UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ___________
Commission
File Number:
(Exact name of Registrant as specified in its charter) |
5812 | ||||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
(Address, including zip code, and telephone number, including
area code, of Registrant’s principal executive offices)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The
(Nasdaq Capital Market) |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
The registrant has shares of class A common stock outstanding, and shares of class B common stock outstanding as of August 19, 2024.
TABLE OF CONTENTS
i |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our management’s beliefs and assumptions and on information currently available to management, and which statements involve substantial risk and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and objectives for future operations such as our ability to achieve in excess of 100% annual unit growth rate over the next three to five years, our hope to generate future comparable restaurant sales growth, our plan to drive high profitability, and our intention to heighten brand awareness are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions.
These risks and uncertainties include, among other things, the risk that we may not be able to successfully implement our growth strategy if we are unable to identify appropriate sites for restaurant locations, expand in existing and new markets, obtain favorable lease terms, attract guests to our restaurants or hire and retain personnel; the risk that we may not be able to maintain or improve our comparable restaurant sales growth; that the restaurant industry is a highly competitive industry with many competitors; that our limited number of restaurants, the significant expense associated with opening new restaurants, and the unit volumes of our new restaurants makes us susceptible to significant fluctuations in our results of operations; that we have incurred operating losses and may not be profitable in the future; the risk that our plans to maintain and increase liquidity may not be successful; that we depend on our senior management team and other key employees, and the loss of one or more key personnel or an inability to attract, hire, integrate and retain highly skilled personnel could have an adverse effect on our business, financial condition or results of operations; that our operating results and growth strategies will be closely tied to the success of our future franchise partners and we will have limited control with respect to their operations; the risk that we may face negative publicity or damage to our reputation, which could arise from concerns regarding food safety and foodborne illness or other matters; that minimum wage increases and mandated employee benefits could cause a significant increase in our labor costs; that events or circumstances could cause the termination or limitation of our rights to certain intellectual property critical to our business that is licensed from Yoshiharu Holdings Co., or that we could face infringements on our intellectual property rights and be unable to protect our brand name, trademarks and other intellectual property rights; that challenging economic conditions may affect our business by adversely impacting numerous items that include, but are not limited to: consumer confidence and discretionary spending, the future cost and availability of credit and the operations of our third-party vendors and other service providers; the risk that we, or our point of sale and restaurant management platform partners, may fail to secure guests’ confidential, personally identifiable, debit card or credit card information or other private data relating to our employees or us; and the impact of the COVID-19 pandemic, or a similar public health threat, on global capital and financial markets, general economic conditions in the United States, and our business and operations.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described elsewhere in this Quarterly Report on Form 10-Q and in the section titled “Risk Factors” in the Company’s recently filed registration statement on Form S-1 (File No. 333-262330). We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law.
ii |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Yoshiharu Global Co.
Unaudited Consolidated Balance Sheets
As of | June 30, 2024 | December 31, 2023 | ||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | $ | ||||||
Accounts receivable | ||||||||
Inventories | ||||||||
Total current assets | ||||||||
Non-Current Assets: | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use asset | ||||||||
Intangible asset | ||||||||
Goodwill | ||||||||
Other assets | ||||||||
Total non-current assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Line of credit | ||||||||
Current portion of operating lease liabilities | ||||||||
Current portion of bank notes payables | ||||||||
Current portion of loan payable, EIDL | ||||||||
Loans payable to financial institutions | ||||||||
Due to related party | ||||||||
Other payables | ||||||||
Total current liabilities | ||||||||
Operating lease liabilities, less current portion | ||||||||
Bank notes payables, less current portion | ||||||||
Loan payable, EIDL, less current portion | ||||||||
Notes payable to related party | ||||||||
Convertible notes to related party | ||||||||
Total liabilities | ||||||||
Commitments and Contingencies | ||||||||
Stockholders’ equity | ||||||||
Class A Common Stock - $ par value; authorized shares; shares issued and outstanding at June 30, 2024 and shares issued and outstanding at December 31, 2023 | ||||||||
Class B Common Stock - $ par value; authorized shares; shares issued and outstanding at June 30, 2024 and December 31, 2023 | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
See accompanying notes to unaudited consolidated financial statements.
1 |
Yoshiharu Global Co.
Unaudited Consolidated Statements of Operations
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Revenue: | ||||||||||||||||
$ | $ | $ | $ | |||||||||||||
Total revenue | ||||||||||||||||
Restaurant operating expenses: | ||||||||||||||||
Food, beverages and supplies | ||||||||||||||||
Labor | ||||||||||||||||
Rent and utilities | ||||||||||||||||
Delivery and service fees | ||||||||||||||||
Depreciation | ||||||||||||||||
Total restaurant operating expenses | ||||||||||||||||
Net operating restaurant operating income | ||||||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | ||||||||||||||||
Related party compensation | ||||||||||||||||
Advertising and marketing | ||||||||||||||||
Total operating expenses | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income (expense): | ||||||||||||||||
Gain on disposal of fixed asset | ||||||||||||||||
Other income | ||||||||||||||||
Interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total other income (expense), net | ( | ) | ( | ( | ) | ( | ) | |||||||||
Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income tax provision | ||||||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Loss per share: | ||||||||||||||||
Basic and diluted | $ | ) | ) | ) | ) | |||||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic and diluted |
See accompanying notes to unaudited consolidated financial statements.
2 |
Yoshiharu Global Co.
Unaudited Consolidated Statements of Stockholders’ Equity (Deficit)
Class A Shares | Class B Shares | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Issuance of Class A Common Stock | - | |||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance at March 31, 2024 (unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance at June 30, 2024 (unaudited) | $ | $ | $ | $ | ( | ) | $ |
Class A Shares | Class B Shares | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance at March 31, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance at June 30, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
3 |
Yoshiharu Global Co.
Unaudited Consolidated Statements of Cash Flows
For the six months ended June 30, | ||||||||
2024 | 2023 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Gain on disposal of fixed asset | ( | ) | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | ( | ) | ||||||
Inventories | ( | ) | ||||||
Other assets | ( | ) | ||||||
Accounts payable and accrued expenses | ( | ) | ||||||
Due to related party | ||||||||
Other payables | ||||||||
Net cash provided by (used in) operating activities | ( | ) | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | ( | ) | ( | ) | ||||
Acquisition of LV entities | ( | ) | ||||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities: | ||||||||
Advance from line of credit | ||||||||
Proceeds from borrowings for acquisition of LV entities | ||||||||
Proceeds from borrowings | ||||||||
Repayments on bank notes payables | ( | ) | ( | ) | ||||
Repayment of loan payable to financial institutions | ( | ) | ||||||
Proceeds from sale of common shares | ||||||||
Net cash provided by financing activities | ||||||||
Net decrease in cash | ( | ) | ( | ) | ||||
Cash – beginning of period | ||||||||
Cash – end of period | $ | $ | ||||||
Supplemental disclosures of non-cash financing activities: | ||||||||
Note payable to related party | $ | |||||||
Convertible notes to related party | $ | |||||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid during the periods for: | ||||||||
Interest | $ | $ | ||||||
Income taxes | $ | $ |
See accompanying notes to unaudited consolidated financial statements.
4 |
YOSHIHARU GLOBAL CO.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Yoshiharu Global Co. (“Yoshiharu”) was incorporated in the State of Delaware on December 9, 2021. Yoshiharu has the following wholly owned subsidiaries:
Name | Date of Formation | Description of Business | ||
The Company owns several restaurants specializing in Japanese ramen and other Japanese cuisines. The Company offers a variety of Japanese ramens, rice bowls, and appetizers. Unless otherwise stated or the context otherwise requires, the terms “Yoshiharu” “we,” “us,” “our” and the “Company” refer collectively to Yoshiharu and, where appropriate, its subsidiaries.
Prior
to September 30, 2021, the Yoshiharu business (the “Business”) consisted of the first seven separate entities listed above
(collectively, the “Entities”), each wholly owned by James Chae (“Mr. Chae”), and each holding one (1) store,
except for JJ, which held two stores and the Business’s intellectual property (the “IP”). Effective October 2021, JJ
transferred the IP to Mr. Chae. Effective October 2021, Mr. Chae contributed
On
December 9, 2021, Yoshiharu completed a share exchange agreement whereby Mr. Chae, the sole stockholder of Holdings, received
On
November 22, 2023, the Company filed a Certificate of Amendment (the “Certificate of Amendment”) to the Company’s Amended
and Restated Certificate of Incorporation to effect a reverse stock split of its issued Class A common stock and Class B common stock
together with the Class A common stock, “Common Stock”), in the ratio of
No fractional shares were issued as a result of the Reverse Stock Split. Instead, any fractional shares that would have resulted from the Reverse Stock Split were rounded up to the next whole number. As a result, total of shares of Class A common stock were issued and total of shares of Class A common stock were outstanding as of December 31, 2023. The Reverse Stock Split affected all stockholders uniformly and did not alter any stockholder’s percentage interest in the Company’s outstanding Common Stock, except for adjustments that may result from the treatment of fractional shares. The number of authorized shares of Common Stock of the Company and number of authorized, issued, and outstanding shares of the preferred stock of the Company were not changed.
5 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United States of America. The consolidated financial statements include Yoshiharu and its wholly owned subsidiaries instead in Note 1 above as of June 30, 2024 and December 31, 2023 and for the six months ended June 30, 2024 and 2023. All intercompany accounts, transactions, and profits have been eliminated upon consolidation.
Initial Public Offering
In
September 2022, the Company consummated its initial public offering (the “IPO”) of
The
Company granted the underwriters a 45-day option to purchase up to
On September 9, 2022, the Company’s stock began trading on the Nasdaq Capital Market under the symbol “YOSH.”
YLV Acquisition
On
June 12, 2024, the Company consummated the acquisition of assets of three restaurant entities (Jjanga, HJH, and Aku) for an aggregate
$
Deferred Offering Costs
Deferred offering costs were expenses directly related to the IPO. These costs consisted of legal, accounting, printing, and filing fees. The deferred offering costs were offset against the IPO proceeds in September 2022 and were reclassified to additional paid-in capital upon completion of the IPO.
Use of Estimates and Assumptions
The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and the accompanying notes. Such estimates include accounts receivables, accrued liabilities, income taxes, long-lived assets, and deferred tax valuation allowances. These estimates generally involve complex issues and require management to make judgments, involve analysis of historical and future trends that can require extended periods of time to resolve, and are subject to change from period to period. In all cases, actual results could differ materially from estimates.
Marketing
Marketing
costs are charged to expense as incurred. Marketing costs were approximately $
Delivery Fees Charged by Delivery Service Providers
The Company’s customers may order online through third party service providers such as Uber Eats, Door Dash, and others. These third-party service providers charge delivery and order fees to the Company. Such fees are expensed when incurred. Delivery fees are included in delivery and service fees in the accompanying consolidated statements of operations.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company’s net revenue primarily consists of revenues from food and beverage sales. Revenues from the sale of food items by Company-owned restaurants are recognized as Company sales when a customer receives the food that they purchased, which is when our obligation to perform is satisfied. The timing and amount of revenue recognized related to Company sales was not impacted by the adoption of ASC 606.
6 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Inventories, which are stated at the lower of cost or net realizable value, consist primarily of perishable food items and supplies. Cost is determined using the first-in, first out method.
Segment Reporting
ASC
280, Segment Reporting, requires public companies to report financial and descriptive information about their reportable operating segments.
The Company identifies its operating segments based on how executive decision makers internally evaluates separate financial information,
business activities and management responsibility. Accordingly, the Company has
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows:
Furniture and equipment | ||
Leasehold improvements | ||
Vehicle |
Goodwill and Intangible Assets
Goodwill and certain intangible assets were recorded in connection with the YLV asset acquisition in April 2024, and were accounted for in accordance with ASC 805, “Business Combinations.” Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired. Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was recognized during the three and six months ended June 30, 2024.
Income Taxes
The accounting standard on accounting for uncertainty in income taxes addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under that guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company had no unrecognized tax benefits identified or recorded as liabilities as of June 30, 2024.
Impairment of Long-Lived Assets
When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, the Company performs an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income.
7 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
The Company utilizes ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The Company’s financial instruments consisted of cash, operating lease right-of-use assets, net, accounts payable and accrued expenses, notes payables, and operating lease liabilities. The estimated fair value of cash, operating lease right-of-use assets, net, and notes payables approximate its carrying amount due to the short maturity of these instruments.
Leases
In accordance with ASC 842, Leases, the Company determines whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, the Company determines whether it should be classified as an operating or finance lease. Operating leases are recorded in the balance sheet as: right-of-use asset (“ROU asset”) and operating lease liability. An ROU asset represents the Company’s right to use an underlying asset for the lease term and an operating lease liability represents the Company’s obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at the commencement date of the lease and measured based on the present value of lease payments over the lease term. The ROU asset also includes deferred rent liabilities. The Company’s lease arrangements generally do not provide an implicit interest rate. As a result, in such situations the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option in the measurement of its ROU asset and operating lease liability. Lease expense for the operating lease is recognized on a straight-line basis over the lease term. The Company has a lease agreement with lease and non-lease components, which are accounted for as a single lease component.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
8 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITION UNDER ASSET PURCHASE
On June 12, 2024, the Company consummated the closing of the transactions contemplated by an Asset Purchase Agreement (“APA”) with Mr. Jihyuck Hwang (“Seller”)(see Note 9 Related Party Transactions) via the Company’s wholly owned subsidiary, Yoshiharu Las Vegas (“YLV”). The APA provided for the purchase of specific assets of the three restaurant businesses, including inventory, security deposits, fixed assets and lease assignment effective as of April 20, 2024. The Company considered the guidance in ASC 805, Business Combinations, and determined the transaction was an asset acquisition. As a result, the estimated fair value of the assets acquired, and amount of liabilities assumed are included in the accompanying balance sheet as of June 30, 2024. The three restaurants consist of one Japanese ramen restaurant, and two Izakaya style restaurants offering sushi & steak along with Japanese ramen.
The condensed consolidated financial statements include the results of the YLV from the date of acquisition. The purchase price has been allocated based on estimated fair values as of the acquisition date. The purchase price was allocated as follows:
Preliminary Purchase Price | April 20, 2024 | |||
Cash | $ | |||
Promissory note to Seller | ||||
Bank notes payables | ||||
Convertible note to Seller | ||||
Total purchase price | $ | |||
Preliminary Purchase Price Allocation | ||||
Fixed assets | $ | |||
Inventory and other assets | ||||
Operating lease right-of-use asset, net | ||||
Goodwill | ||||
Intangible assets | ||||
Operating lease liabilities | ( | ) | ||
Acquired assets, net | $ |
The purchase price allocation has been prepared on a preliminary basis based on the information that was available to the Company at the time the condensed consolidated financial statements were prepared, and revisions to the preliminary purchase price allocation may result as additional information becomes available.
In determining the purchase price allocation, management considered, among other factors, the Company’s intention to use the acquired assets. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized, with no expected residual value.
4. INTANGIBLE ASSETS
Intangible assets consisted of the following:
Life | Average Remining Life | June 30, 2024 | April 20, 2024 | ||||||||||
Brand & non-compete | $ | $ | |||||||||||
Less – accumulated amortization | ( | ) | |||||||||||
Total intangible assets, net | $ | $ |
Estimated future amortization of intangible assets is as follows:
Years ending December 31, | Amount | |||
2024 | $ | |||
2025 | ||||
2026 | ||||
2027 | ||||
2028 | ||||
Thereafter | ||||
Total | $ |
Amortization
expense on intangible assets amounted to $
9 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
Leasehold Improvement | $ | $ | ||||||
Furniture and equipment | ||||||||
Vehicle | ||||||||
Total property and equipment | ||||||||
Accumulated depreciation | ( | ) | ( | ) | ||||
Total property and equipment, net | $ | $ |
Total
depreciation was $
6. OTHER ASSETS
Other assets consisted of the following:
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
Escrow deposit to acquire assets from Las Vegas restaurants | $ | $ | ||||||
Security deposits | ||||||||
Tenant improvement receivable | ||||||||
Loan to Won Zo Whittier | ||||||||
Others | ||||||||
Total other assets | $ | $ |
7. LINE OF CREDIT
The
Company has a $
10 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
8. BANK NOTES PAYABLES
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
November 27, 2018 ($ | $ | $ | ||||||
September 14, 2021 ($ | ||||||||
April 22, 2022 ($ | ||||||||
May 22, 2023 ($ | ||||||||
May 22, 2023 ($ | ||||||||
May 22, 2023 ($ | ||||||||
September 13, 2023 ($ | ||||||||
September 13, 2023 ($ | ||||||||
March 22, 2024 ($ | ||||||||
March 22, 2024 ($ | ||||||||
January 30, 2024 ($ | ||||||||
June 4, 2024 ($ | ||||||||
Total bank notes payables | ||||||||
Less - current portion | ( | ) | ( | ) | ||||
Total bank notes payables, less current portion | $ | $ |
The following table provides future minimum payments as of June 30, 2024:
For the years ended | Amount | |||
2024 (remaining six months) | $ | |||
2025 | ||||
2026 | ||||
2027 | ||||
2028 | ||||
Thereafter | ||||
Total | $ |
November 27, 2018 – $780,000 – Global JJ Group, Inc.
On
November 27, 2018, Global JJ Group, Inc. (the “JJ”) executed the standard loan documents required for securing a loan of
$
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
11 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
8. BANK NOTES PAYABLES (Continued)
September 14, 2021 – $197,000 – Global CC Group, Inc.
On
September 14, 2021, the CC executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
April 22, 2022– $195,000 – Yoshiharu Cerritos.
On
April 22, 2022, Yoshiharu Cerritos (the “YC”) executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
May 22, 2023– $138,000 – Global BB Group, Inc.
On
May 22, 2023, Global BB Group, Inc. (the “BB”) executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
May 22, 2023– $196,000 – Global CC Group, Inc.
On
May 22, 2023, Global CC Group, Inc. (the “CC”) executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
May 22, 2023– $178,000 – Global DD Group, Inc.
On
May 22, 2023, Global DD Group, Inc. (the “DD”) executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
12 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
8. BANK NOTES PAYABLES (Continued)
September 13, 2023– $150,000 – Yoshiharu Garden Grove
On
September 13, 2023, Yoshiharu Garden Grove (the “YG”) executed the standard loan documents required for securing a loan of
$
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
September 13, 2023– $150,000 – Yoshiharu Laguna
On
September 13, 2023, Yoshiharu Laguna (the “YL”) executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
March 22, 2024– $150,000 – Yoshiharu Menifee
On
March,22, 2024, Yoshiharu Menifee (the “YM”) executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
March 22, 2024– $150,000 – Yoshiharu San Clemente
On
March,22, 2024, Yoshiharu San Clemente (the “YCT”) executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
January 30, 2024– $500,000 – Yoshiharu
On
January 30, 2024, Yoshiharu Global Co. (the “Yoshiharu”) executed the standard loan documents required for securing a loan
of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
June 4, 2024– $900,000 – Yoshiharu Las Vegas
On
June 4, 2024, Yoshiharu Las Vegas (the “YLV”) executed the standard loan documents required for securing a loan of $
Pursuant
to that certain Loan Authorization and Agreement, interest accrues at a variable rate that is subject to change from time to time based
on changes in an independent index which is the Prime Rate as published in the Wall Street Journal per annum and will accrue only on
funds actually advanced from the date of each advance. The loan requires a payment of $
13 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
9. LOAN PAYABLES, EIDL
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
June 13, 2020 ($ | $ | $ | ||||||
June 13, 2020 ($ | ||||||||
July 15, 2020 ($ | ||||||||
Total loans payables, EIDL | ||||||||
Less - current portion | ( | ) | ( | ) | ||||
Total loans payables, EIDL, less current portion | $ | $ |
The following table provides future minimum payments as of June 30, 2024:
For the years ended | Amount | |||
2024 (remaining nine months) | $ | |||
2025 | ||||
2026 | ||||
2027 | ||||
2028 | ||||
Thereafter | ||||
Total | $ |
June 13, 2020 – $150,000 – Global AA Group, Inc.
On June 13, 2020, Global AA Group, Inc. (the “AA”) executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the AA’s business.
Pursuant
to that certain Loan Authorization and Agreement, the AA borrowed an aggregate principal amount of the AA EIDL Loan of $
In connection therewith, the AA executed (i) a loan for the benefit of the SBA, which contains customary events of default and (ii) a security agreement, granting the SBA a security interest in all tangible and intangible personal property of the AA, which also contains customary events of default.
June 13, 2020 – $150,000 – Global BB Group, Inc.
On June 13, 2020, Global BB Group, Inc. (the “BB”) executed the standard loan documents required for securing an EIDL loan (the “BB EIDL Loan”) from the SBA in light of the impact of the COVID-19 pandemic on the BB’s business.
14 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
9. LOAN PAYABLES, EIDL (Continued)
Pursuant
to that certain Loan Authorization and Agreement, the BB borrowed an aggregate principal amount of the BB EIDL Loan of $
In connection therewith, the BB executed (i) a loan for the benefit of the SBA, which contains customary events of default and (ii) a security agreement, granting the SBA a security interest in all tangible and intangible personal property of the BB, which also contains customary events of default.
July 15, 2020 – $150,000 – Global JJ Group, Inc.
On July 15, 2020, Global JJ Group, Inc. (the “JJ”) executed the standard loan documents required for securing an EIDL loan (the “JJ EIDL Loan”) from the SBA in light of the impact of the COVID-19 pandemic on the JJ’s business.
Pursuant
to that certain Loan Authorization and Agreement, the JJ borrowed an aggregate principal amount of the JJ EIDL Loan of $
15 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10. LOANS PAYABLE TO FINANCIAL INSTITUTIONS
Loans payable to financial institutions consist of the following:
June 30, 2024 | December 31, 2023 | |||||||
November 17, 2023 ($ | ||||||||
November 17, 2023 ($ | ||||||||
November 21, 2023 ($ | ||||||||
November 30, 2023 ($ | ||||||||
November 20, 2023 ($ | ||||||||
November 20, 2023 ($ | ||||||||
Total loan payable | $ | $ |
11. RELATED PARTY TRANSACTIONS
The Company had the following related party transactions:
● | Due
to related party – From time to time, the Company loaned money to APIIS Financial Group, a company owned by James Chae,
who is also the majority stockholder and CEO of the Company. The balance is non-interest bearing and due on demand. As of June 30,
2024 and December 31, 2023, the balance was $ | |
● | Related
party compensation – For the six months ended June 30, 2024 and 2023, the compensation to James Chae was $ | |
● | Notes
payable and Convertible notes to related party –. 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 $ | |
● | Combination
of Entities Under Common Control - Effective October 2021, JJ transferred IP assets to James Chae, and then Mr. Chae contributed
| |
● | Private
Placement - In December 2021, the Company received subscriptions for the sale of | |
● | Exchange class A common stock for class B common stock - Immediately prior to the IPO in September 2022, the Company exchanged shares of class A common stock held by James Chae into shares of class B common stock.
|
16 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAX
Total income tax (benefit) expense consists of the following:
For the Six Months Ended June 30, | 2024 | 2023 | ||||||
Current provision (benefit): | ||||||||
Federal | $ | $ | ||||||
State | ||||||||
Total current provision (benefit) | ||||||||
Deferred provision (benefit): | ||||||||
Federal | ||||||||
State | ||||||||
Total deferred provision (benefit) | ||||||||
Total tax provision (benefit) | $ | $ |
A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:
June 30, | 2024 | 2023 | ||||||
Statutory federal rate | % | % | ||||||
State income taxes net of federal income tax benefit and others | % | % | ||||||
Permanent differences for tax purposes and others | % | % | ||||||
Change in valuation allowance | - | % | - | % | ||||
Effective tax rate | % | % |
17 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAX (Continued)
The
income tax benefit differs from the amount computed by applying the U.S. federal statutory tax rate of
June 30, 2024 | December 31, 2023 | |||||||
Deferred tax assets: | ||||||||
Net operating loss | $ | $ | ||||||
Other temporary differences | ||||||||
Total deferred tax assets | ||||||||
Less – valuation allowance | ( | ) | ( | ) | ||||
Total deferred tax assets, net of valuation allowance | $ | $ |
Deferred income taxes reflect the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax assets and liabilities are as follows:
As
of December 31, 2023, the Company had available net operating loss carryovers of approximately $
The Company files income tax returns in the U.S. federal jurisdiction and California and is subject to income tax examinations by federal tax authorities for tax year ended 2018 and later and subject to California authorities for tax year ended 2017 and later. The Company currently is not under examination by any tax authority. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of June 30, 2024 and December 31, 2023, the Company has no accrued interest or penalties related to uncertain tax positions.
As
of June 30, 2024, the Company had cumulative net operating loss carryforwards for federal tax purposes of approximately $
13. COMMITMENTS AND CONTINGENCIES
Commitments
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components. The Company has elected to account for these lease and non-lease components as a single lease component.
18 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES (Continued)
In accordance with ASC 842, the components of lease expense were as follows:
June 30, | ||||||||
For the six months ended | 2024 | 2023 | ||||||
Operating lease expense | $ | $ | ||||||
Total lease expense | $ | $ |
In accordance with ASC 842, other information related to leases was as follows:
For the six months ended | 2024 | 2023 | ||||||
Operating cash flows from operating leases | $ | $ | ||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
Weighted-average remaining lease term—operating leases | ||||||||
Weighted-average discount rate—operating leases | % |
Operating | ||||
Year ending: | Lease | |||
2024 (remaining six months) | $ | |||
2025 | ||||
2026 | ||||
2027 | ||||
2028 | ||||
Thereafter | ||||
Total undiscounted cash flows | $ | |||
Reconciliation of lease liabilities: | ||||
Weighted-average remaining lease terms | ||||
Weighted-average discount rate | % | |||
Present values | $ | |||
Lease liabilities—current | ||||
Lease liabilities—long-term | ||||
Lease liabilities—total | $ | |||
Difference between undiscounted and discounted cash flows | $ |
19 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
14. STOCKHOLDERS’ EQUITY
Class A Common Stock
The
Company has authorization to issue and have outstanding at any one time
See Note 1 and Note 8 above for details regarding the issuance and redemption of shares of the Company’s class A common stock to and from James Chae, the Company’s majority stockholder, in December 2021.
In December 2021, the Company received subscriptions for the sale of shares of class A common stock to investors for $ per share, for total expected proceeds of