EX-99.2 4 ex99-2.htm

 

Exhibit 99.2

 

JJANGA LLC

HJH LLC

Ramen Aku LLC

 

Combined Financial Statements

As of and for the years ended December 31, 2023 and 2022

with Report of Independent Registered Public Accounting Firm

 

 
 

 

Table of Contents

 

  Page
   
Report of Independent Registered Public Accounting Firm 1
   
Combined Financial Statements  
   
Combined Balance Sheets 2
   
Combined Statements of Operations 3
   
Combined Statements of Shareholders’ Equity 4
   
Combined Statements of Cash Flows 5
   
Notes to Combined Financial Statements 6
   
Supplementary Combining Schedules  
   
Supplementary Schedule I - Combining Balance Sheets 14
   
Supplementary Schedule II - Combining Statements of Operations 16
   
Supplementary Schedule III - Combining Statements of Cash Flows 18

 

 
 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and

Members of Jjanga LLC, HJH LLC, Ramen Aku LLC

 

Opinion on the Combined Financial Statements

 

We have audited the accompanying combined balance sheets of Jjanga LLC, HJH LLC and Ramen Aku LLC (collectively, the “Company”) as of December 31, 2023 and 2022, the related combined statements of operations, member’s equity, and cash flows, and the related notes and schedules (referred to as the “combined financial statements”) for years then ended. In our opinion, the combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s combined financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the combined financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. Communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole and we are not, by communicating the critical audit matters, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. We determined that there are no critical audit matters.

 

/S/ BCRG Group

BCRG Group (PCAOB ID 7158)

 

We have served as the Company’s auditor since 2024.

Irvine, CA

July 2, 2024

 

1
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Combined Balance Sheets

 

 

December 31,  2023   2022 
         
ASSETS          
           
Current Assets:          
Cash  $45,632   $441,903 
Accounts receivable, net of allowance for bad debt of $0   80,749    76,067 
Inventories, net   23,424    22,689 
Total current assets   149,805    540,659 
           
Non-Current Assets:          
Property and equipment, net   1,145,500    1,196,892 
Other assets   1,200    1,200 
Operating lease right-of-use asset, net   1,483,632    1,129,163 
Total non-current assets   2,630,332    2,327,255 
           
Total assets  $2,780,137   $2,867,914 
           
LIABILITIES AND MEMBER’S EQUITY          
           
Current Liabilities:          
Accounts payable and accrued expenses  $338,673   $277,306 
Bank overdrafts   85,899    - 
Current portion of operating lease liabilities   225,993    276,604 
Current portion of loan payable, EIDL   47,431    74,203 
           
Total current liabilities   697,996    628,113 
Operating lease liabilities, less current portion   1,283,542    874,194 
Loan payable, EIDL, less current portion   2,678,366    2,725,797 
Total liabilities   4,659,904    4,228,104 
           
Commitments and contingencies          
           
Member’s equity   3,045,691    720,045 
Accumulated deficit   (4,925,458)   (2,080,235)
           
Total liabilities and member’s deficit  $2,780,137   $2,867,914 

 

See Notes to the Combined Financial Statements.

 

2
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Combined Statements of Operations

 

 

Years ended December 31,  2023   2022 
         
Revenue:          
Food and beverage  $5,729,219   $5,427,584 
Total revenue   5,729,219    5,427,584 
           
Restaurant operating expenses:          
Food, beverages and supplies   1,688,054    1,624,214 
Labor   2,316,591    2,068,422 
Rent and utilities   573,070    343,488 
Delivery and service fees   115,580    149,713 
Depreciation   193,580    147,567 
Total restaurant operating expenses   4,886,875    4,333,404 
           
Net restaurant operating income   842,344    1,094,180 
           
Operating expenses:          
General and administrative   457,201    177,203 
Advertising and marketing   12,434    8,500 
Total operating expenses   469,635    185,703 
           
Income from operations   372,709    908,477 
           
Other expense:          
Interest   (74,093)   (51,490)
Total other income   (74,093)   (51,490)
           
Income before income taxes   298,616    856,987 
           
Income tax provision   -    - 
           
Net income  $298,616   $856,987 

 

See Notes to the Combined Financial Statements

 

3
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Combined Statements of Stockholders’ Equity

 

 

   Member
Contribution		   Retained
earnings/
(distributions)		   Total
Member’s
Equity (Deficit)		 
             
Balance at December 31, 2021 (audited)  $134,696   $1,216,167   $1,350,863 
                
Contributions   585,349    -    585,349 
Distributions   -    (4,153,389)   (4,153,389)
Net income   -    856,987    856,987 
                
Balance at December 31, 2022 (audited)  $720,045   $(2,080,235)  $(1,360,190)
                
Contributions   2,325,646    -    2,325,646 
Distributions   -    (3,143,839)   (3,143,839)
Net income   -    298,616    298,616 
                
Balance at December 31, 2023 (audited)  $2,325,646   $(2,845,223)  $(519,577)

 

See Notes to the Combined Financial Statements.

 

4
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Combined Statements of Cash Flows

 

 

       (audited) 
   For the twelve months ended December 31 
   2023   2022 
         
Cash flows from operating activities:          
Net income  $298,616   $856,987 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   193,580    84,010 
Changes in assets and liabilities:          
Accounts receivable   (4,682)   (31,612)
Inventory   (735)   (8,874)
Accounts payable and accrued expenses   65,635    16,394 
Net cash provided by operating activities   552,414    916,905 
           
Cash flows from investing activities:          
Purchases of property and equipment   (142,188)   (370,290)
Net cash used in investing activities   (142,188)   (370,290)
           
Cash flows from financing activities:          
Bank overdrafts   85,899    - 
Member’s contribution   2,325,646    585,349 
Member’s distribution   (3,143,839)   (4,153,389)
Proceeds from EIDL loan   -    2,800,000 
Repayment of EIDL loan   (74,203)   - 
Net cash used in financing activities   (806,497)   (768,040)
           
Net (decrease) increase in cash   (396,271)   (221,425)
           
Cash – beginning of period   441,903    663,328 
           
Cash – end of period  $45,632   $441,903 
           
Supplemental disclosures of cash flow information          
Cash paid during the periods for:          
Interest          
Income taxes  $-   $- 

 

See Notes to the Combined Financial Statements.

 

5
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Notes to Combined Financial Statements

 

 

1. NATURE OF OPERATIONS

 

Jjanga LLC, HJH LLC, and Ramen Aku LLC (collectively, the “Company”) was incorporated in the State of Nevada on April 9, 2012, May 9, 2019 and July 20, 2022, respectively.

 

Name   Date of Formation   Description of Business
Jjanga LLC (“Jjanga”)   April 9, 2013   Sushi and Steak store located in Las Vegas, Nevada.
HJH LLC (“HJH”)   May 9, 2019   All-You-Can-Eat Sushi store located in Las Vegas, Nevada.
Ramen Aku LLC (“Aku”)   July 20, 2022   Ramen store located in Las Vegas, Nevada.

 

The Company operates three distinctive dining establishments in Las Vegas, NV: Jjanga, dba Jjanga Steak & Sushi, in Southwest Vegas, is known for its sushi and hibachi dishes, perfect for events and group dining. HJH, dba Jjanga Sushi & Oyster Bar, located near the Strip, offers all-you-can-eat sushi and innovative sushi creations, and Ramen Aku, located on N Decatur Blvd., specializes in authentic Japanese ramen with rich broths and handmade noodles. Together, these restaurants provide a diverse range of Japanese culinary experiences to locals and visitors alike.

 

The Company is owned, operated, and managed by one Member.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Reporting

 

The combined financial statements include legal entities listed above as of and for the years ended December 31, 2023 and 2022.

 

Basis of Presentation and Combining Financial Statements

 

The accompanying combined financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United States of America. The Combined financial statements include Jjanga LLC, HJH LLC, and Ramen Aku LLC. All intercompany accounts, transactions, and profits have been eliminated upon combining. There were no intercompany accounts or transactions amongst Jjanga, HJH, and Aku as of and for the years ended December 31, 2023 and 2022.

 

Use of Estimates and Assumptions

 

The preparation of Combined financial statements in conformity with the GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.

 

Marketing

 

Marketing costs are charged to expense as incurred. Marketing costs were $12,434 and $8,500 for the years ended December 31, 2023, and 2022, respectively, and are included in operating expenses in the accompanying Combined statements of income.

 

6
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Notes to Combined Financial Statements

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Delivery Fees Charged by Delivery Service Providers

 

The Company’s customers may order online through third party service providers such as Uber Eats, Door Dash, and others. These third-party service providers charge delivery and order fees to the Company. Such fees are expensed when incurred. Delivery fees are included in delivery and service fees in the accompanying combined statements of operations.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company’s net revenue primarily consists of revenues from food and beverage sales. Revenues from the sale of food items by Company-owned restaurants are recognized as Company sales when a customer purchases the food, which is when our obligation to perform is satisfied. The timing and amount of revenue recognized related to Company sales was not impacted by the adoption of Topic 606.

 

Inventories

 

Inventories, which are stated at the lower of cost or net realizable value, consist primarily of perishable food items and supplies. Cost is determined using the first-in, first out method.

 

Segment Reporting

 

Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. The Company identifies its operating segments based on how executive decision makers internally evaluates separate financial information, business activities and management responsibility. Accordingly, the Company has one reportable segment, consisting of operating its stores.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation and amortization are calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life or the lease term of the related asset. The estimated useful lives are as follows:

 

Furniture and equipment   5 to 7 years
Leasehold improvements   Shorter of estimated useful life or term of lease
Vehicle   5 years

 

 

7
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Notes to Combined Financial Statements

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income Taxes

 

The Company is a limited liability company registered under the state of Nevada and files a partnership tax return with the federal jurisdictions. The Company is not subject to state tax under the state of Nevada. Therefore, each member of the Company is taxed on its own share of the Company’s taxable income.

 

Impairment of Long-Lived Assets

 

When circumstances, such as adverse market conditions, indicate that the carrying value of a long-lived asset may be impaired, the Company performs an analysis to review the recoverability of the asset’s carrying value, which includes estimating the undiscounted cash flows (excluding interest charges) from the expected future operations of the asset. These estimates consider factors such as expected future operating income, operating trends and prospects, as well as the effects of demand, competition and other factors. If the analysis indicates that the carrying value is not recoverable from future cash flows, an impairment loss is recognized to the extent that the carrying value exceeds the estimated fair value. Any impairment losses are recorded as operating expenses, which reduce net income. The Company did not have any impairment of long-lived assets as of December 31, 2023 and 2022.

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk are accounts receivable and other receivables arising from its normal business activities. The Company has a diversified customer base. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for un-collectible accounts and, as a consequence, believes that its accounts receivable related credit risk exposure beyond such allowance is limited.

 

Fair Value of Financial Instruments

 

The Company utilizes ASC 820-10, Fair Value Measurement and Disclosure, for valuing financial assets and liabilities measured on a recurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

 

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The Company’s financial instruments consisted of cash, operating lease right-of-use assets, net, accounts payable and accrued expenses, notes payables, and operating lease liabilities. The estimated fair value of cash, operating lease right-of-use assets, net, and notes payables approximate its carrying amount due to the short maturity of these instruments.

 

8
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Notes to Combined Financial Statements

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Leases

 

In accordance with ASC 842, Leases, the Company determines whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, the Company determines whether it should be classified as an operating or finance lease. Operating leases are recorded in the balance sheet as: right-of-use asset (“ROU asset”) and operating lease liability. ROU asset represents the Company’s right to use an underlying asset for the lease term and lease liability represents the Company’s obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at the commencement date of the lease and measured based on the present value of lease payments over the lease term. The ROU asset also includes deferred rent liabilities. The Company’s lease arrangement generally do not provide an implicit interest rate. As a result, in such situations the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option in the measurement of its ROU asset and liability. Lease expense for the operating lease is recognized on a straight-line basis over the lease term. The Company has a lease agreement with lease and non-lease components, which are accounted for as a single lease component.

 

Recent Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments—Credit Losses,” which will require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Subsequently, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accounting standards. Further, the FASB issued ASU No. 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, and ASU 2020-02 to provide additional guidance on the credit losses standard. For the Company as an emerging growth company, the amendments for ASU 2016-13 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASUs is on a modified retrospective basis. The Company has adopted this ASU since April 1, 2023. The Company considers the impact on its combined financial statements and related disclosures to be immaterial.

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which modifies the rules on income tax disclosures to require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The adopting this new guidance on its combined financial statements and related disclosures will have no impact on the Company.

 

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The purpose of the amendment is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Based on management’s assessment, the Company has determined that it has only one operating segment as defined by ASC 280.

 

Except for the above-mentioned pronouncements, there are no new recently issued accounting standards that will have a material impact on the consolidated financial position, statements of operations, and cash flows.

 

9
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Notes to Combined Financial Statements

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

COVID-19 Impact on Concentration of Risk

 

The novel coronavirus (“COVID-19”) pandemic has significantly impacted health and economic conditions throughout the United States and globally, as public concern about becoming ill with the virus has led to the issuance of recommendations and/or mandates from federal, state and local authorities to practice social distancing or self-quarantine. The Company is continually monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on operations, financial position, cash flows, inventory, supply chains, purchasing trends, customer payments, and the industry in general, in addition to the impact on its employees. We have experienced significant disruptions to our business due to the COVID-19 pandemic and related suggested and mandated social distancing and shelter-in-place orders.

 

3. PROPERTY AND EQUIPMENT, NET

 

December 31  2023   2022 
         
Leasehold Improvement                        
Furniture and equipment          
Total property and equipment          
Accumulated depreciation          
Total property and equipment, net          

 

Total depreciation was $193,580 and $147,567 for the years ended December 31, 2023 and 2022, respectively.

 

10
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Notes to Combined Financial Statements

 

 

4. LOAN PAYABLES, EIDL

 

December 31,  2023   2022 
         
April 21, 2022 ($2,000,000) - Jjanga  $1,950,517   $2,000,000 
February 9, 2022 ($800,000) - HJH   775,280    800,000 
Total loan payables, EIDL   2,725,797    2,800,000 
Less - current portion   (47,431)   (74,203)
Total loan payables, EIDL, less current portion   2,678,366    2,725,797 

 

The following table provides future minimum payments as of December 31, 2023:

 

For the years ended  Amount 
2024  $47,731 
2025   49,980 
2026   52,336 
2027   54,803 
2028   57,386 
Thereafter   2,463,561 
      
Total  $2,725,797 

 

April 21, 2022 – $2,000,000 – Jjanga

 

On April 21, 2022, Jjanga LLC (the “Jjanga”) executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Jjanga’s business.

 

Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), Jjanga borrowed an aggregate principal amount of the EIDL Loan of $2,000,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 4.75% per annum and will accrue only on funds actually advanced from the date of each advance. Installment payments, including principal and interest, are due monthly beginning May 2023 (twelve months from the date of the SBA Loan) in the amount of $10,298. The balance of principal and interest is payable thirty years from the date of the SBA Loan.

 

In connection therewith, Jjanga executed (i) a loan for the benefit of the SBA (the “SBA Loan”), which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of Jjanga, which also contains customary events of default (the “SBA Security Agreement”).

 

11
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Notes to Combined Financial Statements

 

 

4. LOAN PAYABLES, EIDL (continued)

 

February 9, 2022 – $800,000 – HJH LLC

 

On February 9, 2022, HJH LLC (the “HJH”) executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the HJH’s business.

 

Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), HJH borrowed an aggregate principal amount of the EIDL Loan of $800,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 4.75% per annum and will accrue only on funds actually advanced from the date of each advance. Installment payments, including principal and interest, are due monthly beginning March 2023 (twelve months from the date of the SBA Loan) in the amount of $4,120. The balance of principal and interest is payable thirty years from the date of the SBA Loan.

 

In connection therewith, HJH executed (i) a loan for the benefit of the SBA (the “SBA Loan”), which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of HJH, which also contains customary events of default (the “SBA Security Agreement”).

 

5. COMMITMENTS AND CONTINGENCIES

 

Commitments

 

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

 

The Company has lease agreements with lease and non-lease components. The Company has elected to account for these lease and non-lease components as a single lease component.

 

In accordance with ASC 842, the components of lease expense were as follows:

 

Year ended December 31,  2023   2022 
Operating lease expense  $389,345   $331,370 
Total lease expense  $389,345   $331,370 

 

In accordance with ASC 842, other information related to leases was as follows:

 

Year ended December 31,  2023   2022 
Operating cash flows from operating leases  $385,401   $337,123 
Cash paid for amounts included in the measurement of lease liabilities  $385,401   $337,123 
           
Weighted-average remaining lease term—operating leases         6.5 Years  
Weighted-average discount rate—operating leases        7%

 

12
 

 

HJH LLC, Kanji LLC, and Ramen Aku LLC

Notes to Combined Financial Statements

 

 

In accordance with ASC 842, maturities of operating lease liabilities as of December 31, 2023 were as follows:

 

   Operating 
Year ending:  Lease 
2024  $323,529 
2025   280,047 
2026   286,320 
2027   292,781 
2028   257,485 
Thereafter   582,699 
Total undiscounted cash flows  $2,022,861 
      
Reconciliation of lease liabilities:     
Weighted-average remaining lease terms    6.5 Years  
Weighted-average discount rate   7%
Present values  $1,509,534 
      
Lease liabilities—current   225,993 
Lease liabilities—long-term   1,283,542 
Lease liabilities—total  $1,509,535 
      
Difference between undiscounted and discounted cash flows  $513,326 

 

Contingencies

 

From time to time, the Company may be involved in certain legal actions and claims arising in the normal course of business. Management is of the opinion that such matters will be resolved without material effect on the Company’s financial condition or results of operations.

 

6. SUBSEQUENT EVENTS

 

The Company evaluated all events or transactions that occurred after December 31, 2023. During this period, the Company did not have any material recognizable subsequent events required to be disclosed other than the following:

 

  ● On June 12, 2024, the Company executed an amended asset purchase agreement with Yoshiharu Global Co, updating the original agreement from November 21, 2023. This amendment allows separate closings for restaurants, effective April 20, 2024. Yoshiharu Global Co. will acquire assets from three restaurants: Jjanga, HJH, and Aku, for $1,800,000 in cash, a $600,000 promissory note, and a $1,200,000 convertible note. Mr. Hwang, the sole member of the three restaurants, will serve as Managing Director under an employment agreement.

 

13
 

 

Supplementary Schedule I

Combining Balance Sheets

As of December 31, 2023 and 2022

 

   As of December 31, 2023 
   Jjanga   HJH   AKU   Combined 
                 
ASSETS                    
                     
Current Assets:                    
Cash  $3,000   $3,000   $39,632   $45,632 
Accounts receivable   48,832    18,250    13,667    80,749 
Inventories   11,796    5,393    6,235    23,424 
Total current assets   63,628    26,643    59,534    149,805 
                     
Non-Current Assets:                    
Property and equipment, net   843,081    89,612    212,807    1,145,500 
Other assets   1,200    -    -    1,200 
Operating lease right-of-use asset, net   633,736    46,257    803,639    1,483,632 
Total non-current assets   1,478,017    135,869    1,016,446    2,630,332 
                     
Total assets  $1,541,645   $162,512   $1,075,980   $2,780,137 
                     
LIABILITIES AND MEMBER’S EQUITY                    
                     
Current Liabilities:                    
Accounts payable and accrued expenses  $176,599   $92,933   $69,141   $338,673 
Bank overdrafts   49,913    35,986    -    85,899 
Current portion of operating lease liabilities   111,075    48,717    66,201    225,993 
Current portion of loan payable, EIDL   33,267    14,164    -    47,431 
                     
Total current liabilities   370,854    191,800    135,342    697,996 
Operating lease liabilities, less current portion   524,265    -    759,277    1,283,542 
Loan payable, EIDL, less current portion   1,917,250    761,116    -    2,678,366 
Total liabilities   2,812,369    952,916    894,619    4,659,904 
                     
Commitments and contingencies                    
                     
Member’s equity   2,171,233    469,851    404,607    3,045,691 
Retained earnings   (3,441,957)   (1,260,255)   (223,246)   (4,925,458)
                     
Total liabilities and member’s equity  $1,541,645   $162,512   $1,075,980   $2,780,137 

 

14
 

 

Supplementary Schedule I

Combining Balance Sheets

As of December 31, 2023 and 2022

 

   As of December 31, 2022 
   Jjanga   HJH   AKU   Combined 
                 
ASSETS                    
                     
Current Assets:                    
Cash  $211,099   $166,155   $64,649   $441,903 
Accounts receivable   47,212    19,421    9,434    76,067 
Inventories   8,578    6,681    7,430    22,689 
Total current assets   266,889    192,257    81,513    540,659 
                     
Non-Current Assets:                    
Property and equipment, net   839,646    117,246    240,000    1,196,892 
Other assets   1,200    -    -    1,200 
Operating lease right-of-use asset, net   103,294    151,675    874,194    1,129,163 
Total non-current assets   944,140    268,921    1,114,194    2,327,255 
                     
Total assets  $1,211,029   $461,178   $1,195,707   $2,867,914 
                     
LIABILITIES AND MEMBER’S EQUITY                    
                     
Current Liabilities:                    
Accounts payable and accrued expenses  $189,264   $65,982   $22,060   $277,306 
Current portion of operating lease liabilities   107,571    110,055    58,978    276,604 
Current portion of loan payable, EIDL   49,483    24,720    -    74,203 
                     
Total current liabilities   346,318    200,757    81,038    628,113 
Operating lease liabilities, less current portion   -    48,717    825,477    874,194 
Loan payable, EIDL, less current portion   1,950,517    775,280    -    2,725,797 
Total liabilities   2,296,835    1,024,754    906,515    4,228,104 
                     
Commitments and contingencies                    
                     
Member’s equity   257,949    147,246    314,850    720,045 
Retained earnings   (1,343,755)   (710,822)   (25,658)   (2,080,235)
                     
Total liabilities and member’s equity  $1,211,029   $461,178   $1,195,707   $2,867,914 

 

15
 

 

Supplementary Schedule II

Combining Statements of Operations

Years Ended December 31, 2023 and 2022

 

   Year Ended December 31, 2023 
   Jjanga   HJH   AKU   Combined 
                 
Revenue:                    
Food and beverage  $3,066,322   $1,345,157   $1,317,740   $5,729,219 
Total revenue   3,066,322    1,345,157    1,317,740    5,729,219 
                     
Restaurant operating expenses:                    
Food, beverages and supplies   1,120,392    259,031    308,631    1,688,054 
Labor   1,315,548    666,390    334,653    2,316,591 
Rent and utilities   210,609    188,225    174,236    573,070 
Delivery and service fees   70,956    44,559    65    115,580 
Depreciation   138,753    27,634    27,193    193,580 
Total restaurant operating expenses   2,856,258    1,185,839    844,778    4,886,875 
                     
Net restaurant operating income   210,064    159,318    472,962    842,344 
    7%               
Operating expenses:                    
General and administrative   196,144    54,740    206,317    457,201 
Advertising and marketing   11,516    -    918    12,434 
Total operating expenses   207,660    54,740    207,235    469,635 
                     
Income from operations   2,404    104,578    265,727    372,709 
                     
Other expense:                    
Interest   (74,093)   -    -    (74,093)
Total other expenses   (74,093)   -    -      
                     
Income (loss) before income taxes   (71,689)   104,578    265,727    298,616 
                     
Income tax provision   -    -    -    - 
                     
Net income (loss)  $(71,689)  $104,578   $265,727   $298,616 

 

16
 

 

Supplementary Schedule II

Combining Statements of Operations

Years Ended December 31, 2023 and 2022

 

   Year Ended December 31, 2022 
   Jjanga   HJH   AKU   Combined 
                 
Revenue:                    
Food and beverage  $3,778,464   $1,626,496   $22,624   $5,427,584 
Total revenue   3,778,464    1,626,496    22,624    5,427,584 
                     
Restaurant operating expenses:                    
Food, beverages and supplies   1,238,542    380,790    4,882    1,624,214 
Labor   1,407,608    653,661    7,153    2,068,422 
Rent and utilities   176,865    156,118    10,505    343,488 
Delivery and service fees   81,948    67,765    -    149,713 
Depreciation   125,957    21,610    -    147,567 
Total restaurant operating expenses   3,030,920    1,279,944    22,540    4,333,404 
                     
Net restaurant operating income   747,544    346,552    84    1,094,180 
    20%               
Operating expenses:                    
General and administrative   109,933    48,028    19,242    177,203 
Advertising and marketing   2,000    -    6,500    8,500 
Total operating expenses   111,933    48,028    25,742    185,703 
                     
Income (loss) from operations   635,611    298,524    (25,658)   908,477 
                     
Other expense:                    
Interest   (51,490)   -    -    (51,490)
Total other expenses   (51,490)   -    -      
                     
Income (loss) before income taxes   584,121    298,524    (25,658)   856,987 
                     
Income tax provision   -    -    -    - 
                     
Net income (loss)  $584,121   $298,524   $(25,658)  $856,987 

 

17
 

 

Supplementary Schedule III

Combining Statements of Cash Flows

Years Ended December 31, 2023 and 2022

 

   Year Ended December 31, 2023 
   Jjanga   HJH   AKU   Combined 
                 
Cash flows from operating activities:                    
Net income (loss)  $(71,689)  $104,578   $265,727   $298,616 
Adjustments to reconcile net income to net cash provided by operating activities:                    
Depreciation   138,753    27,634    27,193    193,580 
Changes in assets and liabilities:                    
Accounts receivable   (1,620)   1,171    (4,233)   (4,682)
Inventory   (3,218)   1,288    1,195    (735)
Accounts payable and accrued expenses   (15,338)   22,314    58,659    65,635 
Net cash provided by operating activities   46,888    156,985    348,541    552,414 
                     
Cash flows from investing activities:                    
Purchases of property and equipment   (142,188)   -    -    (142,188)
Net cash used in investing activities   (142,188)   -    -    (142,188)
                     
Cash flows from financing activities:                    
Bank overdrafts   49,913    35,986    -    85,899 
Member’s contribution   1,913,284    322,605    89,757    2,325,646 
Member’s distribution   (2,026,513)   (654,011)   (463,315)   (3,143,839)
Repayment of EIDL loan   (49,483)   (24,720)   -    (74,203)
Net cash used in financing activities   (112,799)   (320,140)   (373,558)   (806,497)
                     
Net decrease in cash   (208,099)   (163,155)   (25,017)   (396,271)
                     
Cash – beginning of period   -    166,155    64,649    230,804 
                     
Cash – end of period  $(208,099)  $3,000   $39,632   $(165,467)
                     
Supplemental disclosures of cash flow information                    
Cash paid during the periods for:                    
Interest  $74,093   $-   $-   $74,093 
Income taxes  $-   $-   $-   $- 

 

18
 

 

Supplementary Schedule III

Combining Statements of Cash Flows

Years Ended December 31, 2023 and 2022

 

   Year Ended December 31, 2022 
   Jjanga   HJH   AKU   Combined 
                 
Cash flows from operating activities:                    
Net income (loss)  $584,121   $298,524   $(25,658)  $856,987 
Adjustments to reconcile net income to net cash provided by operating activities:                    
Depreciation   50,524    33,486    -    84,010 
Changes in assets and liabilities:                    
Accounts receivable   (14,046)   (8,132)   (9,434)   (31,612)
Inventory   3,797    (5,241)   (7,430)   (8,874)
Other assets   -    -    -    - 
Accounts payable and accrued expenses   16,066    164    164    16,394 
Net cash provided by (used in) operating activities   640,462    318,801    (42,358)   916,905 
                     
Cash flows from investing activities:                    
Purchases of property and equipment   (70,050)   (60,240)   (240,000)   (370,290)
Net cash used in investing activities   (70,050)   (60,240)   (240,000)   (370,290)
                     
Cash flows from financing activities:                    
Member’s contribution   265,728    4,771    314,850    585,349 
Member’s distribution   (3,100,701)   (1,052,688)   -    (4,153,389)
Proceeds from EIDL loan   2,000,000    800,000    -    2,800,000 
Net cash provided (used in) financing activities   (834,973)   (247,917)   314,850    (768,040)
                     
Net (decrease) increase in cash   (264,561)   10,644    32,492    (221,425)
                     
Cash – beginning of period   -    155,511    32,157    187,668 
                     
Cash – end of period  $(264,561)  $166,155   $64,649   $(33,757)
                     
Supplemental disclosures of cash flow information                    
Cash paid during the periods for:                    
Interest  $51,490   $-   $-   $51,490 
Income taxes  $-   $-   $-   $- 

 

19