UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of March 29, 2024, the registrant had
Table of Contents
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PART I. |
1 |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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4 |
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5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 |
Item 3. |
24 |
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Item 4. |
24 |
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PART II. |
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Item 1. |
25 |
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Item 1A. |
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Item 2. |
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Item 3. |
25 |
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Item 4. |
25 |
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Item 5. |
25 |
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Item 6. |
26 |
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27 |
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Kura Sushi USA, Inc.
Condensed Balance Sheets
(amounts in thousands, except par value)
(Unaudited)
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February 29, 2024 |
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August 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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Short-term investments |
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Accounts and other receivables |
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Inventories |
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Due from affiliate |
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Prepaid expenses and other current assets |
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Total current assets |
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Non-current assets: |
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Property and equipment – net |
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Operating lease right-of-use assets |
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Deposits and other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Salaries and wages payable |
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Operating lease liabilities – current |
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Due to affiliate |
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Sales tax payable |
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Total current liabilities |
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Non-current liabilities: |
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Operating lease liabilities – non-current |
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Other liabilities |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive income |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
1
Kura Sushi USA, Inc.
Condensed Statements of Operations and Comprehensive Loss
(amounts in thousands, except per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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February 29, 2024 |
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February 28, 2023 |
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February 29, 2024 |
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February 28, 2023 |
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Sales |
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$ |
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$ |
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$ |
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$ |
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Restaurant operating costs: |
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Food and beverage costs |
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Labor and related costs |
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Occupancy and related expenses |
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Depreciation and amortization expenses |
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Other costs |
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Total restaurant operating costs |
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General and administrative expenses |
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Depreciation and amortization expenses |
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Total operating expenses |
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Operating loss |
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Other expense (income): |
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Interest expense |
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Interest income |
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Loss before income taxes |
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Income tax expense |
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Net loss |
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$ |
( |
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$ |
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$ |
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$ |
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Net loss per Class A and Class B shares |
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Basic |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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Weighted average Class A and Class B shares outstanding |
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Basic |
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Diluted |
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Other comprehensive income (loss): |
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Unrealized gain on short-term investments |
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$ |
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— |
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$ |
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— |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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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)
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Class A |
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Class B |
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Paid-in |
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Accumulated |
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Other |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income |
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Equity |
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Balances as of August 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Employee stock plan |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balances as of November 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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$ |
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— |
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— |
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Employee stock plan |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balances as of February 29, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Common Stock |
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Additional |
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Total |
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Class A |
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Class B |
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Paid-in |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balances as of August 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Employee stock plan |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances as of November 30, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Employee stock plan |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances as of February 28, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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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)
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Six Months Ended |
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February 29, 2024 |
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February 28, 2023 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash provided by operating activities |
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Depreciation and amortization |
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Stock-based compensation, net of amounts capitalized |
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Loss on disposal of property and equipment |
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— |
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Non-cash lease expense |
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Changes in operating assets and liabilities: |
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Accounts and other receivables |
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( |
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( |
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Inventories |
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( |
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( |
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Due from affiliate |
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Prepaid expenses and other current assets |
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( |
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Deposits and other assets |
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Accounts payable |
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( |
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( |
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Accrued expenses and other current liabilities |
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( |
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Salaries and wages payable |
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( |
) |
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( |
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Operating lease liabilities |
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( |
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( |
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Due to affiliate |
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( |
) |
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( |
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Sales tax payable |
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( |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Payments for property and equipment |
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( |
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( |
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Payments for initial direct costs |
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( |
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( |
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Payments for purchases of liquor licenses |
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( |
) |
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( |
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Purchases of short-term investments |
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( |
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— |
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Redemption of short-term investments |
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— |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities |
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Repayment of principal on finance leases |
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( |
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( |
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Taxes paid on vested restricted stock awards |
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( |
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— |
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Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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Decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information |
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Cash paid for income taxes |
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$ |
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$ |
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Noncash investing activities |
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Amounts unpaid for purchases of property and equipment |
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$ |
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$ |
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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,” “our” 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, 2023.
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, 2023. 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, 2024 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 2024” and “fiscal year 2023” refer to the Company’s fiscal years ending August 31, 2024 and ended August 31, 2023, respectively.
Use of Estimates
Preparing 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.
Short-Term Investments
Short-term investments consist of certificates of deposits and Treasury bills. The Company considers all highly liquid investments with an original maturity date greater than three months but less than one year as short-term investments. The carrying value of the short-term investments is equivalent to their amortized cost basis. As of February 29, 2024 and August 31, 2023, short-term investments were $
5
of $
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. The Company’s short-term investments consist of certificates of deposits and Treasury bills that are classified as available-for-sale debt securities which are measured at fair value with unrealized gains or losses recorded in other comprehensive income (loss).
Recently Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which requires greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid and effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued. The amendments should be applied on a prospective basis although retrospective application is permitted. The Company is currently evaluating the effects of this pronouncement on its financial statements and expects the update to result in additional disclosures.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance in this update is effective for all public entities for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the effects of this pronouncement on its financial statements and expects the update to result in additional disclosures.
Note 2. Balance Sheet Components
Accounts and Other Receivables
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February 29, 2024 |
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August 31, 2023 |
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(amounts in thousands) |
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Lease receivables |
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$ |
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$ |
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Credit card and other receivables |
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Total accounts and other receivables |
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$ |
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$ |
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Property and Equipment - net
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February 29, 2024 |
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August 31, 2023 |
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(amounts in thousands) |
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Leasehold improvements |
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$ |
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$ |
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Lease assets |
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Furniture and fixtures |
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Computer equipment |
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Vehicles |
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Software |
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Construction in progress |
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Property and equipment – gross |
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Less: accumulated depreciation and amortization |
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( |
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( |
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Total property and equipment – net |
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$ |
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$ |
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Depreciation and amortization expense for property and equipment was $
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 finance leases are immaterial. The Company’s leases have remaining lease terms of
Lease related costs recognized in the statements of operations and comprehensive income (loss) are as follows:
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Three Months Ended |
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Six Months Ended |
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February 29, 2024 |
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February 28, 2023 |
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February 29, 2024 |
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February 28, 2023 |
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(amounts in thousands) |
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Operating lease cost |
Classification |
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Operating lease cost |
Occupancy and related expenses, other costs and general and administrative expenses |
$ |
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$ |
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$ |
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$ |
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Variable lease cost |
Occupancy and related expenses, and general and administrative expenses |
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Total operating lease cost |
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$ |
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$ |
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$ |
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$ |
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Supplemental balance sheet information related to leases is as follows:
Operating Leases
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February 29, 2024 |
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August 31, 2023 |
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(amounts in thousands) |
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Right-of-use assets |
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$ |
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$ |
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Lease liabilities – current |
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$ |
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$ |
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Lease liabilities – non-current |
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Total lease liabilities |
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$ |
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$ |
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Six Months Ended |
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February 29, 2024 |
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February 28, 2023 |
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Weighted Average Remaining Lease Term (Years) |
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Operating leases |
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Weighted Average Discount Rate |
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Operating leases |
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% |
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% |
Supplemental disclosures of cash flow information related to leases are as follows:
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Six Months Ended |
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February 29, 2024 |
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February 28, 2023 |
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(amounts in thousands) |
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Operating cash flows paid for operating lease liabilities |
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$ |
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$ |
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Operating right-of-use assets obtained in exchange for new operating lease liabilities |
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$ |
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$ |
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7
As of February 29, 2024, the Company had an additional $
Maturities of lease liabilities, net of lease receivables, were as follows:
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Operating Leases |
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(amounts in thousands) |
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Remainder of 2024 |
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$ |
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2025 |
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2026 |
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2027 |
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2028 |
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Thereafter |
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Total lease payments |
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Less: imputed interest |
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( |
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Present value of lease liabilities |
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$ |
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Note 4. Related Party Transactions
Kura Sushi, Inc. (“Kura Japan”) is the majority stockholder of the Company and is incorporated and headquartered in Japan. In August 2019, the Company entered into a Shared Services Agreement with Kura Japan, pursuant to which Kura Japan provides the Company with certain strategic, operational and other support services, including assigning certain employees to work for the Company as expatriates to provide support to the Company’s operations, sending its employees to the Company on a short-term basis to provide support for the opening of new restaurants or renovation of existing restaurants, and providing the Company with certain supplies, parts and equipment for use in the Company’s restaurants. In addition, the Company has agreed to continue to provide Kura Japan with certain translational support services and market research. In exchange for such services, supplies, parts and equipment, the parties pay fees to each other as set forth under the Shared Services Agreement. A right of setoff is not required; however, from time to time, either party will net settle transactions as needed. Purchases of administrative supplies, expatriate salaries and travel and other administrative expenses payable to Kura Japan are included in general and administrative expenses in the accompanying statements of operations and comprehensive income (loss). Purchases of equipment from Kura Japan are included in property and equipment in the accompanying balance sheets.
In August 2019, the Company entered into an Amended and Restated Exclusive License Agreement (the “License Agreement”) with Kura Japan. Pursuant to the License Agreement, the Company pays Kura Japan a royalty fee of
On April 10, 2020, the Company and Kura Japan entered into a Revolving Credit Agreement, as amended, to provide the Company a revolving credit line of $
Balances with Kura Japan are as follows:
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February 29, 2024 |
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August 31, 2023 |
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(amounts in thousands) |
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Due from affiliate |
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$ |
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$ |
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Due to affiliate |
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$ |
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$ |
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8
Reimbursements and other payments by the Company to Kura Japan were as follows:
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Three Months Ended |
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Six Months Ended |
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February 29, 2024 |
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February 28, 2023 |
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February 29, 2024 |
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February 28, 2023 |
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(amounts in thousands) |
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Related party transactions: |
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Expatriate salaries expense |
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$ |
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$ |
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$ |
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$ |
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Royalty payments |
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Travel and other administrative expenses |
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— |
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Purchases of equipment |
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Total related party transactions |
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$ |
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$ |
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$ |
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$ |
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Reimbursements by Kura Japan to the Company were $
Note 5. Stock-based Compensation
The following table summarizes the stock option activity under the Company’s 2018 Incentive Compensation Plan, as amended and restated (the “Stock Incentive Plan”):
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Options Outstanding |
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Number of Shares |
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Weighted Average |
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Outstanding — August 31, 2023 |
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$ |
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Granted |
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$ |
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Exercised |
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( |
) |
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$ |
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Cancelled/forfeited |
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( |
) |
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$ |
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Outstanding — November 30, 2023 |
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$ |
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Granted |
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$ |
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Exercised |
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( |
) |
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$ |
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Cancelled/forfeited |
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( |
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$ |
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Outstanding — February 29, 2024 |
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$ |
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The following table summarizes the restricted stock unit (“RSU”) activity under the Stock Incentive Plan:
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Number of Shares |
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Weighted Average |
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Outstanding — August 31, 2023 |
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$ |
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Granted |
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— |
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— |
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Vested |
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( |