash flow from operations and proceeds from its IPO will be sufficient to fund obligations for at least the next 12 months[253](index=253&type=chunk) Total Contractual Obligations as of Dec 31, 2023 | Obligation Type | Total Amount | | :--- | :--- | | Capital lease payments | $7,913,897 | | Bank note payables | $1,406,329 | | EIDL loan payables | $425,865 | | Loans payable to financial institutions | $534,239 | | **Total** | **$10,280,330** | [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Yoshiharu Global Co. is exempt from providing this market risk disclosure - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[266](index=266&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=52&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The company's audited financial statements and supplementary data are included in the report, starting on page F-1 - This section incorporates by reference the financial statements which begin on page F-1 of the Form 10-K[267](index=267&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=52&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - The company reported no disagreements with its accountants[268](index=268&type=chunk) [Item 9A. Controls and Procedures](index=52&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were ineffective due to material weaknesses in accounting resources and segregation of duties - Management concluded that disclosure controls and procedures were ineffective as of December 31, 2023[269](index=269&type=chunk) - Material weaknesses were identified related to inadequate accounting resources and a lack of segregation of duties, attributed to the small size of the accounting staff[270](index=270&type=chunk) - Management also concluded that internal controls over financial reporting were ineffective as of December 31, 2023, based on the COSO framework[275](index=275&type=chunk) [Item 9B. Other Information](index=53&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the fourth quarter of 2023 - No directors or officers adopted or terminated Rule 10b5-1 trading plans in the fourth quarter of 2023[278](index=278&type=chunk) [Part III](index=53&type=section&id=PART%20III) [Item 10. Directors, Executive Officers and Corporate Governance](index=53&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's leadership includes CEO James Chae and CFO Soojae Ryan Cho, with a board that operates as a "controlled company" due to Mr. Chae's majority voting power Executive Officers and Directors | Name | Age | Position | | :--- | :--- | :--- | | James Chae | 60 | President, CEO, Director and Chairman | | Soojae Ryan Cho | 54 | Chief Financial Officer | | Jay Kim | 61 | Director | | Harinne Kim | 50 | Director | | Yusil Yeo | 44 | Director | - The company is a "controlled company" under Nasdaq rules because CEO James Chae controls a majority of the voting power, exempting it from certain governance requirements like having a majority-independent board[296](index=296&type=chunk) - The Audit Committee consists of three independent directors: Jay Kim, Harinne Kim, and Yusil Yeo, with Ms. Yeo serving as chairperson and qualifying as an "audit committee financial expert"[305](index=305&type=chunk)[306](index=306&type=chunk) [Item 11. Executive Compensation](index=59&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for NEOs, including CEO James Chae ($340,000) and CFO Soojae Ryan Cho ($144,000) in 2023, is performance-based, supported by an equity incentive plan 2023 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Bonus ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | James Chae, CEO and Chairman | 2023 | $285,000 | $55,000 | $340,000 | | Soojae Ryan Cho, CFO | 2023 | $144,000 | -0- | $144,000 | - CEO James Chae has an employment contract for an annual salary of **$285,000**. CFO Soojae Ryan Cho's offer letter provides for an annual salary of **$144,000**[333](index=333&type=chunk)[334](index=334&type=chunk) - The company adopted a 2022 Omnibus Equity Incentive Plan, authorizing up to **1,500,000 shares of Class A common stock** for issuance as various types of awards[339](index=339&type=chunk)[344](index=344&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=67&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) As of April 1, 2024, CEO James Chae beneficially owned 52.68% of Class A and 100% of Class B stock, resulting in 73.90% total voting power Security Ownership of Principal Shareholders and Management (as of April 1, 2024) | Name of Beneficial Owner | Class A Shares Beneficially Owned | % of Class A | Class B Shares Beneficially Owned | % of Class B | % of Total Voting Power | | :--- | :--- | :--- | :--- | :--- | :--- | | James Chae | 648,100 | 52.68% | 100,000 | 100.00% | 73.90% | | All NEOs and Directors as a Group (5 persons) | 663,000 | 53.89% | 100,000 | 100.00% | 74.57% | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=67&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company has significant related party transactions with CEO James Chae, who controls 73.9% of voting power, and has a policy for reviewing such transactions - James Chae, the CEO, holds **100% of the Class B Common Stock** and **52.7% of the Class A Common Stock**, granting him **73.9% of the total voting power**[373](index=373&type=chunk) - The company was formed through a series of transactions where James Chae contributed his existing restaurant entities and intellectual property in exchange for equity[371](index=371&type=chunk)[372](index=372&type=chunk) - The Board of Directors has adopted a written policy for reviewing and approving related party transactions, which is administered by the Audit Committee[374](index=374&type=chunk) [Item 14. Principal Accountant Fees and Services](index=69&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) BF Borgers CPA PC served as the independent auditor, with total fees of $314,000 in 2023, and the Audit Committee pre-approves all services Principal Accountant Fees | Fee Category | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Audit fees | $198,000 | $222,000 | | Tax fees | $12,000 | $11,000 | | All other fees | $104,000 | $33,000 | | **Total fees** | **$314,000** | **$266,000** | - The Audit Committee pre-approves all audit and permitted non-audit services provided by the independent registered public accounting firm[378](index=378&type=chunk) [Part IV](index=71&type=section&id=PART%20IV) [Item 15. Exhibits and Financial Statement Schedules](index=71&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K, including financial statements and various exhibits - The report includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and Notes to Financial Statements[381](index=381&type=chunk) [Item 16. Form 10-K Summary](index=71&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable as the company has not provided a Form 10-K summary - This item is not applicable[384](index=384&type=chunk) [Financial Statements and Supplementary Data](index=72&type=section&id=Financial%20Statements%20and%20Supplementary%20Data) [Consolidated Financial Statements](index=72&type=section&id=Consolidated%20Financial%20Statements) The audited consolidated financial statements present the company's financial position and results, showing total assets of $13.0 million and a net loss of $3.0 million in 2023 Consolidated Balance Sheet Highlights (as of Dec 31, 2023) | Account | Amount | | :--- | :--- | | **Total Assets** | **$13,019,364** | | Cash | $1,832,661 | | Property and equipment, net | $4,092,950 | | **Total Liabilities** | **$10,365,885** | | Line of credit | $1,000,000 | | Operating lease liabilities | $6,261,765 | | Bank notes payables | $1,406,329 | | **Total Stockholders' Equity** | **$2,653,479** | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2023) | Account | Amount | | :--- | :--- | | Total Revenue | $9,214,779 | | Total Restaurant Operating Expenses | $8,850,385 | | Loss from Operations | ($3,515,254) | | **Net Loss** | **($3,040,364)** | | **Loss Per Share (Basic & Diluted)** | **($2.29)** | [Notes to Consolidated Financial Statements](index=77&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's formation, accounting policies, financial statement line items, including the 2023 reverse stock split, IPO specifics, and related party transactions - A **1-for-10 reverse stock split** of both Class A and Class B common stock was effective November 27, 2023[400](index=400&type=chunk) - In 2022, a total of **$385,900** in Paycheck Protection Program (PPP) loans were forgiven by the SBA[461](index=461&type=chunk)[466](index=466&type=chunk)[469](index=469&type=chunk) - On November 28, 2023, a **$700,454** Restaurant Revitalization Fund (RRF) loan was forgiven by the SBA[488](index=488&type=chunk)