VSTD 10-K & 10-Q changes, risk factors and insider trading
Vestand Inc. · OTC · Retail-Eating Places · CIK 1898604 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “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.”
Removed heading “The ongoing COVID-19 pandemic has adversely affected, and may continue to adversely affect, our operations, financial condition, liquidity and financial results.”
Largest changes
“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.”see in full comparison
“The ongoing COVID-19 pandemic has adversely affected, and may continue to adversely affect, our operations, financial condition, liquidity and financial results.”see in full comparison
“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. 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. …”see in full comparison
“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). 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. …”see in full comparison
“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. 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. …”see in full comparison
“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. 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).”see in full comparison
Full comparison: every changed paragraph (21)
We
incurred a net loss of $3.0$2.7 million and $3.5$3.0 million for the years ended December 31, 20232024 and 2022,2023, respectively. We must raise capital
through the sale of equity in order to continue to sustain our operations.
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.
On
January 5, 2024, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Alumni Capital
Capital LP, a Delaware limited partnership (“Alumni”), whichwhereby provideswe that, upon the terms and subjectsold 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 in45,000 shares of our Class A Common Stock.Stock in exchange
for $118 thousand on November 20, 2024. This Purchase Agreement terminated on December 31, 2024.
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. 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. 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”). 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.
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. 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. 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.
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). 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. 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. 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.
WeNotwithstanding believeour current belief that theour expected cash flow from operations, and the
the proceeds from the IPO,Purchase Agreement and the proceeds from the Securitiesprivate Purchaseplacements Agreementset 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.thereafter, there are no assurances that we will be able to do so. If we fail to generate adequate capital, we may be
forced to curb our operations or cease to continue our operations altogether.
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 20222023 and in 2023,2024, respectively, andwe 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 thedevelopment.
early second quarter of 2024. We also plan to open an additional two to four new restaurants in 2024. We identify target markets where we
can enter or expand, taking into account numerous factors such as the locations of our current restaurants,
demographics, traffic patterns
and information gathered from various sources. We may not be able to open our planned new restaurants
within budget or on a timely basis,
if at all, given the uncertainty of these factors, which could adversely affect our business, financial
condition and results of operations.
As we operate more restaurants, our rate of expansion relative to the size of our restaurant base
will eventually decline.
We
opened two new restaurants in 20222023 and in 2023,2024, respectively, and opened one new restaurant in February 2024. We currently have two new locations
under construction/development, and expect to completecompleted the acquisition of three existing restaurants in the early second quarter ofApril 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. We may in the future open restaurants in markets where we have little or no
operating 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.
Restaurants Restaurants
we open in new markets may take longer to reach expected sales and profit levels on a consistent basis and may have higher
construction, construction,
occupancy or operating costs than restaurants we open in existing markets, thereby affecting our overall profitability.
New markets may
have competitive conditions, consumer tastes and discretionary spending patterns that are more difficult to predict or
satisfy than our
existing markets and there may be little or no market awareness of our brand in these new markets. We may need to make
greater investments
than we originally planned in advertising and promotional activity in new markets to build brand awareness. We also
may find it more
difficult in new markets to hire, motivate and keep qualified employees who share our vision, passion and business culture.
If we do
not successfully execute our plans to enter new markets, our business, financial condition or results of operations could be
materially materially
adversely affected.
As
of December 31, 20222023 and 2023,2024, we operated eightten and tenfifteen restaurants, respectively. We have opened onetwo new restaurantrestaurants in February
and 2024October 2024, respectively, and
acquired three restaurants in April 2024. We 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 2024.2025. The capital resources required to develop
each new restaurant
are significant. On average, we estimate that our restaurants require a cash build-out cost of approximately $350,000-$550,000
per restaurant,
net of landlord tenant improvement allowances and pre-opening costs and assuming that we do not purchase the underlying
real estate.
Actual costs may vary significantly depending upon a variety of factors, including the site and size of the restaurant and conditions
conditions in the local real estate and labor markets. The combination of our relatively small number of existing restaurants, the significant investment
investment associated with each new restaurant, variance in the operating results in any one restaurant, or a delay or cancellation in
the planned
opening of a restaurant could materially affect our business, financial condition or results of operations.
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. 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. COVID-19 and the government measures taken to control it have caused a significant
disruption to our business operation. 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.
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. 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. 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. 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.
We
have, from time to time, have 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 our Chairman and Chief Executive
Officer, Mr. Chae, which is unsecured, non-interest bearing, and is repayable on demand.
As of December 31, 20232024 and December 31, 2022,
2023, the balance was $24,720$732,710 and $172,720,$24,176, respectively. If James Chae or his affiliate APIIS
Financial, Inc. chooses to call for repayment
of a significant of such borrowings, we may need to use the net proceeds from the IPO,
which may adversely impact our operations. Any
failure to service such indebtedness or comply with any such obligations may also cause
us to incur legal fees if lender brings an action
for breach of contract, or otherwise adversely affect our business, financial condition,
results of operation and prospects.
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. AvailabilityThe availability of qualified employees is scarce. Additionally, labor costs have increased due to recent
minimum minimum
wage increases in California and the fact that we employ fewer employees who are working extended hours and therefore we are
experiencing experiencing
an increase of overtime payable to such employees, If we continue to face labor shortages or increased labor costs because
of these factors
or as a result of increased competition for employees, higher employee turnover rates, additional increases in federal,
state or local
minimum wage rates or other employee benefits costs (including costs associated with health insurance coverage), our operating
expenses expenses
could increase and our growth could be adversely affected. In addition, our success depends in part upon our ability to attract,
motivate motivate
and retain a sufficient number of well-qualified restaurant operators and management personnel, as well as a sufficient number
of other
qualified employees, to keep pace with our expansion schedule. Qualified individuals needed to fill these positions are in short
supply supply
in some geographic areas. In addition, restaurants have traditionally experienced relatively high employee turnover rates. We
are experiencing
problems in recruiting and retaining employees, and our ability to recruit and retain such individuals may delay the
planned openings
of new restaurants or result in higher employee turnover in existing restaurants, which could have a material adverse
effect on our business,
financial condition or results of operations.
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.
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. 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).
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. 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. 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. 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.
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. 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. 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. 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. 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. 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.
Management's Discussion & Analysis (MD&A)
Removed heading “Key Performance Indicators”
Removed heading “EBITDA and Adjusted EBITDA”
Removed heading “Restaurant-level Contribution and Restaurant-level Contribution Margin”
Removed heading “Average Unit Volumes (AUVs)”
Removed heading “Comparable Restaurant Sales Growth”
Removed heading “Number of Restaurant Openings”
Largest changes
“EBITDA is defined as net income (loss) before interest, income taxes and depreciation and amortization. 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. …”see in full comparison
“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). 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. …”see in full comparison
“Restaurant-level Contribution and Restaurant-level Contribution Margin”see in full comparison
“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. …”see in full comparison
“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. 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. …”see in full comparison
Full comparison: every changed paragraph (55)
We
are a fast-growing Japanese restaurant operator and was borne out of
the idea of introducing the modernized Japanese dining experience
to customers all over the world. 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
two new restaurantrestaurants in February and October 2024 and currently have two new
locations under construction/development. We expectalso to completeconsummated the acquisition
of three existing restaurants in theLas early second quarter of 2024 and also plan to open an additional two to four new restaurantsVegas in June 2024.
On
February 17,13, 2023,2025, we accepted independent director HelenJay Lee’s
Kim’s formal resignation, effective immediately. Ms.Mr. Lee’sKim’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. Harinne Kim.
On March 17, 2025, we appointed Mr. 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. He will not serve on any of the committees of the Board.
The
following table presents selected comparative results of operations from our audited financial statements for the threeyear months and year
ended December
31, 20232024 compared to the three months and year ended December 31, 2022.2023. Our financial results for these periods are not
necessarily indicative of the
financial results that we will achieve in future periods. Certain totals for the table below may not sum
to 100% due to rounding.
Revenues.
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%. 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 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. 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,Revenues.
beverage and supplies. Food, beverage and supplies costsRevenues were approximately $2.4$12.9 million for the year ended December 31, 20232024 compared
to $2.2$9.2 million for the year ended December 31, 2022,2023, representing
an increase of approximately $0.2$3.6 million, or 9.9%.39.3%. The increase in
costs sales for the year ended December 31, 2023 was primarily driven by increases$3.5 million in revenues sales
from the acquisition of three restaurants in Las Vesgas, and another $1.0 million in sales from two new restaurantrestaurants opened in AprilFebruary
and 2023.
AsOctober 2024, which were offset by a percentage$0.8 of sales, food, beverage and supply costs were comparable during the years ended December 31, 2023 and 2022. 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 amillion decrease ofin approximatelysales $80at thousandother or 11.9%.restaurants.
Food, beverage and supplies. 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%. 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.
Labor and related costs were approximately $4.2$4.8 million for the year ended December 31, 20232024 compared to $3.7$4.2 million for the year ended
December 31, 2022,2023, representing an increase of approximately $0.6 million, or 15.4%.14.2%. The increase in costs was largely driven by additional
labor costs incurred with respect to athe three acquired restaurants in Las Vegas and the two new restaurant opened in April 2023 and in December 2023.2024. As a percentage
of sales, labor and
related costs slightly increaseddecreased during the comparable years ended December 31, 20232024 and 2022. 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 thecomparatively newlower restaurant openedlabor
costs in AprilLas 2023.Vegas.
Rent
and utilities. Rent and utilities expenses for the year ended December 31, 2023 slightly2024 increased compared to the year ended in December
December 31, 2022.2023 Theby increase$0.6 wasmillion primarily adue resultto the acquisition of additionalthree occupancyrestaurants expenses incurred with respect to a new restaurant opened
in AprilLas 2023.Vegas. As a percentage of sales, rent and utilities
expenses decreasedslightly increased to 12.3%13.7% in the year ended December 31, 2023,2024, compared
to 13.3%12.3% for the year ended December 31, 2022.2023. The decrease
increase in costs as a percentage of sales was primarily driven by the increasesopening in
salesof volume from both existingnew restaurants and a new location. Rent and utilities expenses were approximately $289 thousand for the
three months ended December 31, 2023 compared to $348 thousand fortowards the threeend months ended December 31, 2022, representing a decrease
of approximatelythe $60 thousand, or 17.1%.year.
Delivery
and service fees. 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 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. 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. 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, 2022,2023, representing a decrease of approximately $3$35 thousand or 2.2%6.3%, primarily due to
a decrease in food sales via delivery during the comparable period.period due to the post COVID effect. 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. Depreciation and amortization expenses incurred were approximately $546$822 thousand for the year ended December
31, 20232024 compared to $658$546 thousand for the year ended December 31, 2022,2023, representing aan decreaseincrease of approximately $113$277 thousand, or
50.7%. 17.1%.
The decreaseincrease was primarily due to the changesacquisition of three restaurants in estimatedLas depreciableVegas livestogether fornew existingtwo newly opened restaurants during the first quarter
in 2022.
As2024. a result, theThe depreciation and amortization expenses as a percentage of sales decreasedwas to 5.9%6.4% for the year ended December 31, 2023
2024 compared to 7.9%
5.9% for year ended December 31, 2022. 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.2023.
General
and administrative expenses. 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 compared to $2.9 million for the year ended December 31, 2022,2023, representing an increase of approximately $0.5$0.4 million or 18.5%.12.1%.
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. As a
percentage of sales, general and administrative expenses increaseddecreased to 29.7% for the year ended December 31,
2024 from 37.1% for the year ended December 31, 2023 from 34.8% for the year
ended December 31, 2022,2023, primarily due to the significant increasemanagement in necessary corporate costs mentioned above outpacing the increase
in sales. 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 dueefforts to thecontrol non-recurringmanageable expenses incurred for the IPO during the comparing period
in 2022.expenses.
Related
party compensation: Compensation to James Chae was approximately $340$140 thousand for the year ended December 31, 20232024 compared to $917$340
thousand for the year ended December 31, 2022,2023, representing a decrease of approximately $577$200 thousand. WithThe the IPO in September 2022,
the board has approved a success bonus to James Chae for the amount and the employment contractdecrease was madeprimarily with James Chae in Novemberdue
2022 forto the management ofefforts ourto company.control expenses. 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 and 11.1% for the year ended December 31, 2022. Compensation to James Chae was approximately $123 thousand for the three months
ended December 31, 2023 per the employment contract made in November 2022.2023.
Key
Performance Indicators
In
assessing the performance of our business, we consider a variety of financial and performance measures. 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. 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. 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.
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. 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.
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. 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. 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. 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.
The
following table presents a reconciliation of net loss to EBITDA and Adjusted EBITDA:
(a) Represents income recorded upon the forgiveness of payroll protection loans from the SBA.
(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.
(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. 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.
We
present Restaurant-level Contribution because it excludes the impact of general and administrative expenses, which are not incurred at
the restaurant-level. We also use Restaurant-level Contribution to measure operating performance and returns from opening new restaurants.
Restaurant-level Contribution margin allows us to evaluate the level of Restaurant-level Contribution generated from sales.
However, you should be aware that Restaurant-level
Contribution and Restaurant-level Contribution margin are financial measures which are not indicative of overall results for the company,
and Restaurant-level Contribution and Restaurant-level Contribution margin do not accrue directly to the benefit of stockholders because
of corporate-level expenses excluded from such measures.
In addition, when evaluating Restaurant-level Contribution
and Restaurant-level Contribution margin, you should be aware that in the future we may incur expenses similar to those excluded when
calculating these measures. 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. Our computation of Restaurant-level Contribution and Restaurant-level Contribution margin
may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Restaurant-level
Contribution and Restaurant-level Contribution margin in the same fashion. Restaurant-level Contribution and Restaurant- level Contribution
margin have limitations as analytical tools, and you should not consider it in isolation or as a substitute for analysis of our results
as reported under GAAP.
The
following table reconciles net restaurant operating income to Restaurant-level Contribution and Restaurant-level Contribution margin
for the years and three months ended December 31, 2023 and 2022:
(a)
Represents restaurant-level contribution divided by revenue.
Average
Unit Volumes (AUVs)
“Average
Unit Volumes” or “AUVs” consist of the average annual sales of all restaurants that have been open for 3 months or
longer at the end of the year presented. AUVs are calculated by dividing (x) annual sales for the year presented for all such restaurants
by (y) the total number of restaurants in that base. We make fractional adjustments to sales for restaurants that were not open for the
entire year presented (such as a restaurant closed for renovation) to annualize sales for such period of time. This measurement allows
management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base.
The
following table shows the AUVs for the years ended December 31, 2023 and December 31, 2023, respectively:
Comparable
Restaurant Sales Growth
Comparable
restaurant sales growth represents the change in year-over-year sales for restaurants open for at least three months prior to the start of
the accounting period presented, including those temporarily closed for renovations during the year. Measuring our comparable restaurant
sales growth allows us to evaluate the performance of our existing restaurant base. Various factors impact comparable restaurant sales,
including:
The
following table shows the comparable restaurant sales growth for the years ended December 31, 2023 and December 31, 2022:
Number
of Restaurant Openings
The
following table shows the growth in our restaurant base for the years ended December 31, 2023 and December 31, 2022:
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.
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. 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. 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”). 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.
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. 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. 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. 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. 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. 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. 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.
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. 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. 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”). 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. 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.
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). 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. 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. 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.
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. 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.
WeNotwithstanding
believeour current belief that theour expected cash flow from operationsoperations, and the proceeds from the IPOPurchase 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.thereafter, there are no assurances that we will be able to do so. If we fail
to generate adequate capital, we may be forced to curb our operations or cease to continue our operations altogether.
Net cash provided by operating activities during the year ended December 31, 2024 was $875,224, which resulted from net loss of $2,665,869, a non-cash charge of $822,318 for depreciation and $39,828 for amortization which was offset by and net cash inflows of $2,678,947 from changes in operating assets and liabilities. 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. The decrease in other assets of $896,567 primarily consists of the escrow deposit of $729,352 to acquire assets of three restaurants in Las Vegas in 2023 which was consummated in April 2024. The increase in other payable of $1,012,591 is primarily due to a deposit of $1,000,000 from an individual who wanted to participate in the acquisition of Korea BBQ restaurant.
Net
cash used in operating activities during the year ended December 31, 2022 was $3,798,770, which resulted from net loss of
$3,487,367, non-cash charges of $658,371 for depreciation and amortization which was offset by the PPP loan forgiveness of $385,900,
and net cash outflows of $583,874 from changes in operating assets and liabilities. The net loss was significantly higher for the
period relative to prior periods as a result of restaurant startup costs and increased general and administrative expenses. 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 decreases in payables to related parties were the result of repayment of expenditures incurred by the
related parties in connection with the opening of new restaurants. The increase in accounts payable was primarily
due to the three new restaurants opened in July 2021, February 2022 and July 2022.
Net
cash used in investing activities during the years ended December 31, 20232024 and 20222023 was $1,471,151$2,561,527and and $1,473,275,$1,471,151, respectively. TheseFor 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. Excluding the acquisition of Las Vegas restaurants, 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.openings.
Net cash provided by financing activities during the year ended December 31, 2024 was $1,465,013 due to $2,130,980 cash received through bank borrowings, offset by $933,756 of repayment of bank borrowings and loan payable to financial institutions.
Net
cash provided by financing activities during the year ended December 31, 2022 was $10,694,064, primarily due to $10,285,650 in net proceeds
from the sale of 2,940,000 shares of Class A Common Stock after deducting underwriting discounts and commissions and other offering expenses
in September 2022, $60,000 in proceeds from the sale of Class A Common Stock in December 2021,
and $558,133 cash received through borrowings from banks, offset by $209,719 of repayment of borrowings.
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
Largest changes
Labor. Laborsee in full comparisonandexpenserelatedwascosts were approximately $1.6$3.33 million for thethreesix months endedMarchJune31,30,20252025, compared to$1.3$2.78 millionforin the prior year period, an increase of approximately $548 thousand, or 19.7 percent. The increase was primarily attributable to the addition of staffing costs from the threemonthsnewlyendedacquiredMarchLas31,Vegas2024,restaurantsrepresentingandanwageincreaseinflationof approximately $0.3 million, or 21.1%. The increase in costs was largely driven by additional labor costs incurred with respectcompared to thethreepriornew restaurants acquired.year. As a percentage ofsales,revenues, laborandexpenserelated costswas44.4%46.2 percent inthe three months ended March 31,2025 compared to45.8%45.3 percent in 2024, remaining relatively consistent despite thethree months ended March 31, 2024.expansion.
Rent and utilities. Rent and utilitiessee in full comparisonexpensesexpensewerewasapproximately$1.13$557 thousandmillion for thethreesix months endedMarchJune31,30,20252025, compared to$319$769 thousandforin thethreepriormonthsyearended March 31, 2024, representingperiod, an increase of approximately$238$364 thousand, or74.8%.47.3 percent. The increase was primarilyadueresultto the addition of lease expenses from the threenewnewlyrestaurantsacquiredacquired.Las Vegas restaurants, as well as higher utility costs. As a percentage ofsales,revenues, rent and utilitiesratio for the three months ended March 31, 2025 increasedrose to15.9%15.7 percent in 2025 compared to11.3%12.5 percent inthe2024,prior period due toreflecting theincreaseimpactutilityofexpensesnewinleasestheandthreecostmonths ended March 31, 2025.inflation.
Food, beverage and supplies. Food, beverage and supplies costs were approximatelysee in full comparison$946$2.3thousandmillion for thethreesix months endedMarchJune31,30,20252025, compared to$668$1.5thousandmillion for thethreesix months endedMarchJune31,30, 2024, representing an increase of approximately$278$761 thousand, or41.6%.50.4%. TheTheincrease in costs for thethree-monthsix-month period was primarilydrivenattributablebytoincreaseshigherin revenuessales from the threenewnewly acquired restaurants in Las Vegas,andas well as a general increase in food material costs compared tolastthe prior year. As a percentage of sales, food, beverage and supply costsdecreasedincreased to26.9%31.5% in thethreesix months endedMarchJune31,30,20252025, compared to23.8%24.6% in thethreesix months endedMarchJune31,30, 2024. Thedecreasehigherin costs as apercentage of sales was primarily driven bytheinflationarymarket.pressures in food input costs.
see in full comparisonThreeSix months endedMarchJune31,30, 2025 Compared tothreeSix months endedMarchJune31,30, 2024
“Delivery and service fees. Delivery and service fees were $307 thousand for the six months ended June 30, 2025, compared to $281 thousand in the prior year period, an increase of approximately $26 thousand, or 9.2%. The increase was primarily attributable to higher overall sales volumes, including contributions from the newly acquired Las Vegas restaurants. As a percentage of revenues, delivery and service fees remained relatively stable at 4.3% in 2025 compared to 4.6% in 2024, indicating consistent cost management despite higher activity levels Depreciation and amortization expenses. …”see in full comparison
“Net cash used in operating activities was $4.5 million for the six months ended June 30, 2025, compared to net cash provided of $0.6 million for the six months ended June 30, 2024. The $5.1 million unfavorable variance was primarily attributable to a higher net loss of $2.6 million in the current period, as compared to $2.0 million in the prior year, and significant unfavorable changes in working capital. …”see in full comparison
Full comparison: every changed paragraph (26)
Yoshiharu
is a fast-growing Japanese restaurant operator and was borne out of the idea of introducing the modernized Japanese dining experience
to customers all over the world. Specializing in Japanese ramen, Yoshiharu gained recognition as a leading ramen restaurant in Southern
California within six months of our 2016 debut and has continued to expand our top-notch restaurant service across Southern California,
currently owning and operating 15 restaurant stores with an additional 2 restaurant stores under construction/development/acquisition
as of MarchJune 31,30, 2025.
ThreeSix
months ended MarchJune 31,30, 2025 Compared to threeSix months ended MarchJune 31,30, 2024
The
following table presents selected comparative results of operations from our unaudited financial statements for the threesix months ended
MarchJune 31,30, 20252025, compared to threesix months ended MarchJune 31,30, 2024. Our financial results for these periods are not necessarily indicative of
of the financial results that we will achieve in future periods. Certain totals for the table below may not sum to 100% due to rounding.
Revenues.Revenues
RevenuesRevenue were $3.5$7.2 million for the threesix months ended MarchJune 31,30, 20252025, compared to $2.8$6.1 million for the threesix months ended MarchJune 31,
30, 2024, representing an
increase of approximately $0.7$1.1 million, or 24.9%.17.3%. TheThis increase in sales for the three-month period was primarily
driven byattributable fromto the acquisition of three restaurants in
Las VesgasVegas induring the second quarter 2024.of 2025, which contributed incremental sales to the period.
Food,
beverage and supplies. Food, beverage and supplies costs were approximately $946$2.3 thousandmillion for the threesix months ended MarchJune 31,30, 20252025,
compared to $668$1.5 thousandmillion for the threesix months ended MarchJune 31,30, 2024, representing an increase of approximately $278$761 thousand, or 41.6%.50.4%. The
The increase in costs for the three-monthsix-month period was primarily drivenattributable byto increaseshigher in revenuessales from the three newnewly acquired restaurants in Las
Vegas, andas well as a general increase in food material costs compared to lastthe prior year. As a percentage of sales, food, beverage and
supply costs
decreased increased to 26.9%31.5% in the threesix months ended MarchJune 31,30, 20252025, compared to 23.8%24.6% in the threesix months ended MarchJune 31,30, 2024. The decreasehigher
in costs as a percentage of sales was primarily driven by theinflationary market.pressures in food input costs.
Labor.
Labor andexpense relatedwas costs were approximately $1.6$3.33 million for the threesix months ended MarchJune 31,30, 20252025, compared to $1.3$2.78 million forin the prior year period, an increase
of approximately $548 thousand, or 19.7 percent. The increase was primarily attributable to the addition of staffing costs from the three
monthsnewly endedacquired MarchLas 31,Vegas 2024,restaurants representingand anwage increaseinflation of approximately $0.3 million, or 21.1%. The increase in costs was largely driven
by additional labor costs incurred with respectcompared to the threeprior new restaurants acquired.year. As a percentage of sales,revenues, labor andexpense related costs
was 44.4%46.2
percent in the three months ended March 31, 2025 compared to 45.8%45.3 percent in 2024, remaining relatively consistent despite the three months ended March 31, 2024.expansion.
Rent
and utilities. Rent and utilities expensesexpense werewas approximately$1.13 $557 thousandmillion for the threesix months ended MarchJune 31,30, 20252025, compared to
$319 $769 thousand for in
the threeprior monthsyear ended March 31, 2024, representingperiod, an increase of approximately $238$364 thousand, or 74.8%.47.3 percent. The increase
was primarily adue resultto the addition of
lease expenses from the three newnewly restaurantsacquired acquired.Las Vegas restaurants, as well as higher utility costs. As a percentage of sales,revenues, rent
and utilities ratio for the three months ended
March 31, 2025 increasedrose to 15.9%15.7 percent in 2025 compared to 11.3%12.5 percent in the2024, prior period due toreflecting the increaseimpact utilityof expensesnew inleases theand threecost months ended
March 31, 2025.inflation.
Delivery and service fees. Delivery and service fees were $307 thousand for the six months ended June 30, 2025, compared to $281 thousand in the prior year period, an increase of approximately $26 thousand, or 9.2%. The increase was primarily attributable to higher overall sales volumes, including contributions from the newly acquired Las Vegas restaurants. As a percentage of revenues, delivery and service fees remained relatively stable at 4.3% in 2025 compared to 4.6% in 2024, indicating consistent cost management despite higher activity levels Depreciation and amortization expenses. Depreciation and amortization expense was $479 thousand for the six months ended June 30, 2025, compared to $350 thousand in the prior year period, an increase of approximately $129 thousand, or 36.6 percent. The increase was primarily due to depreciation on fixed assets acquired with the three new Las Vegas restaurants, along with ongoing depreciation from capital improvements made in prior periods. As a percentage of revenues, depreciation rose to 6.6 percent in 2025 compared to 5.7 percent in 2024, reflecting a higher asset base following recent expansion.
Delivery
and service fees. Delivery and service fees incurred were approximately $130 thousand for the three months ended March 31, 2025 compared
to $143 thousand for the three months ended March 31, 2024, representing a decrease of approximately $14 thousand or 9.6%, primarily
due to a decrease in food sales via delivery during the comparable period due to the post COVID effect. As a percentage of sales, delivery
and service fees ratio for the period ended March 31, 2025 decreased due to increase in sales percentage of the dining-in compared to
take-out.
Depreciation
and amortization expenses. . Depreciation and amortization expenses incurred were approximately $171 thousand for the three months
ended March 31, 2024 compared to $227 thousand for the three months ended March 31, 2025, representing an increase of approximately $56
thousand, or 33.0%. The increase was primarily due to the three new restaurants in the three months ended March 31, 2025.
General
and administrative expenses. General and administrative expensesexpense werewas approximately $1.3$2.53 million for the threesix months ended March
31,June 202530, 2025, compared
to $0.9$2.01 million forin the threeprior monthsyear ended March 31, 2024, representingperiod, an increase of approximately $0.4$519 millionthousand, or
37.5%. This25.8 percent. The increase in general and administrative expenses was primarily due
to tohigher corporate overhead costs associated with supporting the $0.3expanded millionrestaurant increasebase inand professional fees during
the three months ended March 31, 2025. The Company raised capital during the period from numerous equity deals including debt structuring,
private placements for common stock and warrants.fees. As a percentage of sales,
revenues, general and administrative expensesexpense increasedwas 35.2 percent in 2025 compared to 36.0%32.8 in
the three months ended March 31, 2025 from 32.7%percent in the2024, threereflecting monthshigher endedfixed Marchoverhead
relative 31,to 2024.sales growth.
Related party compensation Related party compensation was $42 thousand for the six months ended June 30, 2025, compared to $96 thousand in the prior year period, a decrease of approximately $54 thousand, or 56.0 percent. The decrease was primarily due to reduced compensation paid to James Chae following his resignation as an officer during the current period. As a percentage of revenues, related party compensation declined to 0.6 percent in 2025 from 1.6 percent in 2024, reflecting reduced payments relative to overall sales growth
Related
party compensation: Compensation to James Chae was approximately $42 thousand for the three months ended March 31, 2025 and 2024, respectively.
As a percentage of sales, related party compensation was 1.2% in the three months ended March 31, 2025 and 1.5% in the three months ended
March 31, 2024.
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. If we fail
to generate adequate capital, we may be forced to curb our operations or cease to continue our operations altogether.
Net cash used in operating activities was $4.5 million for the six months ended June 30, 2025, compared to net cash provided of $0.6 million for the six months ended June 30, 2024. The $5.1 million unfavorable variance was primarily attributable to a higher net loss of $2.6 million in the current period, as compared to $2.0 million in the prior year, and significant unfavorable changes in working capital. The most notable working capital changes included an increase in accounts receivable of $0.4 million, reflecting higher sales volumes from the Las Vegas restaurants, an increase in other assets of $1.0 million, and a decrease in accounts payable and accrued expenses of $0.8 million. Additionally, due to related party balances decreased by $39 thousand, further reducing operating cash flows. These outflows were only partially offset by non-cash adjustments of $0.5 million in depreciation and amortization, and a $50 thousand gain on disposal of fixed assets.
The deterioration in operating cash flows compared to the prior year reflects both the expanded operating scale following the Las Vegas acquisitions and the increased working capital requirements associated with supporting higher revenues.
Net
cash used in operating activities during the three-month period ended March 31, 2025 was $863,204 which resulted from net loss of
$1,424,886, non-cash charges of $240,323 for depreciation and amortization with gain on disposal of fixed assets of $50,000, and net
cash inflows of $371,359 from changes in operating assets and liabilities. The net cash inflows from changes in operating assets and
liabilities were primarily the result of increases in due to related party by $192,876 and accounts
payable and accrued expenses by $68,386 and a decrease in accounts receivable by $26,371 which was offset by an increase in
inventory by $3,759 and a decrease in other payables by $36,734.
Net
cash used in operating activities during the three-month period ended March 31, 2024 was $373,196 which resulted from net loss of $876,205,
non-cash charges of $170,682 for depreciation and amortization and net cash inflows of $332,327 from changes in operating assets and
liabilities. The net cash inflows from changes in operating assets and liabilities were primarily the result of an decrease in other
assets by $346,962 and increases in accounts payable and accrued expenses by $26,707 and due to related party by $56,921, which was offset
by the increases in accounts receivable by $94,135 and inventory by $4,128.
Net cash used in investing activities was $33 thousand for the six months ended June 30, 2025, compared to $2.2 million for the six months ended June 30, 2024. The decrease in cash used was primarily attributable to the absence of acquisition activity in 2025. In the prior year period, the Company completed the acquisition of the Las Vegas restaurant entities for approximately $1.8 million, in addition to $0.4 million of purchases of property and equipment. In contrast, cash outflows in 2025 were limited to routine purchases of property and equipment of $33 thousand.
Net
cash used in investing activities during the three months ended March 31, 2025 and 2024 was $32,622 and $356,642, respectively. These
expenditures in each period are primarily related to purchases of property and equipment in connection with current and future restaurant
openings.
Net cash provided by financing activities was $4.7 million for the six months ended June 30, 2025, compared to $1.3 million for the six months ended June 30, 2024. The increase was primarily driven by proceeds of $6.4 million from the sale of common shares and warrants in 2025, compared to only $64 thousand raised from equity issuances in the prior year. In addition, the Company received $1.1 million in borrowings in 2025, compared to $0.9 million in 2024.
These inflows were partially offset by repayments of $1.6 million on bank notes payable, $1.2 million on convertible notes, and $34 thousand on loans payable to financial institutions in 2025. By comparison, repayments in 2024 consisted of $372 thousand on bank notes and $298 thousand on loans payable to financial institutions.
Net
cash provided by financing activities during the three months ended March 31, 2025 was $3,051,698 primarily due to $4,614,000 of
cash received through private placements and warranty subscriptions and $1,100,000 of cash received from borrowings, which was
offset by $1,462,302 of repayment of bank borrowings and loan payable to financial institutions and $1,200,000 of repayment of
convertible notes.
Net
cash provided by financing activities during the three months ended March 31, 2024 was $623,250 due to $812,000 cash received through
bank borrowings, offset by $252,899 of repayment of bank borrowings and loan payable to financial institutions.
The
following table presents our commitments and contractual obligations as of MarchJune 31,30, 2025, as well as our long-term obligations:
As
of MarchJune 31,30, 2025, we did not have any material off-balance sheet arrangements.
VSTD insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding VSTD (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 55,947 | $12.0K | 0.0% | New position |