Vestand Inc.: Form 10-Q for the period ended Jun 30, 2025

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ending December 31, 2024. As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ending December 31, 2024.

Overview of Yoshiharu

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 June 30, 2025.

We take pride in our warm, hearty, smooth, and rich bone broth, which is slowly boiled for over 12 hours. Customers can taste and experience supreme quality and deep flavors. Combining the broth with the fresh, savory, and highest-quality ingredients, Yoshiharu serves 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).

Our mission is to bring our Japanese ramen and cuisine to the mainstream, by providing a meal that customers find comforting. Since the inception of the business, we have been making our own ramen broth and other key ingredients such as pork chashu and flavored eggs from scratch, whereby upholding the quality and taste of our foods, including the signature texture and deep, rich flavor of our handcrafted broth. Moreover, we believe that slowly cooking the bone broth makes it high in collagen and rich in nutrients. Yoshiharu also strives to present food that is not only healthy, but also affordable. We feed, entertain and delight our customers, with our active kitchens and bustling dining rooms providing happy hours, student and senior discounts, and special holiday events. As a result of our vision, customers can comfortably enjoy our food in a friendly and welcoming atmosphere.

We operate in a large and rapidly growing market. We believe the consumer appetite for Asian cuisine is widespread across many demographics and grants us the opportunity to expand in both existing and new U.S. markets, as well as internationally.

Our Growth Strategies

Pursue New Restaurant Development.

We have pursued a disciplined new corporate owned growth strategy. Having expanded our concept and operating model across varying restaurant sizes and geographies, we plan to leverage our expertise opening new restaurants to fill in existing markets and expand into new geographies. While we currently aim to achieve in excess of 100% annual unit growth rate over the next three to five years, we cannot predict the time period of which we can achieve any level of restaurant growth or whether we will achieve this level of growth at all. Our ability to achieve new restaurant growth is impacted by a number of risks and uncertainties beyond our control, including but not limited to landlord delays; competition in existing and new markets, including competition for restaurant sites; and the lack of development and overall decrease in commercial real estate due to macroeconomic decline. We believe there is a significant opportunity to employ this strategy to open additional restaurants in our existing markets and in new markets with similar demographics and retail environments.

Deliver Consistent Comparable Restaurant Sales Growth.

We have achieved positive comparable restaurant sales growth in recent periods. We believe we will be able to generate future comparable restaurant sales growth by growing traffic through increased brand awareness, consistent delivery of a satisfying dining experience, new menu offerings, and restaurant renovations. We will continue to manage our menu and pricing as part of our overall strategy to drive traffic and increase average check. We are also exploring initiatives to grow sales of alcoholic beverages at our restaurants, including the potential of a larger format restaurant with a sake bar concept. In addition to the strategies stated above, we expect to initiate sales of franchises in 2025.

Increase Profitability.

We have invested in our infrastructure and personnel, which we believe positions us to continue to scale our business operations. As we continue to grow, we expect to drive higher profitability both at a restaurant-level and corporate-level by taking advantage of our increasing buying power with suppliers and leveraging our existing support infrastructure. Additionally, we believe we will be able to optimize labor costs at existing restaurants as our restaurant base matures and AUV’s increase. We believe that as our restaurant base grows, our general and administrative costs will increase at a slower rate than our sales.

Heighten Brand Awareness.

We intend to continue to pursue targeted local marketing efforts and plan to increase our investment in advertising. We also are exploring the development of instant ramen noodles which we would distribute through retail channels. We intend to explore partnerships with grocery retailers to provide small-format Yoshiharu kiosks in stores to promote a limited selection of Yoshiharu cuisine.

Experienced Management Team Dedicated to Growth.

Our team is led by experienced and passionate senior management who are committed to our mission. We are led by our Chief Executive Officer, James Chae. Mr. Chae founded Yoshiharu in 2016 and leads a team of talented professionals with deep financial, operational, culinary, and real estate experience.

Components of Our Results of Operations

Revenues. Revenues represent 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. Food and beverage costs are variable in nature, change with sales volume and are influenced by menu mix and subject to increases or decreases based on fluctuations in commodity costs. Other important factors causing fluctuations in food and beverage costs include seasonality and restaurant-level management of food waste. Food and beverage costs are a substantial expense and are expected to grow proportionally as our sales grow.

Labor. Labor includes all restaurant-level management and hourly labor costs, including wages, employee benefits and payroll taxes. Similar to the food and beverage costs that we incur, labor and related expenses are expected to grow proportionally as our sales increase. Factors that influence fluctuations in our labor and related expenses include minimum wage and payroll tax legislation, the frequency and severity of workers’ compensation claims, healthcare costs and the performance of our restaurants.

Rent and utilities. Rent and utilities include rent for all restaurant locations and related taxes.

Depreciation and amortization expenses. Depreciation and amortization expenses are periodic non-cash charges that consist of depreciation of fixed assets, including equipment and capitalized leasehold improvements. Depreciation is determined using the straight-line method over the assets’ estimated useful lives, ranging from three to ten years.

Delivery and service fees. The Company’s customers may order online through third party service providers such as Uber Eats, Door Dash, Grubhub and others. These third-party service providers charge delivery and order fees to the Company.

General and administrative expenses. General and administrative expenses include expenses associated with corporate and regional supervision functions that support the operations of existing restaurants and development of new restaurants, including compensation and benefits, travel expenses, stock-based compensation expenses for corporate-level employees, legal and professional fees, marketing costs, information systems, corporate office rent and other related corporate costs. General and administrative expenses are expected to grow as our sales grows, including incremental legal, accounting, insurance and other expenses incurred as a public company.

Advertising and marketing expenses. Advertising and marketing expenses include expenses associated with marketing campaigns and periodic advertising. Advertising and marketing expenses are expected to grow leading up to the planned openings of restaurant locations and is expected to stabilize as an average by location as our sales grow.

Interest expense. Interest expense includes non-cash charges related to our capital lease obligations and bank notes payable.

Income tax provision (benefit). Provision for income taxes represents federal, state and local current and deferred income tax expense.

Results of Operations

Six months ended June 30, 2025 Compared to Six months ended June 30, 2024

The following table presents selected comparative results of operations from our unaudited financial statements for the six months ended June 30, 2025, compared to six months ended June 30, 2024. 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 Revenue were $7.2 million for the six months ended June 30, 2025, compared to $6.1 million for the six months ended June 30, 2024, an increase of approximately $1.1 million, or 17.3%. This increase was primarily attributable to the acquisition of three restaurants in Las Vegas during the second quarter of 2025, which contributed incremental sales to the period.

Food, beverage and supplies. Food, beverage and supplies costs were approximately $2.3 million for the six months ended June 30, 2025, compared to $1.5 million for the six months ended June 30, 2024, representing an increase of approximately $761 thousand, or 50.4%. The increase in costs for the six-month period was primarily attributable to higher sales from the three newly acquired restaurants in Las Vegas, as well as a general increase in food material costs compared to the prior year. As a percentage of sales, food, beverage and supply costs increased to 31.5% in the six months ended June 30, 2025, compared to 24.6% in the six months ended June 30, 2024. The higher percentage of sales was primarily driven by inflationary pressures in food input costs.

Labor. Labor expense was $3.33 million for the six months ended June 30, 2025, compared to $2.78 million in 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 newly acquired Las Vegas restaurants and wage inflation compared to the prior year. As a percentage of revenues, labor expense was 46.2 percent in 2025 compared to 45.3 percent in 2024, remaining relatively consistent despite the expansion.

Rent and utilities. Rent and utilities expense was $1.13 million for the six months ended June 30, 2025, compared to $769 thousand in the prior year period, an increase of approximately $364 thousand, or 47.3 percent. The increase was primarily due to the addition of lease expenses from the three newly acquired Las Vegas restaurants, as well as higher utility costs. As a percentage of revenues, rent and utilities rose to 15.7 percent in 2025 compared to 12.5 percent in 2024, reflecting the impact of new leases and cost 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.

General and administrative expenses. General and administrative expense was $2.53 million for the six months ended June 30, 2025, compared to $2.01 million in the prior year period, an increase of approximately $519 thousand, or 25.8 percent. The increase was primarily due to higher corporate overhead costs associated with supporting the expanded restaurant base and professional fees. As a percentage of revenues, general and administrative expense was 35.2 percent in 2025 compared to 32.8 percent in 2024, reflecting higher fixed overhead relative to 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

Liquidity and Capital Resources

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.

Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, costs incurred for restaurant remodels and restaurant fixtures. Historically, our main sources of liquidity have been cash flows from operations, borrowings from banks, and sales of common shares.

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 March 27, 2025, Nasdaq notified the Company that it had regained compliance with Rule 5550(b)(1). As a result, the hearing scheduled for April 1, 2025 has been cancelled and the Company’s securities will continue to be listed and traded on The Nasdaq Stock Market.

On April 2, 2025, the Company entered into two new securities subscription agreements and amended one securities subscription agreement (the “Subscription Agreements”) with certain investors pursuant to which the investors purchased an aggregate of 400,000 additional warrants for a purchase price of $1,000,000. 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 at an exercise price of $0.01 (the “Shares”) pursuant to the terms of warrant agreements dated as of April 2, 2025 (the “Warrant Agreement”).

On April 9, 2025, Yoshiharu Global Co., a Delaware corporation (the “Company”) entered into two new securities subscription agreements (the “Subscription Agreements”) with certain investors pursuant to which the investors purchased an aggregate of 400,000 additional warrants for an aggregate purchase price of $1,000,000. 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 at an exercise price of $0.01 (the “Shares”) pursuant to the terms of warrant agreements dated as of April 9, 2025 (the “Warrant Agreement”).

Summary of Cash Flows

The following table summarizes our cash flows for the periods presented:

Cash Flows Used in Operating Activities

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.

Cash Flows Used in Investing Activities

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.

Cash Flows Provided by Financing Activities

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.

Contractual Obligations

The following table presents our commitments and contractual obligations as of June 30, 2025, as well as our long-term obligations:

Income Taxes

The Company files income tax returns in the U.S. federal and California state jurisdictions.

We are considered a U.S. corporation and a regarded entity for U.S. federal, state and local income taxes. Accordingly, a provision will be recorded for the anticipated tax consequences of our reported results of operations for U.S. federal, state and foreign income taxes.

JOBS Act Accounting Election

We are an “emerging growth company,” as defined in the JOBS Act, and may take advantage of certain exemptions from various public company reporting requirements for up to five years or until we are no longer an emerging growth company, whichever is earlier. The JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until those standards apply to private companies. We have elected to use this extended transition period under the JOBS Act. 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 June 30, 2025, we did not have any material off-balance sheet arrangements.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to utilize estimates and make judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. The estimates are evaluated by management on an ongoing basis, and the results of these evaluations form a basis for making decisions about the carrying value of assets and liabilities that are not readily apparent from other sources. Although actual results may differ from these estimates under different assumptions or conditions, management believes that the estimates used in the preparation of our financial statements are reasonable. The critical accounting policies affecting our financial reporting are summarized in Note 2 to the financial statements included elsewhere in this Quarterly Report.

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.

We are a smaller reporting company as defined by 17 C.F.R. 229.10(f)(1) and are not required to provide information under this item.

Evaluation of Disclosure Controls and Procedures

As of June 30, 2025, our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, management concluded that our disclosure controls and procedures were not fully effective due to the material weaknesses in internal control over financial reporting described below.

Material Weaknesses in Internal Control Over Financial Reporting

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, we identified material weaknesses related to (i) an insufficient number of accounting personnel with specialized knowledge of U.S. GAAP and SEC reporting requirements, and (ii) a lack of segregation of duties within our finance and accounting functions.

Remediation Efforts and Progress

During the quarter ended June 30, 2025, we made meaningful progress in addressing these weaknesses:

• We hired additional accounting staff and reassigned certain responsibilities to improve segregation of duties.
• We engaged outside accounting consultants with public company reporting expertise to assist with quarterly and annual filings.
• We implemented enhanced review and approval procedures for journal entries, reconciliations, and financial reporting.
• We initiated the use of new internal control documentation and testing procedures overseen by management and the Audit Committee.

These measures represent important steps toward strengthening our internal control environment. Although the remediation process is not yet complete and the material weaknesses have not been fully eliminated, management believes the actions taken have already enhanced the reliability of our financial reporting and demonstrate our commitment to strong corporate governance.

Changes in Internal Control Over Financial Reporting

Except as described above, there were no other changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Commitment to Remediation Evaluation of Disclosure Controls and Procedures

As of June 30, 2025, our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, management concluded that our disclosure controls and procedures were not fully effective due to the material weaknesses in internal control over financial reporting described below.