10-K: Yoshiharu Global Co. Details Capital Structure and Risk Factors in 10-K Filing

Yoshiharu Global Co.'s 10-K filing outlines the company's capital structure, growth strategies, and significant risks, including potential delisting from Nasdaq and dependence on future capital raises.

Summary

• Yoshiharu Global Co.'s 10-K filing details the company's capital stock structure, consisting of Class A and Class B common stock.
• Class A common stock has one vote per share, while Class B common stock has 10 votes per share and is primarily held by the CEO, James Chae.
• The document outlines potential anti-takeover effects due to certain provisions in the company's charter and bylaws.
• The company faces risks including operating losses, dependence on securing appropriate restaurant sites, and competition in the restaurant industry.
• The filing mentions a potential delisting from Nasdaq due to stockholders' equity falling below the required minimum.
• The company is pursuing new restaurant development and franchise sales to drive growth.
• The document also discusses supply chain disruptions, inflation, and government regulations affecting the business.
• Recent capital raising activities include a securities purchase agreement with Alumni Capital LP and private placements with several investors.
• The company is obligated to register shares sold in private placements and may be forced to repurchase them if registration requirements are not met.
• The company's management acknowledges material weaknesses in internal control over financial reporting.

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While there is revenue growth and expansion, the company is also facing net losses, potential delisting from Nasdaq, and material weaknesses in internal control. The need for future capital raises adds to the uncertainty.

Positives

• The company is pursuing new restaurant development and franchise sales to drive growth.
• The company has achieved positive comparable restaurant sales growth in recent periods.
• The company is investing in infrastructure and personnel to scale business operations.
• The company is exploring the development of instant ramen noodles and partnerships with grocery retailers.
• The company acquired three existing restaurants in Las Vegas in April 2024.

Negatives

• The company has incurred operating losses and may not be profitable in the future.
• The company's plans to maintain and increase liquidity may not be successful.
• The company received a Nasdaq notification letter regarding its stockholders' equity falling below the $2,500,000 minimum.
• The company is obligated to register shares sold in private placements and may be forced to repurchase them if registration requirements are not met.
• The company's management acknowledges material weaknesses in internal control over financial reporting.

Risks

• The company may not be able to successfully implement its growth strategy.
• The company may face negative publicity or damage to its reputation.
• The company may face challenges related to food safety and foodborne illness.
• The company may face challenges related to minimum wage increases and mandated employee benefits.
• The company may face challenges related to intellectual property rights.
• The company may face challenges related to economic conditions and consumer spending.
• The company may need capital in the future, and it may not be able to raise that capital on favorable terms.
• The company may be delisted from the Nasdaq Capital Market.

Future Outlook

The company expects inflationary and other cost pressures to continue into and throughout the year 2025.

Management Comments

• The company's mission is to bring its Japanese ramen and cuisine to the mainstream, by providing a meal that customers find comforting.
• The company believes that slowly cooking the bone broth makes it high in collagen and rich in nutrients.
• The company also strives to present food that is not only healthy, but also affordable.

Industry Context

The restaurant industry is divided into several primary segments, including limited-service and full-service restaurants, which are generally categorized by price, quality of food, service, and location. Yoshiharu sits at the intersection of these two segments offering the experience and food quality of a full-service restaurant and the speed of service of a limited-service restaurant.

Comparison to Industry Standards

• Jinya Ramen Bar operates approximately 40 locations in the United States and also franchises their restaurants.
• Yoshiharu competes primarily based on product quality, dining experience, ambience, location, convenience, value perception, and price.

Management Changes

Related Party Transactions

• From time to time, the Company borrowed money from James Chae. The balance is non-interest bearing and due on demand.
• Related party compensation For the years ended December 31, 2024 and 2023, the compensation to James Chae was $ 139,769 and $ 339,740 , respectively.
• On June 12, 2024, the Company consummated the acquisition of certain assets in three Las Vegas restaurants from Mr. Jihyuck Hwang. Total acquisition cost was $ 3.6 million, consisting of $ 1.8 million in cash, issuance of a $ 600,000 promissory note and issuance of a $ 1.2 million convertible note to Mr. Hwang.

Stakeholder Impact

• Shareholders face the risk of potential delisting from Nasdaq and dilution from future capital raises.
• Employees may be affected by cost-cutting measures or changes in compensation.
• Customers may be impacted by changes in menu offerings or restaurant locations.
• Suppliers may be affected by changes in the company's financial condition or purchasing practices.
• Creditors face the risk of non-payment or default on outstanding debt.

Next Steps

• The company will need to convince Nasdaq that it has a viable plan to correct the stockholders' equity deficiency.
• The company is obligated to file a registration statement to register shares sold in private placements.
• The company plans to pursue a multi-facet expansion strategy by opening new corporate restaurants or acquiring existing restaurants in both new and existing markets, as well as utilizing the franchise market.

Key Dates

Keywords

Yoshiharu Global Co, capital stock, risk factors, financial results, restaurant industry, growth strategy, Nasdaq, internal control, securities, ramen