What changed in Vestand Inc.'s 10-K — 2023 vs 2024
vs
Paragraph-level year-over-year comparison of Vestand Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+139 added−126 removedSource: 10-K (2025-03-27) vs 10-K (2024-04-01)
Top changes in Vestand Inc.'s 2024 10-K
139 paragraphs added · 126 removed · 71 edited across 5 sections
- Item 7. Management's Discussion & Analysis+60 / −72 · 32 edited
- Item 1A. Risk Factors+42 / −27 · 16 edited
- Item 1. Business+20 / −23 · 19 edited
- Item 5. Market for Registrant's Common Equity+14 / −2 · 2 edited
- Item 1C. Cybersecurity+3 / −2 · 2 edited
Item 1. Business
Business — how the company describes what it does
19 edited+1 added−4 removed113 unchanged
Item 1. Business
Business — how the company describes what it does
19 edited+1 added−4 removed113 unchanged
2023 filing
2024 filing
Biggest changeWe are obligated under non-cancelable leases for the majority of our restaurants, as well as our corporate offices. The majority of our restaurant leases have lease terms of 10 years, inclusive of customary extensions which are at the option of the company.
Biggest changeThe majority of our restaurant leases have lease terms of 10 years, inclusive of customary extensions which are at the option of the company. Our restaurant leases generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges, and other operating costs.
Although historically, and as of December 31, 2023, global supply chain disruptions have not materially adversely affected our business, a substantial increase in the cost of, or inability to procure, the food products most critical to our menu, such as canola oil, rice, meats, fish and other seafood, as well as fresh vegetables, could materially and adversely affect our business, financial condition or results from operations.
Although historically, and as of December 31, 2024, global supply chain disruptions have not materially adversely affected our business, a substantial increase in the cost of, or inability to procure, the food products most critical to our menu, such as canola oil, rice, meats, fish and other seafood, as well as fresh vegetables, could materially and adversely affect our business, financial condition or results from operations.
We lease the property for our corporate offices and all of the properties on which we operate our restaurants. 3 The table below shows the locations of our restaurants as of the date of this Report: Store Location Address Year Launched Orange 1891 N Tustin St, Orange, CA 92865 2016 Buena Park 6970 Beach Blvd, #F206 Buena Park, CA 90621 2017 Whittier 8426 Laurel Ave, STE A Whittier, CA 90605 2017 Chino 4004 Grand Ave STE C Chino, CA 91710 2019 Eastvale 4910 Hamner Ave STE 150, Eastvale, CA 91752 2020 Irvine 3935 Portola Pkwy, Irvine, CA 92602 2021 La Mirada 12806 La Mirada Blvd, La Mirada, CA 90638 2022 Cerritos 11533 South St, Cerritos, CA 90703 2022 Corona 440 N Mckinley St STE 101, Corona, CA 92879 2023 Garden Grove 9812 Chapman Avenue Garden Grove, CA 92841 2023 Laguna 32341 Golden Lantern, STE B, Laguna Niguel, CA 92677 1Q 2024* 1 Menifee 27311 Newport Road, Suite 320, Menifee, CA 92584 2Q 2024* 2 San Clemente 638 Camino de Los Mares STE 16, San Clemente, CA 92673 2Q 2024* 2 Las Vegas 6125 S.
We lease the property for our corporate offices and all of the properties on which we operate our restaurants. 3 The table below shows the locations of our restaurants as of the date of this Report: Store Location Address Year Launched Orange 1891 N Tustin St, Orange, CA 92865 2016 Buena Park 6970 Beach Blvd, #F206 Buena Park, CA 90621 2017 Whittier 8426 Laurel Ave, STE A Whittier, CA 90605 2017 Chino 4004 Grand Ave STE C Chino, CA 91710 2019 Eastvale 4910 Hamner Ave STE 150, Eastvale, CA 91752 2020 Irvine 3935 Portola Pkwy, Irvine, CA 92602 2021 La Mirada 12806 La Mirada Blvd, La Mirada, CA 90638 2022 Cerritos 11533 South St, Cerritos, CA 90703 2022 Corona 440 N Mckinley St STE 101, Corona, CA 92879 2023 Garden Grove 9812 Chapman Avenue Garden Grove, CA 92841 2023 Laguna 32341 Golden Lantern, STE B, Laguna Niguel, CA 92677 1Q 2024* 1 San Clemente 638 Camino de Los Mares STE 16, San Clemente, CA 92673 4Q 2024* 2 Menifee 27311 Newport Road, Suite 320, Menifee, CA 92584 1Q 2025* 3 Ontario 960 N Haven Ave, Suite 100, Ontario, CA 91764 1Q 2025* 3 Las Vegas 6125 S.
At Yoshiharu, we believe our rapid customer turnover, combined with our ability to deliver in 2 major day parts with lunch and dinner, allows for robust and efficient sales in each of our restaurants. Our average unit volume (“AUV”, as defined herein) was $1.2 million in 2022 and $1.1 million in 2023. Quality of Food and Excellence in Customer Service.
At Yoshiharu, we believe our rapid customer turnover, combined with our ability to deliver in 2 major day parts with lunch and dinner, allows for robust and efficient sales in each of our restaurants. Our average unit volume (“AUV”, as defined herein) was $1.1 million in 2023 and $1.0 million in 2024. Quality of Food and Excellence in Customer Service.
In September 2022, we consummated our initial public offering (the “IPO”) of 2,940,000 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”) at a public offering price of $4.00 per share, generating gross proceeds of $11,760,000.
In September 2022, we consummated our initial public offering (the “IPO”) of 2,940,000 shares of our Class A common stock (pre-Reverse Stock Split), par value $0.0001 per share (“Class A Common Stock”) at a public offering price of $4.00 per share, generating gross proceeds of $11,760,000.
We have been able to offset to some extent these inflationary and other cost pressures through actions such as increasing menu prices and supply chain initiatives, however, we expect these inflationary and other cost pressures to continue into the year 2024. Our Strengths Experienced Management Team Dedicated to Growth .
We have been able to offset to some extent these inflationary and other cost pressures through actions such as increasing menu prices and supply chain initiatives, however, we expect these inflationary and other cost pressures to continue into and throughout the year 2025. Our Strengths Experienced Management Team Dedicated to Growth .
The Reverse Stock Split affects all stockholders uniformly and did not alter any stockholder’s percentage interest in our outstanding Common Stock, except for adjustments that may result from the treatment of fractional shares. The number of authorized shares of Common Stock and number of authorized, issued, and outstanding shares of the preferred stock were not changed.
The Reverse Stock Split affects all stockholders uniformly and did not alter any stockholder’s percentage interest in our outstanding Common Stock, except for adjustments that may result from the treatment of fractional shares. The number of authorized shares of Common Stock and number of authorized shares of our Class B common stock were not changed.
During this time, the Asian population’s share of the nation’s total population is projected to increase by 15%, from approximately 6% to 6.9%. Additionally, we believe that Yoshiharu is well-positioned to grow our share of the restaurant market as consumers seek quality, value, healthier options, and authentic global and regional cuisine in their dining choices.
During this time, the Asian population’s share of the nation’s total population is projected to increase by 100%, from approximately 7% to 14%. Additionally, we believe that Yoshiharu is well-positioned to grow our share of the restaurant market as consumers seek quality, value, healthier options, and authentic global and regional cuisine in their dining choices.
According to the National Restaurant Association 2023 State of the Industry report, roughly 45% of family and casual dining restaurants plan to add new menu items identified as healthy or nutritious in 2023.
According to the National Restaurant Association 2024 State of the Industry report, roughly 47% of family and casual dining restaurants plan to add new menu items identified as healthy or nutritious in 2024.
Seasonality Due to Yoshiharu’s menu breadth and diversification of offerings, we do not experience significant seasonality. Employees As of December 31, 2023, we had approximately 180 employees, of whom 20 were exempt employees and the remainder were non-exempt employees.
Seasonality Due to Yoshiharu’s menu breadth and diversification of offerings, we do not experience significant seasonality. Employees As of December 31, 2024, we had approximately 259 employees, of whom 10 were exempt employees and the remainder were non-exempt employees.
Restaurant Industry Overview According to the National Restaurant Association (the “NRA”), restaurant industry sales in 2023 were over $1.0 trillion, up from $966 billion in 2022 and is forecast to grow to $1.1 trillion in 2024.
Restaurant Industry Overview According to the National Restaurant Association (the “NRA”), restaurant industry sales in 2024 were over $1.1 trillion, up from $1.0 trillion in 2024 and is forecast to grow to $1.5 trillion in 2025.
As part of our strategic site selection process, we receive potential site locations from networks of local brokers, which are then reviewed by our Development Team.
Site Development and Expansion Site Selection Process We consider site selection to be instrumental to our success. As part of our strategic site selection process, we receive potential site locations from networks of local brokers, which are then reviewed by our Development Team.
Census Bureau, the Asian population is projected to be one of the fastest growing demographics in the United States, increasing in size from 20 million people in calendar year 2020 to 24.4 million people by calendar year 2030.
Census Bureau, the Asian population is projected to be one of the fastest growing demographics in the United States, increasing in size from 22.4 million people in calendar year 2019 to 46 million people by calendar year 2060.
We primarily compete with other full-service restaurants, which, according to the NRA, had approximately$305 billion of sales in calendar year 2022, up from $266 billion in 2021.
We primarily compete with other full-service restaurants, which, according to the NRA, had approximately $353 billion of sales in calendar year 2024, up from $324 billion in 2023.
Properties As of December 31, 2023, we operated ten restaurants in California and opened one new location in February 2024 in California. We operate a variety of restaurant formats, including in-line and end-cap restaurants located in retail centers of varying sizes. Our restaurants currently average approximately 1,578 square feet.
Properties As of December 31, 2024, we operated twelve (12) restaurants in California and one location under construction. We also operated three restaurants in Las Vegas since April 2024. We operate a variety of restaurant formats, including in-line and end-cap restaurants located in retail centres of varying sizes. Our restaurants currently average approximately 1,578 square feet.
We believe that increased multiculturalism in the United States, driven in part by growth in the Asian demographic, contributes to a favorable macro environment for Yoshiharu’s future growth. According to the U.S.
The limited-service segment generated approximately $421 billion in calendar year 2024, or a roughly $26 billion increase from the prior year. 7 We believe that increased multiculturalism in the United States, driven in part by growth in the Asian demographic, contributes to a favorable macro environment for Yoshiharu’s future growth. According to the U.S.
Our restaurant leases generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges, and other operating costs. Some restaurant leases provide for contingent rental payments based on sales thresholds, although we generally do not expect to pay significant rent on these properties based on the thresholds in those leases.
Some restaurant leases provide for contingent rental payments based on sales thresholds, although we generally do not expect to pay significant rent on these properties based on the thresholds in those leases. We do not own any real property.
Fort Apache Road, Suite 200, Las Vegas, NV 89148 1Q 2024* 3 Las Vegas 280 E Flamingo Road, Suite C, Las Vegas, NV 89169 1Q 2024* 3 Las Vegas 6572 N Decatur Blvd., Las Vegas, NV 89131 1Q 2024* 3 * 1 Opened in February 2024. * 2 Under construction. * 3 Under closing process.
Fort Apache Road, Suite 200, Las Vegas, NV 89148 2Q 2024* 4 Las Vegas 280 E Flamingo Road, Suite C, Las Vegas, NV 89169 2Q 2024* 4 Las Vegas 6572 N Decatur Blvd., Las Vegas, NV 89131 2Q 2024* 4 * 1 Opened in February 2024. * 2 Opened in October 2024 * 3 Under construction. * 4 Acquired in April 2024 We are obligated under non-cancelable leases for the majority of our restaurants, as well as our corporate offices.
Further, we entered into a material definitive agreement to acquire three existing restaurants in Las Vegas and expect to close the acquisition in the early second quarter of 2024. We anticipate approximately $350,000 in costs per new location in development, and has spent approximately $514,000 for the two locations under construction/development as of December 31, 2023.
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. We anticipate approximately $350,000 - $550,000 in costs per new location in development and has spent approximately $484,000 for the one location under construction/development as of December 31, 2024.
Removed
We do not own any real property. We opened one restaurant in each year from 2019 through 2021, and we have opened two restaurants in 2022 and 2023. We also opened a new restaurant in February 2024, and currently have two new locations under construction/development.
Added
We opened one restaurant in each year from 2019 through 2021, and we have opened two restaurants in 2022, 2023 and 2024, respectively. We also acquired three existing restaurants in Las Vegas 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”).
Removed
In 2019, we closed our West Hollywood and Lynwood, California restaurants due to underperformance. We cannot provide assurance that we will be able to open any specific number of restaurants in any year.
Removed
See “Risk Factors—Risks Related to Our Business and Industry—Our long-term success is highly dependent on our ability to successfully identify and secure appropriate sites and timely develop and expand our operations in existing and new markets.” Site Development and Expansion Site Selection Process We consider site selection to be instrumental to our success.
Removed
The limited-service segment generated approximately $370 billion in calendar year 2022, or a roughly $30 billion increase from the prior year. 7 According to the 2023 State of the Restaurant report, full-service restaurant sales are expected to increase to $324 billion in calendar year 2023, an increase of 6.2% from 2022 and the limited-service segment is forecast to reach $395 billion in 2023, resulting in a 6.8% increase from 2022.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
16 edited+26 added−11 removed235 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
16 edited+26 added−11 removed235 unchanged
2023 filing
2024 filing
Biggest changeWe believe that the expected cash flow from operations, the proceeds from the IPO, and the proceeds from the Securities Purchase Agreement will be adequate to fund operating lease obligations, capital expenditures and working capital obligations for at least the next 12 months and thereafter.
Biggest changeNotwithstanding our current belief that our expected cash flow from operations, and the proceeds from the Purchase Agreement and from the private placements set forth above (including our belief that we will satisfy our registration requirements so that we are not forced to redeem the equity previously sold to such private placement investors) will be adequate to fund operating lease obligations, capital expenditures and working capital obligations for at least the next 12 months and thereafter, there are no assurances that we will be able to do so.
If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our restaurants, which could cause a restaurant to remove items from its menu.
If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our restaurants, which could cause a restaurant to remove items from its menu.
If we face labor shortages, increased labor costs or unionization activities, our growth, business, financial condition and operating results could be adversely affected. Labor is a primary component in the cost of operating our restaurants. We are currently experiencing labor shortages which is a risk that we share with our competitors. Availability of qualified employees is scarce.
If we face labor shortages, increased labor costs or unionization activities, our growth, business, financial condition and operating results could be adversely affected. Labor is a primary component in the cost of operating our restaurants. We are currently experiencing labor shortages which is a risk that we share with our competitors. The availability of qualified employees is scarce.
Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. 27
Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Although historically and as of December 31, 2023, global supply chain disruptions have not materially adversely affected our business, a substantial increase in the cost of, or inability to procure, the food products most critical to our menu, such as canola oil, rice, meats, fish and other seafood, as well as fresh vegetables, could materially and adversely affect our business, financial condition or results from operations.
Although historically and as of December 31, 2024, global supply chain disruptions have not materially adversely affected our business, a substantial increase in the cost of, or inability to procure, the food products most critical to our menu, such as canola oil, rice, meats, fish and other seafood, as well as fresh vegetables, could materially and adversely affect our business, financial condition or results from operations.
During the pandemic and as of December 31, 2023, construction permits have been significantly delayed, causing us to incur lease payments prior to the opening of such locations, which means prior to the generation of any revenues from such stores.
During the pandemic and as of December 31, 2024, construction permits have been significantly delayed, causing us to incur lease payments prior to the opening of such locations, which means prior to the generation of any revenues from such stores.
Item 1A. Risk Factors. Risks Related to Our Business We have incurred operating losses and may not be profitable in the future. Our plans to maintain and increase liquidity may not be successful. We incurred a net loss of $3.0 million and $3.5 million for the years ended December 31, 2023 and 2022, respectively.
Item 1A. Risk Factors. Risks Related to Our Business We have incurred operating losses and may not be profitable in the future. Our plans to maintain and increase liquidity may not be successful. We incurred a net loss of $2.7 million and $3.0 million for the years ended December 31, 2024 and 2023, respectively.
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. As of December 31, 2022 and 2023, we operated eight and ten restaurants, respectively.
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. As of December 31, 2023 and 2024, we operated ten and fifteen restaurants, respectively.
We have, from time to time, have received unsecured borrowings from James Chae and his affiliate APIIS Financial, Inc., a company 100% owned and controlled by our Chairman and Chief Executive Officer, Mr. Chae, which is unsecured, non-interest bearing, and is repayable on demand. As of December 31, 2023 and December 31, 2022, the balance was $24,720 and $172,720, respectively.
We have, from time to time, received unsecured borrowings from our Chairman and Chief Executive Officer, James Chae and his affiliate APIIS Financial, Inc., a company 100% owned and controlled by Mr. Chae, which is unsecured, non-interest bearing, and is repayable on demand. As of December 31, 2024 and December 31, 2023, the balance was $732,710 and $24,176, respectively.
We have a substantial number of hourly employees who are paid wage rates based on the applicable federal or state minimum wage. Since January 1, 2023, the State of California has a minimum wage of $15.50 per hour. Moreover, municipalities may set minimum wages above the applicable state standards, including in the municipalities in which we operate.
We have a substantial number of hourly employees who are paid wage rates based on the applicable federal or state minimum wage. Since January 1, 2024, the State of California has a minimum wage of $16.00 per hour. Moreover, municipalities may set minimum wages above the applicable state standards, including in the municipalities in which we operate.
This growth strategy and the substantial investment associated with the development of each new restaurant may cause our operating results to fluctuate and be unpredictable or adversely affect our business, financial condition or results of operations.
We may in the future open restaurants in markets where we have little or no operating experience. This growth strategy and the substantial investment associated with the development of each new restaurant may cause our operating results to fluctuate and be unpredictable or adversely affect our business, financial condition or results of operations.
We have opened one new restaurant in February 2024 and currently have two new locations under construction/development. We expect to complete the acquisition of three existing restaurants in the early second quarter of 2024 and also plan to open an additional two to four new restaurants in 2024. The capital resources required to develop each new restaurant are significant.
We have opened two new restaurants in February and October 2024, respectively, and acquired three restaurants in April 2024. We currently have two new locations under construction/development. We also plan to open an additional two to four new restaurants in 2025. The capital resources required to develop each new restaurant are significant.
We plan to continue to increase the number of our restaurants in the next several years as part of our expansion strategy and expect to open an additional two to four new restaurants in 2024. We may in the future open restaurants in markets where we have little or no operating experience.
We opened two new restaurants in 2023 and in 2024, respectively, and completed the acquisition of three existing restaurants in April 2024. We plan to continue to increase the number of our restaurants in the next several years as part of our expansion strategy and expect to open an additional two to four new restaurants in 2024.
Our success is dependent in part upon our ability to maintain and enhance the value of our brand and consumers’ connection to our brand.
Risks Related to Our Brand Negative publicity relating to one of our restaurants could reduce sales at some or all of our other restaurants. Our success is dependent in part upon our ability to maintain and enhance the value of our brand and consumers’ connection to our brand.
On January 5, 2024, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right, but not the obligation, to sell to Alumni, and Alumni is obligated to purchase, up to an aggregate of $5,000,000 in shares of our Class A Common Stock.
On January 5, 2024, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni”) whereby we sold to Alumni 45,000 shares of Class A Common Stock in exchange for $118 thousand on November 20, 2024. This Purchase Agreement terminated on December 31, 2024.
Our long-term success is highly dependent on our ability to successfully identify and secure appropriate sites and timely develop and expand our operations in existing and new markets. One of the key means of achieving our growth strategies will be through opening and operating new restaurants on a profitable basis for the foreseeable future.
One of the key means of achieving our growth strategies will be through opening and operating new restaurants on a profitable basis for the foreseeable future. We opened two new restaurants in 2023 and in 2024, respectively, we currently have two new locations under construction/development.
Removed
In September 2022, we consummated our IPO (the “IPO”) of 2,940,000 shares of Class A Common Stock at a public offering price of $4.00 per share, generating gross proceeds of $11,760,000. Net proceeds from the IPO were approximately $10.3 million after deducting underwriting discounts and commissions and other offering expenses of approximately $1.5 million.
Added
We must raise capital through the sale of equity in order to continue to sustain our operations.
Removed
We opened two new restaurants in 2022 and in 2023, respectively, and opened one new restaurant in February 2024. We currently have two new locations under construction/development, and expect to complete the acquisition of three existing restaurants in the early second quarter of 2024. We also plan to open an additional two to four new restaurants in 2024.
Added
On January 6, 2025, the Company issued and sold to Crom Structured Opportunities Fund I, LP, a Delaware limited partnership (“Crom”) a 10% OID promissory note in the aggregate principal amount of $1,100,000 (the “Note”) for a purchase price of $1,000,000.
Removed
We opened two new restaurants in 2022 and in 2023, respectively, and opened one new restaurant in February 2024. We currently have two new locations under construction/development, and expect to complete the acquisition of three existing restaurants in the early second quarter of 2024.
Added
The Company repaid such Note on March 7, 2025 with the proceeds from a loan made to the Company on or about March 6, 2025.
Removed
The ongoing COVID-19 pandemic has adversely affected, and may continue to adversely affect, our operations, financial condition, liquidity and financial results. In March 2020, the World Health Organization declared the novel strain of coronavirus COVID-19 a global pandemic.
Added
Also on January 6, 2025, we entered into an equity purchase agreement (the “Purchase Agreement”) with Crom (the “Investor”) pursuant to which the Company shall have the right, but not the obligation, to sell to the Investor up to $10,000,000 (the “ELOC Shares”) of the Company’s Class A common stock, $0.0001 par value per share (“Class A Common Stock”).
Removed
For the past two and one-half years, this contagious virus, has continued to spread and has adversely affected workforces, customers, economies and financial markets globally. In response to this outbreak, many state and local authorities mandated the temporary closure of non-essential businesses and dine-in restaurant activity or limited indoor dining capacities.
Added
However, we have not yet been able to access capital under this agreement since we must first register shares issuable under the Purchase Agreement, which we may only do after the filing of this Annual Report on Form 10-K.
Removed
COVID-19 and the government measures taken to control it have caused a significant disruption to our business operation.
Added
On March 12, 2025, we entered into private placements with three investors for the sale of Class A common stock at a price of $2.50 per share for gross proceeds of $714,000.
Removed
As of the filing date of this Annual Report on Form 10-K, all of our restaurants are operating at 100% indoor dining capacity; however, there can be no assurance that developments with respect to the COVID-19 pandemic and government measures taken to control it will not adversely affect our operations and financial results.
Added
However, we are obligated to register those shares and if we fail to do so in accordance with those agreements, we may be forced to repurchase those shares at the price we had sold them for. On March 17, 2025 we sold penny warrants at a price of $2.50 per share for gross proceeds of $1,200,000.
Removed
Additionally, consumer behavior has changed and may fundamentally change as a result of COVID-19 in both the near and long term and such change may pose significant challenges to our current service and business models. Traffic in restaurants, including ours, has been affected and may be materially and adversely affected with more consumers relying on off-premises orders.
Added
We are obligated to register the shares underlying such warrants and if we fail to do so in accordance with those agreements, we may be forced to repurchase those warrants for the price we sold them for.
Removed
All of this could materially and adversely impact sales at our restaurants and our growth prospects. We have made adjustments to our restaurant operations due to the COVID-19 pandemic and may have to re-design our service and business models to accommodate consumers’ changed behavior patterns.
Added
Furthermore, on August 21, 2024, we received a notification letter (the “Letter”) from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that its amount of stockholders’ equity has fallen below the $2,500,000 required minimum for continued listing set forth in Nasdaq Listing Rule 5550(b)(1).
Removed
Any such attempted effort could result in capital expenditures, business disruption and lower margin sales, and may not be successful in growing our profitability. In addition to the COVID-19 pandemic, the United States may experience in the future, outbreaks of other viruses, such as norovirus, the bird/avian flu or other diseases.
Added
On February 18, 2025, we received another notification letter (the “2nd Letter”) from Nasdaq notifying the Company that it has scheduled the Company’s securities for delisting from The Nasdaq Capital Market.
Removed
As we have experienced with the COVID-19 pandemic, if a regional or global health pandemic occurs, depending upon its location, duration and severity, our business could be severely affected. Risks Related to Our Brand Negative publicity relating to one of our restaurants could reduce sales at some or all of our other restaurants.
Added
Pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 series, we appealed Nasdaq’s determination to a Hearings Panel (the “Panel”) and a hearing request has stayed the suspension of the Company’s securities and the filing of the Form 25-NSE pending the Panel’s decision after a hearing scheduled for April 1, 2025.
Added
If we fail to remedy our stockholder deficiency prior to April 1, 2025, we will be required to convince Nasdaq that we have a viable plan to correct the deficiency. If Nasdaq rejects our plan, we may be delisted, which will make it more difficult for us to raise capital in order to sustain our operations.
Added
If we fail to generate adequate capital, we may be forced to curb our operations or cease to continue our operations altogether. Our long-term success is highly dependent on our ability to successfully identify and secure appropriate sites and timely develop and expand our operations in existing and new markets.
Added
If our stockholders’ equity fails to comply with the continued listing requirements of the Nasdaq Capital Market, we would face possible delisting, which would result in a limited public market for our Class A Common Stock and make obtaining future debt or equity financing more difficult for us.
Added
Companies listed on Nasdaq are subject to delisting for, among other things, failure to maintain stockholders’ equity of at least $2,500,000 for continued listing, or to meet the alternatives of market value of listed securities or net income from continuing operations.
Added
On February 18, 2025, we received a letter from Nasdaq indicating that Nasdaq has scheduled our securities for delisting from The Nasdaq Capital Market for failure to comply with the stockholders’ equity requirement pursuant to pursuant to Nasdaq Listing Rule 5550(b)(1).
Added
This letter was sent pursuant to an earlier notification letter warning us that we were out of compliance with Listing Rule 5550(b)(1). We were provided an opportunity to provide Nasdaq with a specific plan to achieve and sustain compliance with all Nasdaq listing requirements, which Nasdaq accepted such plan for compliance provided that we achieved compliance by February 17, 2025.
Added
We had not regained compliance within the applicable timeframe and were not eligible for a further period to regain compliance. Pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 series, we may appeal Nasdaq’s determination to a Hearings Panel (the “Panel”), which we did on March 20, 2025 by submitting a request for hearing.
Added
A hearing request stayed the suspension of our securities and the filing of the Form 25-NSE pending the Panel’s decision. Upon paying the non-refundable $20,000 fee, we have an opportunity to present a plan to regain compliance to the Panel on April 1, 2025.
Added
There can be no assurance that Nasdaq will grant our request for approval of our compliance plan, or otherwise reverse its determination that our securities ought to be delisted.
Added
Even if we are successful in our hearing before the Panel, we cannot guarantee that our stockholders’ equity will comply with the Nasdaq Listing Rules for continued listing on the Nasdaq Capital Market in the future.
Added
If we cannot comply with the Nasdaq Listing Rules either now or in the future, our Class A Common Stock would be subject to delisting and would likely trade on the over-the-counter market.
Added
If our Class A Common Stock were to trade on the over-the-counter market, selling shares of our Class A Common Stock could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and security analysts’ coverage of us may be reduced.
Added
In addition, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in shares of our Class A Common Stock, further limiting the liquidity of our Class A Common Stock.
Added
As a result, the market price of our Class A Common Stock may be depressed, and you may find it more difficult to sell shares of our Class A Common Stock.
Added
Such delisting from the Nasdaq and continued or further declines in our stock price could also greatly impair our ability to raise additional necessary capital through equity or debt financing. 27
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
2 edited+1 added−0 removed8 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
2 edited+1 added−0 removed8 unchanged
2023 filing
2024 filing
Biggest changeOur cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Directors.
Biggest changeOur cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Directors. Per the resignation of Jay Kim and the appointment of Sungjoon Chae, the Company no longer has a majority independent board of directors.
As of the date of this report, we are not aware of any cybersecurity incidents, that have had a materially adverse effect on our operations, business, results of operations, or financial condition. Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function.
As of the date of this report, we are no t aware of any cybersecurity incidents, that have had a materially adverse effect on our operations, business, results of operations, or financial condition. Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function.
Added
Per Nasdaq rules we are not required to have a majority independent board but must still comply with certain subcommittee requirements. We may in the future appoint one or more duly qualified independent directors to fill the current vacancy. See “Item 10. Directors, Executive Officers and Corporate Governance—Corporate Governance and Board Structure”
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+12 added−0 removed3 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
2 edited+12 added−0 removed3 unchanged
2023 filing
2024 filing
Biggest change(e) Recent Sales of Unregistered Securities None. (f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved.]
Biggest change(f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved.]
(b) Holders of Record On April 1, 2024, there were 25 holders of record of the shares of our Class A Common Stock and one holder of Class B Common Stock.
(b) Holders of Record On March 24, 2025, there were 37 holders of record of the shares of our Class A Common Stock and one holder of Class B Common Stock.
Added
(e) Recent Sales of Unregistered Securities On March 12, 2025, the Company entered into a private placement securities subscription with three separate investors for the issuance and sale of 285,600 shares in the aggregate for gross proceeds to the Company of $714,000, or $2.50 per share.
Added
Pursuant to the private placement agreements, the Company is obligated to file a registration statement to register these shares with the SEC within thirty (30) calendar days following the filing of this Annual Report on Form 10-K with the SEC.
Added
If the Company fails to submit the registration statement within the timeline specified above or if the registration statement is denied, withdrawn or not declared effective by the SEC within one-hundred twenty (120) days from the filing date, Good Mood Studio will have the option, in its sole discretion, to: (1) require the Company to assist it in filing for an exemption under Rule 144 or other applicable SEC regulations to remove the transfer restrictions from the shares, or, if such exemption is unavailable, demand the Company to repurchase the shares at the original purchase price or (2) demand a full refund of the subscription amount subject to the Company’s financial capability as verified by an independent audit conducted within 15 days of the demand.
Added
On March 17, 2025, the Company sold 480,000 warrants for a purchase price of $1,200,000, or $2.50 per share. Each warrant is exercisable for one share of the Company’s Class A common stock pursuant to the terms of a warrant agreement dated as of March 17, 2025.
Added
Pursuant to the terms of the Warrant Agreement, in the event that the Company has not obtained stockholder approval, the Company may not issue upon exercise of the Warrants a number of shares of Common Stock, which, when aggregated with any shares of Common Stock issued pursuant to the subscription agreements executed contemporaneously between the Company and other investors or holders of Warrants (whether for Common Stock or Warrants) would equal twenty (20%) percent or more of the Common Stock or twenty (20%) percent or more of the voting power of the Company outstanding before the issuance.
Added
The Company is also obligated to file a registration statement to the SEC within thirty (30) calendar days following the filing of this Annual Report on Form 10-K with the SEC.
Added
If the Company fails to (i) submit the registration statement within the timeline specified above or if the registration statement is denied, withdrawn or not declared effective by the SEC within one-hundred twenty (120) days from the filing date or (ii) fail to obtain the Requisite Stockholder Approval within 75 days from the date of the Subscription Agreements, the investors will have the option, in their sole discretion, to: (1) with respect to (i), require the Company to assist it in filing for an exemption under Rule 144 or other applicable SEC regulations to remove the transfer restrictions from the Shares, or, if such exemption is unavailable, demand the Company to repurchase the Warrants or underlying shares at the original purchase price; or (2) demand a full refund of the subscription amount, subject to the Company’s financial capability as verified by an independent audit conducted within 15 days of the demand.
Added
On March 25, 2025, the Company entered into Subscription Agreements with certain investors pursuant to which the investors agreed to pay $1,650,000 in aggregate to purchase an aggregate of 660,000 warrants.
Added
The Subscription Agreements contain customary representations, warranties, and indemnification provisions and were entered into in reliance on self-certification as an accredited investor pursuant to Regulation D promulgated under the Securities Act.
Added
Each warrant is exercisable for one share of the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), at an exercise price of $0.01 (the “Shares”) pursuant to the terms of warrant agreements dated as of March 24, 2025 (the “Warrant Agreement”).
Added
Pursuant to the Subscription Agreements, the Company is obligated to file a registration statement to register these shares with the SEC within thirty (30) calendar days following the filing of this Annual Report on Form 10-K with the SEC.
Added
If the Company fails to submit the registration statement within the timeline specified above or if the registration statement is denied, withdrawn or not declared effective by the SEC within one-hundred twenty (120) days from the filing date, the investors will have the option, in its sole discretion, to: (1) require the Company to assist it in filing for an exemption under Rule 144 or other applicable SEC regulations to remove the transfer restrictions from the shares, or, if such exemption is unavailable, demand the Company to repurchase the shares at the original purchase price or (2) demand a full refund of the subscription amount subject to the Company’s financial capability as verified by an independent audit conducted within 15 days of the demand.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
32 edited+28 added−40 removed33 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
32 edited+28 added−40 removed33 unchanged
2023 filing
2024 filing
Biggest changeWe believe that the expected cash flow from operations and the proceeds from the IPO will be adequate to fund operating lease obligations, capital expenditures and working capital obligations for at least the next 12 months and thereafter. 36 Summary of Cash Flows The following table summarizes our cash flows for the periods presented: Years ended December 31, 2023 2022 Statement of Cash Flow Data: Net cash used in operating activities $ (4,591,656 ) $ (3,798,770 ) Net cash used in investing activities (1,471,151 ) (1,473,275 ) Net cash provided by financing activities 1,386,347 10,694,064 Cash Flows Used in Operating Activities Net cash used in operating activities during the year ended December 31, 2023 was $4,591,656, which resulted from net loss of $3,040,364, a non-cash charge of $545,549 for depreciation and amortization which was offset by the forgiveness of Restaurant Revitalization Fund (“RRF”) of $700,454, a gain on disposal of fixed asset of $8,920 and net cash outflows of $1,387,467 from changes in operating assets and liabilities.
Biggest changeNet cash used in operating activities during the year ended December 31, 2023 was $4,591,656, which resulted from net loss of $3,040,364, a non-cash charge of $545,549 for depreciation and amortization which was offset by the forgiveness of Restaurant Revitalization Fund (“RRF”) of $700,454, a gain on disposal of fixed asset of $8,920 and net cash outflows of $1,387,467 from changes in operating assets and liabilities.
The critical accounting policies affecting our financial reporting are summarized in Note 2 to the financial statements included elsewhere in this Annual Report. 38 Recent Accounting Pronouncements We have determined that all other issued, but not yet effective accounting pronouncements are inapplicable or insignificant to us and once adopted are not expected to have a material impact on our financial position.
The critical accounting policies affecting our financial reporting are summarized in Note 2 to the financial statements included elsewhere in this Annual Report. 36 Recent Accounting Pronouncements We have determined that all other issued, but not yet effective accounting pronouncements are inapplicable or insignificant to us and once adopted are not expected to have a material impact on our financial position.
Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. Off Balance Sheet Arrangements As of December 31, 2023, we did not have any material off-balance sheet arrangements.
Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards. Off Balance Sheet Arrangements As of December 31, 2024, we did not have any material off-balance sheet arrangements.
Specializing in Japanese ramen, we gained recognition as a leading ramen restaurant in Southern California within six months of our 2016 debut and have continued to expand our top-notch restaurant service across Southern California, currently owning and operating ten restaurant stores. We have opened one new restaurant in February 2024 and currently have two new locations under construction/development.
Specializing in Japanese ramen, we gained recognition as a leading ramen restaurant in Southern California within six months of our 2016 debut and have continued to expand our top-notch restaurant service across Southern California, currently owning and operating ten restaurant stores. We have opened two new restaurants in February and October 2024 and currently have two new locations under construction/development.
Provision for income taxes represents federal, state and local current and deferred income tax expenses. 31 Results of Operations The following table presents selected comparative results of operations from our audited financial statements for the three months and year ended December 31, 2023 compared to the three months and year ended December 31, 2022.
Provision for income taxes represents federal, state and local current and deferred income tax expenses. 31 Results of Operations The following table presents selected comparative results of operations from our audited financial statements for the year ended December 31, 2024 compared to the year ended December 31, 2023.
This increase in general and administrative expenses was primarily due to the hiring of additional administrative employees, increases in professional services and corporate-level costs to support growth plans, and the construction/development of new restaurants.
This increase in general and administrative expenses was primarily due to the acquisition of three restaurants in Las Vegas, hiring of additional administrative employees, increases in professional services and corporate-level costs to support growth plans, and the construction/development of new restaurants.
Food, beverage and supplies costs were approximately $2.4 million for the year ended December 31, 2023 compared to $2.2 million for the year ended December 31, 2022, representing an increase of approximately $0.2 million, or 9.9%.
Food, beverage and supplies costs were approximately $3.4 million for the year ended December 31, 2024 compared to $2.4 million for the year ended December 31, 2023, representing an increase of approximately $1.0 million, or 41.5%.
Labor and related costs were approximately $4.2 million for the year ended December 31, 2023 compared to $3.7 million for the year ended December 31, 2022, representing an increase of approximately $0.6 million, or 15.4%.
Labor and related costs were approximately $4.8 million for the year ended December 31, 2024 compared to $4.2 million for the year ended December 31, 2023, representing an increase of approximately $0.6 million, or 14.2%.
Harinne Kim. 30 Components of Our Results of Operations Revenue. Revenue represents sales of food and beverages in restaurants. Restaurant sales in a given period are directly impacted by the number of restaurants we operate and comparable restaurant sales growth. Food and beverage.
He will not serve on any of the committees of the Board. 30 Components of Our Results of Operations Revenue. Revenue represents sales of food and beverages in restaurants. Restaurant sales in a given period are directly impacted by the number of restaurants we operate and comparable restaurant sales growth. Food and beverage.
General and administrative expenses were approximately $3.4 million for the year ended December 31, 2023 compared to $2.9 million for the year ended December 31, 2022, representing an increase of approximately $0.5 million or 18.5%.
General and administrative expenses were approximately $3.8 million for the year ended December 31, 2024 compared to $3.4 million for the year ended December 31, 2023, representing an increase of approximately $0.4 million or 12.1%.
Revenues were $9.2 million for the year ended December 31, 2023 compared to $8.3 million for the year ended December 31, 2022, representing an increase of approximately $0.9 million, or 11.3%.
Revenues were $12.9 million for the year ended December 31, 2024 compared to $9.2 million for the year ended December 31, 2023, representing an increase of approximately $3.6 million, or 39.3%.
The increase in costs for the year ended December 31, 2023 was primarily driven by increases in revenues from the new restaurant opened in April 2023. As a percentage of sales, food, beverage and supply costs were comparable during the years ended December 31, 2023 and 2022.
The increase in costs for the year ended December 31, 2024 was primarily driven by increases in revenues from the acquisition of three restaurants in Las Vegas. As a percentage of sales, food, beverage and supply costs were comparable during the years ended December 31, 2024 and 2023. Labor .
These expenditures in each period are primarily related to purchases of property and equipment in connection with current and future restaurant openings and maintaining our existing restaurants. 37 Cash Flows Provided by Financing Activities Net cash provided by financing activities during the year ended December 31, 2023 was $1,386,347, primarily due to $700,000 in advance from line of credit, refinanced and new bank borrowings of $812,000 and $595,400 in loan payable to financial institution, offset by $715,892 of repayment of bank borrowings and $61,161 repayment of loan payable to financial institutions.
Net cash provided by financing activities during the year ended December 31, 2023 was $1,386,347, primarily due to $700,000 in advance from line of credit, refinanced and new bank borrowings of $812,000 and $595,400 in loan payable to financial institution, offset by $715,892 of repayment of bank borrowings and $61,161 repayment of loan payable to financial institutions.
Appointment of New Director On February 17, 2023, we accepted independent director Helen Lee’s formal resignation, effective immediately. Ms. Lee’s decision to resign was not due to any disagreement with the company on any matter relating to our operations, policies or practices (financial or otherwise). She was replaced on the same day by Ms.
Appointment of New Director On February 13, 2025, we accepted independent director Jay Kim’s formal resignation, effective immediately. Mr. Kim’s decision to resign was not due to any disagreement with the company on any matter relating to our operations, policies or practices (financial or otherwise). On March 17, 2025, we appointed Mr.
The increase in costs was largely driven by additional labor costs incurred with respect to a new restaurant opened in April 2023 and in December 2023. As a percentage of sales, labor and related costs slightly increased during the comparable years ended December 31, 2023 and 2022.
The increase in costs was largely driven by additional labor costs incurred with respect to the three acquired restaurants in Las Vegas and the two new restaurant opened in 2024. As a percentage of sales, labor and related costs decreased during the comparable years ended December 31, 2024 and 2023 due to comparatively lower labor costs in Las Vegas.
Delivery and service fees incurred were approximately $564 thousand for the year ended December 31, 2023 compared to $526 thousand for the year ended December 31, 2022, representing an increase of approximately $38 thousand or 7.3%, primarily due to an increase in food sales via delivery during the comparable period.
Delivery and service fees incurred were approximately $529 thousand for the year ended December 31, 2024 compared to $564 thousand for the year ended December 31, 2023, representing a decrease of approximately $35 thousand or 6.3%, primarily due to a decrease in food sales via delivery during the comparable period due to the post COVID effect.
As a result, the depreciation and amortization expenses as a percentage of sales decreased to 5.9% for the year ended December 31, 2023 compared to 7.9% for year ended December 31, 2022.
The depreciation and amortization expenses as a percentage of sales was 6.4% for the year ended December 31, 2024 compared to 5.9% for year ended December 31, 2023. General and administrative expenses .
Related party compensation: Compensation to James Chae was approximately $340 thousand for the year ended December 31, 2023 compared to $917 thousand for the year ended December 31, 2022, representing a decrease of approximately $577 thousand.
Related party compensation: Compensation to James Chae was approximately $140 thousand for the year ended December 31, 2024 compared to $340 thousand for the year ended December 31, 2023, representing a decrease of approximately $200 thousand. The decrease was primarily due to the management efforts to control expenses.
As a percentage of sales, delivery and service fees ratio for the year ended December 31, 2023 was comparable to the ratio in the prior year due to comparable sales mix between the dining-in and take-out.
As a percentage of sales, delivery and service fees ratio for the year ended December 31, 2024 decreased due to increase in sales percentage of the dining-in compared to take-out. Depreciation and amortization expenses .
As a percentage of sales, rent and utilities expenses decreased to 12.3% in the year ended December 31, 2023, compared to 13.3% for the year ended December 31, 2022. The decrease in costs as a percentage of sales was primarily driven by the increases in sales volume from both existing restaurants and a new location.
As a percentage of sales, rent and utilities expenses slightly increased to 13.7% in the year ended December 31, 2024, compared to 12.3% for the year ended December 31, 2023. The increase in costs as a percentage of sales was primarily driven by the opening of new restaurants towards the end of the year. Delivery and service fees .
Customers can taste and experience supreme quality and deep flavors. Combining the broth with the fresh, savory, and highest-quality ingredients, we serve the perfect, ideal ramen, as well as offers customers a wide variety of sushi rolls, bento menu and other favorite Japanese cuisine.
Combining the broth with the fresh, savory, and highest-quality ingredients, we serve the perfect, ideal ramen, as well as offers customers a wide variety of sushi rolls, bento menu and other favorite Japanese cuisine. Our acclaimed signature Tonkotsu Black Ramen has become a customer favorite with its slow cooked pork bone broth and freshly made, tender chashu (braised pork belly).
As a percentage of sales, general and administrative expenses increased to 37.1% for the year ended December 31, 2023 from 34.8% for the year ended December 31, 2022, primarily due to the significant increase in necessary corporate costs mentioned above outpacing the increase in sales.
As a percentage of sales, general and administrative expenses decreased to 29.7% for the year ended December 31, 2024 from 37.1% for the year ended December 31, 2023, primarily due to the significant management efforts to control manageable expenses.
We expect to complete the acquisition of three existing restaurants in the early second quarter of 2024 and also plan to open an additional two to four new restaurants in 2024. We take pride in our warm, hearty, smooth, and rich bone broth, which is slowly boiled for over twelve hours.
We also consummated the acquisition of three existing restaurants in Las Vegas in June 2024. We take pride in our warm, hearty, smooth, and rich bone broth, which is slowly boiled for over twelve hours. Customers can taste and experience supreme quality and deep flavors.
The increase in sales for the year was partially driven by $0.3 million in sales for the period from one new restaurant opened in July 2022 and another $0.7 million in sales from a new restaurant opened in April 2023, which were offset by a $0.1 million decrease in other restaurants.
The increase in sales for the year was primarily driven by $3.5 million in sales from the acquisition of three restaurants in Las Vesgas, and another $1.0 million in sales from two new restaurants opened in February and October 2024, which were offset by a $0.8 million decrease in sales at other restaurants. Food, beverage and supplies .
Our acclaimed signature Tonkotsu Black Ramen has become a customer favorite with its slow cooked pork bone broth and freshly made, tender chashu (braised pork belly). Our mission is to bring our Japanese ramen and cuisine to the mainstream, by providing a meal that customers find comforting.
Our mission is to bring our Japanese ramen and cuisine to the mainstream, by providing a meal that customers find comforting.
The net cash outflows from changes in operating assets and liabilities were primarily the result of a decrease of $1,276,193 due to related party expense, and an increase of $150,404 in other assets, partially offset by an increase of $867,049 in accounts payable and accrued expenses.
The net cash inflows from changes in operating assets and liabilities were primarily the result of decreases in other assets of $896,567, and increases in accounts payable and accrued expenses of $198,979, due to related party of $708,534 and other payables of $1,012,591, which was offset by an increase in accounts receivable of $84,110 and inventory of $53,614.
As a percentage of sales, related party compensation was 3.7% for the year ended December 31, 2023 and 11.1% for the year ended December 31, 2022.
As a percentage of sales, related party compensation was 1.1% for the year ended December 31, 2024 and 3.7% for the year ended December 31, 2023. 33 Liquidity and Capital Resources Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, costs incurred for restaurant remodels and restaurant fixtures.
Cash Flows Used in Investing Activities Net cash used in investing activities during the years ended December 31, 2023 and 2022 was $1,471,151 and $1,473,275, respectively.
Cash Flows Used in Investing Activities Net cash used in investing activities during the years ended December 31, 2024 and 2023 was $2,561,527and $1,471,151, respectively. For the acquisition of Las Vegas restaurants in total price of $3.6 million, the Company used total $1.8 million of cash with non-cash financing for $1.8 million.
Depreciation and amortization expenses incurred were approximately $546 thousand for the year ended December 31, 2023 compared to $658 thousand for the year ended December 31, 2022, representing a decrease of approximately $113 thousand, or 17.1%. The decrease was primarily due to the changes in estimated depreciable lives for existing restaurants during the first quarter in 2022.
Depreciation and amortization expenses incurred were approximately $822 thousand for the year ended December 31, 2024 compared to $546 thousand for the year ended December 31, 2023, representing an increase of approximately $277 thousand, or 50.7%. The increase was primarily due to the acquisition of three restaurants in Las Vegas together new two newly opened restaurants in 2024.
Historically, our main sources of liquidity have been cash flows from operations, borrowings from banks, and sales of common shares. In September 2022, we consummated our IPO”) of 2,940,000 shares of Class A Common Stock at a public offering price of $4.00 per share, generating gross proceeds of $11,760,000.
Historically, our main sources of liquidity have been cash flows from operations, borrowings from banks, and sales of common shares.
Contractual Obligations The following table presents our commitments and contractual obligations as of December 31, 2023, as well as our long-term obligations: Payments due by period as of December 31, 2023 Total 2024-2025 2026-2027 2028 Thereafter Capital lease payments $ 7,913,897 $ 1,817,623 $ 1,801,876 $ 862,836 $ 3,431,562 Bank note payables 1,406,329 692,452 361,430 90,029 262,418 EIDL loan payables 425,865 21,453 23,121 12,226 369,065 Loans payable to financial institutions 534,239 534,239 - - - Total contractual obligations $ 10,280,330 $ 3,065,767 $ 2,186,427 $ 965,091 $ 4,063,045 Income Taxes We file income tax returns in the U.S. federal and California state jurisdictions.
Contractual Obligations The following table presents our commitments and contractual obligations as of December 31, 2024, as well as our long-term obligations: Payments due by period as of December 31, 2024 Total 2025-2026 2027-2028 2029 Thereafter Capital lease payments $ 10,134,277 $ 2,869,960 $ 2,786,646 $ 1,167,352 $ 3,310,319 Bank note payables 3,113,961 1,873,610 916,527 135,462 188,362 EIDL loan payables 415,414 22,265 23,997 12,689 356,463 Loans payable to financial institutions 34,282 34,282 - - - Total contractual obligations $ 13,697,934 $ 4,800,117 $ 3,727,170 $ 1,315,503 $ 3,855,144 Income Taxes We file income tax returns in the U.S. federal and California state jurisdictions.
Rent and utilities expenses for the year ended December 31, 2023 slightly increased compared to the year ended in December 31, 2022. The increase was primarily a result of additional occupancy expenses incurred with respect to a new restaurant opened in April 2023.
Rent and utilities . Rent and utilities expenses for the year ended December 31, 2024 increased compared to the year ended in December 31, 2023 by $0.6 million primarily due to the acquisition of three restaurants in Las Vegas.
Removed
Years ended December 31, Increase / (Decrease) 2023 2022 $ % Revenue $ 9,214,779 $ 8,282,368 $ 932,411 11.3 % Restaurant operating expenses: Food, beverages and supplies 2,376,961 2,163,085 213,876 9.9 % Labor 4,234,905 3,670,681 564,224 15.4 % Rent and utilities 1,129,060 1,098,389 30,671 2.8 % Delivery and service fees 563,910 525,747 38,163 7.3 % Depreciation 545,549 658,371 (112,822 ) -17.1 % Total restaurant operating expenses 8,850,385 8,116,273 734,112 9.0 % Net restaurant operating income 364,394 166,095 198,299 119.4 % General and administrative 3,419,036 2,884,770 534,266 18.5 % Compensation to related party 339,740 916,891 (577,151 ) -62.9 % Advertising and marketing 120,872 148,664 (27,792 ) -18.7 % Total operating expenses 3,879,648 3,950,325 (70,677 ) -1.8 % Loss from operations (3,515,254 ) (3,784,230 ) 268,976 -7.1 % Other income (expense): PPP loan forgiveness - 385,900 (385,900 ) -100.0 % RRF loan forgiveness 700,454 - 700,454 N/A Gain on disposal of fixed asset 8,920 - 8,920 N/A Other income 32,316 18,508 13,808 74.6 % Interest (218,153 ) (88,300 ) (129,853 ) 147.1 % Loss before income taxes (2,991,717 ) (3,468,122 ) 476,405 -13.7 % Income tax provision 48,647 19,245 29,402 152.8 % Net loss $ (3,040,364 ) $ (3,487,367 ) $ 447,003 -12.8 % Three months ended December 31, Increase / (Decrease) 2023 2022 $ % Revenue $ 2,500,350 $ 2,536,032 $ (35,682 ) -1.4 % Restaurant operating expenses: Food, beverages and supplies 589,915 669,889 (79,974 ) -11.9 % Labor 1,105,707 1,025,794 79,913 7.8 % Rent and utilities 288,671 348,248 (59,577 ) -17.1 % Delivery and service fees 148,771 152,151 (3,380 ) -2.2 % Depreciation 149,161 103,147 46,014 44.6 % Total restaurant operating expenses 2,282,225 2,299,229 (17,004 ) -0.7 % Net restaurant operating income 218,125 236,803 (18,678 ) -7.9 % General and administrative 718,958 981,837 (262,879 ) -26.8 % Compensation to related party 123,432 284,923 (161,491 ) -56.7 % Advertising and marketing 34,279 70,366 (36,087 ) -51.3 % Total operating expenses 876,669 1,337,126 (460,457 ) -34.4 % Loss from operations (658,544 ) (1,100,323 ) 441,779 -40.1 % Other income (expense): RRF loan forgiveness 700,454 - 700,454 N/A Other income 17,542 12,207 5,335 43.7 % Interest (31,276 ) (26,424 ) (4,852 ) 18.4 % Loss before income taxes 28,176 (1,114,540 ) 1,142,716 -102.5 % Income tax provision 19,579 6,576 13,003 197.7 % Net loss $ 8,597 $ (1,121,116 ) $ 1,129,713 -100.8 % 32 Years ended December 31, Three months ended December 31, 2023 2022 2023 2022 (as a percentage of revenues) (as a percentage of revenues) Revenue 100.0 % 100.0 % 100.0 % 100.0 % Restaurant operating expenses: Food, beverages and supplies 25.8 % 26.1 % 23.6 % 26.4 % Labor 46.0 % 44.3 % 44.2 % 40.4 % Rent and utilities 12.3 % 13.3 % 11.5 % 13.7 % Delivery and service fees 6.1 % 6.3 % 6.0 % 6.0 % Depreciation 5.9 % 7.9 % 6.0 % 4.1 % Total restaurant operating expenses 96.0 % 98.0 % 91.3 % 90.7 % Net operating restaurant operating income 4.0 % 2.0 % 8.7 % 9.3 % General and administrative 37.1 % 34.8 % 28.8 % 38.7 % Compensation to related party 3.7 % 11.1 % 4.9 % 11.2 % Advertising and marketing 1.3 % 1.8 % 1.4 % 2.8 % Total operating expenses 42.1 % 47.7 % 35.1 % 52.7 % Loss from operations -38.1 % -45.7 % -26.3 % -43.4 % Other income (expense): RRF loan forgiveness 7.6 % 0.0 % 28.0 % 0.0 % Other income 0.4 % 0.2 % 0.7 % 0.5 % Interest -2.4 % -1.1 % -1.3 % -1.0 % Loss before income taxes -32.5 % -41.9 % 1.1 % -43.9 % Income tax provision 0.5 % 0.2 % 0.8 % 0.3 % Net loss -33.0 % -42.1 % 0.3 % -44.2 % Revenues.
Added
Sungjoon Chae to fill the vacancy on the Board created by the departure of Mr. Jay Kim. Mr. S. Chae will serve on the Board until the Company’s next annual stockholder meeting or until his successor has been duly appointed and qualified or until his earlier death, resignation, retirement, disqualification, removal from office or other cause.
Removed
The seven restaurant locations that were open through all of 2022 and 2023 experienced a slight decrease in sales. Combined average monthly sales for these locations decreased by 0.8% for the year 2023 compared to 2022.
Added
Years ended December 31, Increase / (Decrease) 2024 2023 % Revenue $ 12,839,137 $ 9,214,779 $ 3,624,358 39.3 % Restaurant operating expenses: Food, beverages and supplies 3,363,182 2,376,961 986,221 41.5 % Labor 4,838,325 4,234,905 603,420 14.2 % Rent and utilities 1,770,205 1,129,060 641,145 56.8 % Delivery and service fees 528,632 563,910 (35,278 ) -6.3 % Depreciation 822,318 545,549 276,769 50.7 % Total restaurant operating expenses 11,322,662 8,850,385 2,472,277 27.9 % Net restaurant operating income 1,516,475 364,394 1,152,081 316.2 % General and administrative 3,831,676 3,419,036 412,640 12.1 % Compensation to related party 139,769 339,740 (199,971 ) -58.9 % Advertising and marketing 100,059 120,872 (20,813 ) -17.2 % Total operating expenses 4,071,504 3,879,648 191,856 4.9 % Loss from operations (2,555,029 ) (3,515,254 ) 960,225 -27.3 % Other income (expense): RRF loan forgiveness - 700,454 (700,454 ) -100.0 % Gain on disposal of fixed asset - 8,920 (8,920 ) -100.0 % Other income 378,621 32,316 346,305 1,071.6 % Interest (455,224 ) (218,153 ) (237,071 ) 108.7 % Loss before income taxes (2,631,632 ) (2,991,717 ) 360,085 -12.0 % Income tax provision 34,237 48,647 (14,410 ) -29.6 % Net loss $ (2,665,869 ) $ (3,040,364 ) $ 374,495 -12.3 % 32 Revenues.
Removed
Revenues for the three months ended December 31, 2022 were comparable to the three months ended December 31, 2022 although there was one more restaurant opened in the comparable period. Food, beverage and supplies .
Added
On January 5, 2024, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni”) whereby we sold to Alumni 45,000 shares of Class A Common Stock in exchange for $118 thousand on November 20, 2024. This Purchase Agreement terminated on December 31, 2024.
Removed
Food, beverage and supplies costs were approximately $590 thousand for the three months ended December 31, 2023 compared to $670 thousand for the three months ended December 31, 2022, representing a decrease of approximately $80 thousand or 11.9%. Labor .
Added
On January 6, 2025, the Company issued and sold to Crom Structured Opportunities Fund I, LP, a Delaware limited partnership (“Crom”) a 10% OID promissory note in the aggregate principal amount of $1,100,000 (the “Note”) for a purchase price of $1,000,000.
Removed
Labor and related costs were approximately $1.1 million for the three months ended December 31, 2023 compared to $1.0 million for the three months ended December 31, 2022, representing an increase of approximately $0.1 million, or 7.8%. The increase in costs was mainly due to the new restaurant opened in April 2023. Rent and utilities .
Added
The Company repaid such Note on March 7, 2025 with the proceeds from a loan made to the Company on or about March 6, 2025.
Removed
Rent and utilities expenses were approximately $289 thousand for the three months ended December 31, 2023 compared to $348 thousand for the three months ended December 31, 2022, representing a decrease of approximately $60 thousand, or 17.1%. Delivery and service fees .
Added
Also on January 6, 2025, we entered into an equity purchase agreement (the “Purchase Agreement”) with Crom (the “Investor”) pursuant to which the Company shall have the right, but not the obligation, to sell to the Investor up to $10,000,000 (the “ELOC Shares”) of the Company’s Class A common stock, $0.0001 par value per share (“Class A Common Stock”).
Removed
Delivery and service fees incurred were approximately $149 thousand the three months ended December 31, 2023 compared to $152 thousand for the three months ended December 31, 2022, representing a decrease of approximately $3 thousand or 2.2% primarily due to a decrease in food sales via delivery during the comparable period. Depreciation and amortization expenses .
Added
However, we have not yet been able to access capital under this agreement since we must first register shares issuable under the Purchase Agreement, which we may only do after the filing of this Annual Report on Form 10-K.
Removed
Depreciation and amortization expenses incurred were approximately $149 thousand for the three months ended December 31, 2023 compared to $103 thousand for the three months ended December 31, 2022, representing an increase of approximately $46 thousand or 44.6% due to the increase in fixed assets during the comparable period. General and administrative expenses .
Added
On March 12, 2025, we entered into private placements with three investors for the sale of Class A common stock at a price of $2.50 per share for gross proceeds of $714,000.
Removed
General and administrative expenses were approximately $719 thousands for the three months ended December 31, 2023 compared to $982 thousands for the three months ended December 31, 2022, representing a decrease of approximately $263 thousands or 26.8%. This decrease in general and administrative expenses was due to the non-recurring expenses incurred for the IPO during the comparing period in 2022.
Added
However, we are obligated to register those shares and if we fail to do so in accordance with those agreements, we may be forced to repurchase those shares at the price we had sold them for. On March 17, 2025 we sold penny warrants at a price of $2.50 per share for gross proceeds of $1,200,000.
Removed
With the IPO in September 2022, the board has approved a success bonus to James Chae for the amount and the employment contract was made with James Chae in November 2022 for the management of our company.
Added
We are obligated to register the shares underlying such warrants and if we fail to do so in accordance with those agreements, we may be forced to repurchase those warrants for the price we sold them for. On March 17, 2025, the Company sold 480,000 warrants for a purchase price of $1,200,000, or $2.50 per share.
Removed
Compensation to James Chae was approximately $123 thousand for the three months ended December 31, 2023 per the employment contract made in November 2022. 33 Key Performance Indicators In assessing the performance of our business, we consider a variety of financial and performance measures.
Added
Each warrant is exercisable for one share of the Company’s Class A common stock pursuant to the terms of a warrant agreement dated as of March 17, 2025.
Removed
The key measures for determining how our business is performing include sales, EBITDA, Adjusted EBITDA, Restaurant-level Operating Profit, Restaurant-level Operating Profit margin, Average Unit Volumes (“AUVs”), comparable restaurant sales performance, and the number of restaurant openings. Revenue Revenue represents sales of food and beverages in restaurants, as shown on our statements of income.
Added
Pursuant to the terms of the Warrant Agreement, in the event that the Company has not obtained stockholder approval, the Company may not issue upon exercise of the Warrants a number of shares of Common Stock, which, when aggregated with any shares of Common Stock issued pursuant to the subscription agreements executed contemporaneously between the Company and other investors or holders of Warrants (whether for Common Stock or Warrants) would equal twenty (20%) percent or more of the Common Stock or twenty (20%) percent or more of the voting power of the Company outstanding before the issuance.
Removed
Several factors affect our restaurant sales in any given period including the number of restaurants in operation, guest traffic and average check. EBITDA and Adjusted EBITDA EBITDA is defined as net income (loss) before interest, income taxes and depreciation and amortization.
Added
The Company is also obligated to file a registration statement to the SEC within thirty (30) calendar days following the filing of this Annual Report on Form 10-K with the SEC.
Removed
Adjusted EBITDA is defined as EBITDA plus stock-based compensation expense, non-cash lease expense and asset disposals, closure costs and restaurant impairments, as well as certain items, such as employee retention credit, litigation accrual, and certain executive transition costs, that we believe are not indicative of our core operating results. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by sales.
Added
If the Company fails to (i) submit the registration statement within the timeline specified above or if the registration statement is denied, withdrawn or not declared effective by the SEC within one-hundred twenty (120) days from the filing date or (ii) fail to obtain the requisite stockholder approval within 75 days from the date of the Subscription Agreements, the investors will have the option, in their sole discretion, to: (1) with respect to (i), require the Company to assist it in filing for an exemption under Rule 144 or other applicable SEC regulations to remove the transfer restrictions from the Shares, or, if such exemption is unavailable, demand the Company to repurchase the Warrants or underlying shares at the original purchase price; or (2) demand a full refund of the subscription amount, subject to the Company’s financial capability as verified by an independent audit conducted within 15 days of the demand.
Removed
EBITDA and Adjusted EBITDA are non-GAAP measures which are intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP. We believe that EBITDA and Adjusted EBITDA provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results.
Added
On March 25, 2025, the Company entered into Subscription Agreements with certain investors pursuant to which the investors agreed to pay $1,650,000 in aggregate to purchase an aggregate of 660,000 warrants.
Removed
However, these measures may not provide a complete understanding of the operating results of the company as a whole and such measures should be reviewed in conjunction with our GAAP financial results.
Added
The Subscription Agreements contain customary representations, warranties, and indemnification provisions and were entered into in reliance on self-certification as an accredited investor pursuant to Regulation D promulgated under the Securities Act.
Removed
We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors.
Added
Each warrant is exercisable for one share of the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”), at an exercise price of $0.01 (the “Shares”) pursuant to the terms of warrant agreements dated as of March 24, 2025 (the “Warrant Agreement”).
Removed
However, you should be aware when evaluating EBITDA and Adjusted EBITDA that in the future we may incur expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Added
Pursuant to the Subscription Agreements, the Company is obligated to file a registration statement to register these shares with the SEC within thirty (30) calendar days following the filing of this Annual Report on Form 10-K with the SEC.
Removed
Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
Added
If the Company fails to submit the registration statement within the timeline specified above or if the registration statement is denied, withdrawn or not declared effective by the SEC within one-hundred twenty (120) days from the filing date, Good Mood Studio will have the option, in its sole discretion, to: (1) require the Company to assist it in filing for an exemption under Rule 144 or other applicable SEC regulations to remove the transfer restrictions from the shares, or, if such exemption is unavailable, demand the Company to repurchase the shares at the original purchase price or (2) demand a full refund of the subscription amount subject to the Company’s financial capability as verified by an independent audit conducted within 15 days of the demand.
Removed
We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.
Added
On August 21, 2024, we received a notification letter (the “Letter”) from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that its amount of stockholders’ equity has fallen below the $2,500,000 required minimum for continued listing set forth in Nasdaq Listing Rule 5550(b)(1).
Removed
The following table presents a reconciliation of net loss to EBITDA and Adjusted EBITDA: Years Ended December 31, Three Months Ended December 31, 2023 2022 2023 2022 Net income (loss), as reported $ (3,040,364 ) $ (3,487,367 ) $ 8,597 $ (1,121,116 ) Interest, net 218,153 88,300 31,276 26,424 Taxes 48,647 19,245 19,579 6,576 Depreciation and amortization 545,549 658,371 149,161 103,147 EBITDA (2,228,015 ) (2,721,451 ) 208,613 (984,969 ) PPP loan forgiveness (a) - (385,900 ) - - RRF loan forgiveness (b) (700,454 ) - (700,454 ) - Restaurants opening costs (c) 545,841 169,790 114,769 103,27 Gain on disposal of fixed asset (8,920 ) - - - Related party compensation (d) - 631,968 - - Professional fees (e) - 66,686 - 66,686 Adjusted EBITDA $ (2,391,548 ) $ (2,238,907 ) $ (377,072 ) $ (815,056 ) (a) Represents income recorded upon the forgiveness of payroll protection loans from the SBA.
Added
On February 18, 2025, we received another notification letter (the “2nd Letter”) from Nasdaq notifying the Company that it has scheduled the Company’s securities for delisting from The Nasdaq Capital Market.
Removed
(b) Represents income recorded upon the forgiveness of loan from restaurant revitalization fund. (c) Represents expenses incurred to secure the restaurant locations under development and costs to reserve back-office managers to manage those restaurants. (d) Represents non-recurring IPO success bonus.
Added
Pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 series, we appealed Nasdaq’s determination to a Hearings Panel (the “Panel”) and a hearing request has stayed the suspension of the Company’s securities and the filing of the Form 25-NSE pending the Panel’s decision after a hearing scheduled for April 1, 2025.
Removed
(e) Represents non-recurring professional expenses incurred for the IPO preparation Restaurant-level Contribution and Restaurant-level Contribution Margin Restaurant-level Contribution and Restaurant-level Contribution margin are intended as supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP.
Added
If we fail to remedy our stockholder deficiency prior to April 1, 2025, we will be required to convince Nasdaq that we have a viable plan to correct the deficiency. If Nasdaq rejects our plan, we may be delisted, which will make it more difficult for us to raise capital in order to sustain our operations.
Removed
We believe that Restaurant-level Contribution and Restaurant-level Contribution margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results. We expect Restaurant-level Contribution to increase in proportion to the number of new restaurants we open and our comparable restaurant sales growth.
Added
Notwithstanding our current belief that our expected cash flow from operations, and the proceeds from the Purchase Agreement and from the private placements set forth above (including our belief that we will satisfy our registration requirements so that we are not forced to redeem the equity previously sold to such private placement investors) will be adequate to fund operating lease obligations, capital expenditures and working capital obligations for at least the next 12 months and thereafter, there are no assurances that we will be able to do so.
… 20 more changes not shown on this page.