10-K/A: Yoshiharu Global Co. Details Share Structure and Anti-Takeover Measures in Amended Filing

Yoshiharu Global Co.'s amended 10-K filing details its dual-class share structure, anti-takeover provisions, and recent financial adjustments.

Summary

• Yoshiharu Global Co. has filed an amended 10-K report, which includes immaterial amendments to its financial statements for 2023 and 2022.
• The company has two classes of common stock: Class A, with one vote per share, and Class B, with ten votes per share, with all Class B shares held by CEO James Chae.
• Class B shares convert to Class A shares when Mr. Chae no longer owns at least 25% of the voting power or ceases to beneficially own the shares.
• The filing outlines anti-takeover provisions, including restrictions on calling special stockholder meetings and amendments to the certificate of incorporation.
• The company's Class A common stock trades on Nasdaq under the symbol YOSH.
• The company had 1,230,246 Class A shares and 100,000 Class B shares outstanding as of December 31, 2023.
• The company reported a net loss of $3.0 million for 2023 and $3.5 million for 2022.
• The company's average unit volume (AUV) was $1.1 million in 2023, down from $1.2 million in 2022.
• The company is pursuing a growth strategy that includes opening new restaurants and exploring franchising.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the company is pursuing growth and has a strong brand, it faces significant challenges including operating losses, declining AUV, and ineffective internal controls. The dual-class structure and anti-takeover provisions also raise concerns about corporate governance.

Positives

• The company is actively pursuing a growth strategy with new restaurant development and franchising.
• The company has a strong brand recognition in Southern California.
• The company is exploring new revenue streams such as instant ramen noodles and partnerships with grocery retailers.

Negatives

• The company has incurred operating losses and may not be profitable in the future.
• The company's average unit volume (AUV) decreased from $1.2 million in 2022 to $1.1 million in 2023.
• The company's growth strategy is dependent on identifying and securing appropriate sites and timely development.
• The company's restaurant base is geographically concentrated in California, making it susceptible to regional economic conditions.
• The company faces significant competition in the restaurant industry.
• The company relies on third-party vendors and suppliers, which could lead to supply chain disruptions.
• The company's internal controls over financial reporting were deemed ineffective.

Risks

• The company may not be able to successfully implement its growth strategy due to challenges in identifying appropriate sites, expanding in new markets, and attracting customers.
• The company's profitability is dependent on its ability to anticipate and react to changes in food and supply costs.
• The company's operating results and growth strategies are closely tied to the success of future franchise partners.
• The company may face negative publicity or damage to its reputation due to food safety concerns or other matters.
• The company's operations are subject to extensive government regulations, including those related to public health, safety, and the environment.
• The company may become involved in lawsuits related to intellectual property rights.
• The company's reliance on information technology makes it vulnerable to security breaches.
• The company's management team lacks experience managing a U.S. public company.
• The company is an emerging growth company and may take advantage of reduced reporting requirements, which could make its stock less attractive to investors.
• The company's dual-class structure gives significant control to the CEO, which could discourage potential mergers or takeovers.

Future Outlook

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. The company also intends to explore the development of instant ramen noodles and partnerships with grocery retailers.

Management Comments

• Our mission is to bring our Japanese ramen and cuisine to the mainstream, by providing a meal that customers find comforting.
• We believe that slowly cooking the bone broth makes it high in collagen and rich in nutrients.
• We also strive to present food that is not only healthy, but also affordable.

Industry Context

The restaurant industry is experiencing growth, with sales projected to reach $1.1 trillion in 2024. The company operates in the full-service and limited-service segments, and is well-positioned to benefit from the increasing multiculturalism in the United States and the growing demand for quality, value, and healthy options.

Comparison to Industry Standards

• The company's AUV of $1.1 million in 2023 is below the average for some established full-service restaurant chains, but it is important to note that Yoshiharu is still in a growth phase.
• Jinya Ramen Bar, a direct competitor, operates approximately 40 locations in the United States and also franchises their restaurants, indicating a potential benchmark for Yoshiharu's expansion strategy.
• The company's focus on fresh, high-quality ingredients aligns with the trend of consumers seeking healthier options, as noted in the National Restaurant Association's 2023 State of the Industry report.
• The company's expansion strategy of opening new corporate restaurants and acquiring existing restaurants is a common approach in the restaurant industry, but the success depends on effective site selection and operational execution.
• The company's reliance on third-party delivery services is consistent with industry trends, but it also exposes them to the associated fees and potential loss of control over the customer experience.

Management Changes

Corporate Governance

Related Party Transactions

• The company has borrowed money from James Chae, which is non-interest bearing and due on demand.
• The company has a loan to Won Zo Whittier, 100% owned by James Chae, with a 5-year term and no interest.
• The company has paid compensation to James Chae, which was $340,000 in 2023 and $917,000 in 2022.

Stakeholder Impact

• Shareholders may be concerned about the company's operating losses and declining AUV.
• Employees may be affected by the company's growth plans and potential changes in operations.
• Customers may be impacted by changes in menu offerings and restaurant locations.
• Suppliers may be affected by the company's growth and potential changes in supply chain management.
• Creditors may be concerned about the company's financial performance and ability to repay debts.

Next Steps

• The company plans to open additional restaurants in 2024.
• The company expects to initiate sales of franchises in late 2024 or early 2025.
• The company intends to explore the development of instant ramen noodles and partnerships with grocery retailers.
• The company will need to address its ineffective internal controls over financial reporting.
• The company will need to submit a compliance plan to Nasdaq regarding its delayed Form 10-Q.

Key Dates

Keywords

Yoshiharu Global Co., dual-class stock, anti-takeover provisions, restaurant operations, financial results, growth strategy, franchising, ramen, Japanese cuisine, internal controls