SEC Filing | Kura Sushi USA

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-39012

KURA SUSHI USA, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	26-3808434
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
17461 Derian Avenue, Suite 200 Irvine, California	92614
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (657) 333-4100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.001 par value per share

KRUS

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 2, 2023, the registrant had 8,792,126 shares of Class A common stock, $0.001 par value per share, outstanding and 1,000,050 shares of Class B common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations	2
	Condensed Statements of Stockholders’ Equity	3
	Condensed Statements of Cash Flows	4
	Notes to Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
Signatures		25

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Kura Sushi USA, Inc.

Condensed Balance Sheets

(amounts in thousands, except par value)

(Unaudited)


	November 30, 2022			August 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	26,934		$	35,782
Accounts and other receivables		2,916			2,486
Inventories		1,278			1,120
Due from affiliate		34			156
Prepaid expenses and other current assets		3,877			2,852
Total current assets		35,039			42,396
Non-current assets:
Property and equipment – net		81,109			75,590
Operating lease right-of-use assets		84,154			79,990
Deposits and other assets		4,147			3,380
Total assets	$	204,449		$	201,356

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	5,304		$	5,559
Accrued expenses and other current liabilities		3,518			3,731
Salaries and wages payable		5,481			5,955
Finance leases – current		337			507
Operating lease liabilities – current		8,041			7,992
Due to affiliate		648			285
Sales tax payable		1,162			1,240
Total current liabilities		24,491			25,269
Non-current liabilities:
Finance leases – non-current		22			30
Operating lease liabilities – non-current		87,519			82,280
Other liabilities		510			483
Total liabilities		112,542			108,062
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, $0.001 par value; 1,000 shares authorized, no shares issued or outstanding		—			—
Class A common stock, $0.001 par value; 50,000 shares authorized, 8,791 and 8,788 shares issued and outstanding as of November 30, 2022 and August 31, 2022, respectively		9			9
Class B common stock, $0.001 par value; 10,000 shares authorized, 1,000 shares issued and outstanding as of November 30, 2022 and August 31, 2022		1			1
Additional paid-in capital		119,671			118,970
Accumulated deficit		(27,774	)		(25,686	)
Total stockholders' equity		91,907			93,294
Total liabilities and stockholders' equity	$	204,449		$	201,356

The accompanying notes are an integral part of these condensed financial statements.

Kura Sushi USA, Inc.

Condensed Statements of Operations

(amounts in thousands, except per share data)

(Unaudited)


	Three Months Ended November 30,
	2022			2021
Sales	$	39,318		$	29,832
Restaurant operating costs:
Food and beverage costs		12,430			8,957
Labor and related costs		12,535			9,710
Occupancy and related expenses		2,885			2,200
Depreciation and amortization expenses		1,576			1,171
Other costs		5,321			3,610
Total restaurant operating costs		34,747			25,648
General and administrative expenses		6,642			5,360
Depreciation and amortization expenses		85			88
Total operating expenses		41,474			31,096
Operating loss		(2,156	)		(1,264	)
Other expense (income):
Interest expense		16			25
Interest income		(94	)		(26	)
Loss before income taxes		(2,078	)		(1,263	)
Income tax expense		10			12
Net loss	$	(2,088	)	$	(1,275	)
Net loss per Class A and Class B shares
Basic	$	(0.21	)	$	(0.13	)
Diluted	$	(0.21	)	$	(0.13	)
Weighted average Class A and Class B shares outstanding
Basic		9,789			9,710
Diluted		9,789			9,710

The accompanying notes are an integral part of these condensed financial statements.

Kura Sushi USA, Inc.

Condensed Statements of Stockholders’ Equity

(amounts in thousands)

(Unaudited)


	Common Stock								Additional					Total
	Class A				Class B				Paid-in		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balances as of August 31, 2022		8,788	$	9		1,000	$	1	$	118,970	$	(25,686	)	$	93,294
Stock-based compensation		—		—		—		—		650		—			650
Employee stock plan		3		—		—		—		51		—			51
Net loss		—		—		—		—		—		(2,088	)		(2,088	)
Balances as of November 30, 2022		8,791	$	9		1,000	$	1	$	119,671	$	(27,774	)	$	91,907

	Common Stock								Additional					Total
	Class A				Class B				Paid-in		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balances as of August 31, 2021		8,700	$	9		1,000	$	1	$	115,756	$	(24,922	)	$	90,844
Stock-based compensation		—		—		—		—		443		—			443
Employee stock plan		13		—		—		—		19		—			19
Net loss		—		—		—		—		—		(1,275	)		(1,275	)
Balances as of November 30, 2021		8,713	$	9		1,000	$	1	$	116,218	$	(26,197	)	$	90,031

The accompanying notes are an integral part of these condensed financial statements.

Kura Sushi USA, Inc.

Condensed Statements of Cash Flows

(amounts in thousands)

(Unaudited)


	Three Months Ended November 30,
	2022			2021
Cash flows from operating activities
Net loss	$	(2,088	)	$	(1,275	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization		1,661			1,259
Stock-based compensation		650			443
Non-cash lease expense		844			709
Changes in operating assets and liabilities:
Accounts and other receivables		108			84
Inventories		(158	)		(87	)
Due from affiliate		122			329
Prepaid expenses and other current assets		(568	)		8,303
Deposits and other assets		43			(69	)
Accounts payable		(896	)		194
Accrued expenses and other current liabilities		1,061			241
Salaries and wages payable		(474	)		143
Operating lease liabilities		(162	)		205
Due to affiliate		567			67
Sales tax payable		(181	)		30
Net cash provided by operating activities		529			10,576
Cash flows from investing activities
Payments for property and equipment		(8,344	)		(6,036	)
Payments for initial direct costs		(95	)		(225	)
Payments for purchases of liquor licenses		(811	)		(84	)
Net cash used in investing activities		(9,250	)		(6,345	)
Cash flows from financing activities
Repayment of principal on finance leases		(178	)		(259	)
Proceeds from exercise of stock options		51			19
Net cash used in financing activities		(127	)		(240	)
(Decrease) increase in cash and cash equivalents		(8,848	)		3,991
Cash and cash equivalents, beginning of period		35,782			40,430
Cash and cash equivalents, end of period	$	26,934		$	44,421
Supplemental disclosures of cash flow information
Cash paid for income taxes	$	65		$	45
Noncash investing activities
Amounts unpaid for purchases of property and equipment	$	1,095		$	2,394

The accompanying notes are an integral part of these condensed financial statements.

Kura Sushi USA, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Note 1. Organization and Basis of Presentation

Kura Sushi USA, Inc. is a technology-enabled Japanese restaurant concept that provides guests with a distinctive dining experience by serving authentic Japanese cuisine through an engaging revolving sushi service model, which the Company refers to as the “Kura Experience.” Kura Sushi encourages healthy lifestyles by serving freshly prepared Japanese cuisine using high-quality ingredients that are free from artificial seasonings, sweeteners, colorings, and preservatives. Kura Sushi aims to make quality Japanese cuisine accessible to its guests across the United States through affordable prices and an inviting atmosphere. “Kura Sushi USA,” “Kura Sushi,” “Kura,” and the “Company” refer to Kura Sushi USA, Inc. unless expressly indicated or the context otherwise requires.

Basis of Presentation

The accompanying unaudited condensed financial statements (the “Condensed Financial Statements”) have been prepared by the Company in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. As such, these Condensed Financial Statements should be read in conjunction with the Company’s audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended August 31, 2022.

The accounting policies followed by the Company are set forth in Part II, Item 8, Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Financial Statements included in the Company’s Annual Report on Form 10‑K for the fiscal year ended August 31, 2022. In the opinion of management, all adjustments necessary to fairly state the Condensed Financial Statements have been made. All such adjustments are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of results to be expected for the fiscal year ending August 31, 2023 or for any other future annual or interim period.

Fiscal Year

The Company’s fiscal year begins on September 1 and ends on August 31, and references made to “fiscal year 2023” and “fiscal year 2022” refer to the Company’s fiscal years ending August 31, 2023 and ended August 31, 2022, respectively.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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 presented.

Significant items subject to such estimates include asset retirement obligations, stock-based compensation, the useful lives of assets, the assessment of the recoverability of long-lived assets, and income taxes. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) is the same as net income (loss) for all periods presented. Therefore, a separate statement of comprehensive income (loss) is not included in the accompanying financial statements.

Recently Adopted Accounting Pronouncement

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” which provides guidance on disclosures for transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company adopted this update effective September 1, 2022. The adoption of this update did not have a material impact to the consolidated financial statements.

Note 2. Balance Sheet Components

Accounts and Other Receivables


	November 30, 2022		August 31, 2022
	(amounts in thousands)
Lease receivables	$	2,305	$	1,767
Credit card and other receivables		611		719
Total accounts and other receivables	$	2,916	$	2,486

Prepaid Expenses and Other Current Assets


	November 30, 2022		August 31, 2022
	(amounts in thousands)
Employee retention credit	$	34	$	34
Prepaid expenses		3,525		2,588
Other current assets		318		230
Total prepaid expenses and other current assets	$	3,877	$	2,852

Property and Equipment - net


	November 30, 2022			August 31, 2022
	(amounts in thousands)
Leasehold improvements	$	60,780		$	56,668
Lease assets		6,166			6,166
Furniture and fixtures		24,707			21,759
Computer equipment		1,510			1,307
Vehicles		159			159
Software		924			921
Construction in progress		8,580			8,666
Property and equipment – gross		102,826			95,646
Less: accumulated depreciation and amortization		(21,717	)		(20,056	)
Total property and equipment – net	$	81,109		$	75,590

Depreciation and amortization expense for property and equipment was $1.7 million and $1.3 million for the three months ended November 30, 2022 and November 30, 2021, respectively.

Note 3. Leases

The Company has operating and finance leases for its corporate office, restaurant locations, office equipment, kitchen equipment and automobiles. The Company’s leases have remaining lease terms of less than 1 year to 20 years, some of which include options to extend the leases.

Lease related costs recognized in the statements of operations are as follows:


		Three Months Ended November 30,
		2022		2021
		(amounts in thousands)
Finance lease cost	Classification
Amortization of right-of-use assets	Depreciation and amortization expenses	$	235	$	136
Interest on lease liabilities	Interest expense		4		13
Total finance lease cost		$	239	$	149


		Three Months Ended November 30,
		2022		2021
		(amounts in thousands)
Operating lease cost	Classification
Operating lease cost	Occupancy and related expenses, other costs and general and administrative expenses	$	2,262	$	1,832
Variable lease cost	Occupancy and related expenses, and general and administrative expenses		645		436
Total operating lease cost		$	2,907	$	2,268

Supplemental balance sheet information related to leases is as follows:

Operating Leases


	November 30, 2022		August 31, 2022
	(amounts in thousands)
Right-of-use assets	$	84,154	$	79,990

Lease liabilities – current	$	8,041	$	7,992
Lease liabilities – non-current		87,519		82,280
Total lease liabilities	$	95,560	$	90,272

Finance Lease Assets – net


	November 30, 2022			August 31, 2022
	(amounts in thousands)
Property and equipment	$	6,166		$	6,166
Accumulated depreciation		(3,487	)		(3,348	)
Total property and equipment – net	$	2,679