10-Q
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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

OR

 

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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

 

i


 

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.

 

1


 

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.

2


 

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.

3


 

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.

4


 

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.

5


 

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.

 

6


 

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