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 May 31, 2024

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 July 2, 2024, the registrant had 10,244,893 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 and Comprehensive (Loss) Income

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

27

Signatures

28

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Kura Sushi USA, Inc.

Condensed Balance Sheets

(amounts in thousands, except par value)

(Unaudited)

 

 

 

May 31, 2024

 

 

August 31, 2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

59,405

 

 

$

69,697

 

Short-term investments

 

 

1,250

 

 

 

8,542

 

Accounts and other receivables

 

 

5,510

 

 

 

5,048

 

Inventories

 

 

2,132

 

 

 

1,747

 

Due from affiliate

 

 

 

 

 

104

 

Prepaid expenses and other current assets

 

 

3,988

 

 

 

4,233

 

Total current assets

 

 

72,285

 

 

 

89,371

 

Non-current assets:

 

 

 

 

 

 

Property and equipment – net

 

 

130,663

 

 

 

106,427

 

Operating lease right-of-use assets

 

 

117,030

 

 

 

103,884

 

Deposits and other assets

 

 

4,753

 

 

 

4,977

 

Total assets

 

$

324,731

 

 

$

304,659

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

8,063

 

 

$

7,248

 

Accrued expenses and other current liabilities

 

 

3,412

 

 

 

2,821

 

Salaries and wages payable

 

 

8,596

 

 

 

7,595

 

Operating lease liabilities – current

 

 

11,734

 

 

 

9,225

 

Due to affiliate

 

 

123

 

 

 

555

 

Sales tax payable

 

 

1,766

 

 

 

1,694

 

Total current liabilities

 

 

33,694

 

 

 

29,138

 

Non-current liabilities:

 

 

 

 

 

 

Operating lease liabilities – non-current

 

 

123,848

 

 

 

110,234

 

Other liabilities

 

 

763

 

 

 

646

 

Total liabilities

 

 

158,305

 

 

 

140,018

 

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,
10,243 and 10,147 shares issued and outstanding as of May 31, 2024
and August 31, 2023, respectively

 

 

10

 

 

 

10

 

Class B common stock, $0.001 par value; 10,000 shares authorized,
1,000 shares issued and outstanding as of May 31, 2024
and August 31, 2023

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

194,202

 

 

 

188,771

 

Accumulated deficit

 

 

(27,787

)

 

 

(24,184

)

Accumulated other comprehensive income

 

 

 

 

 

43

 

Total stockholders' equity

 

 

166,426

 

 

 

164,641

 

Total liabilities and stockholders' equity

 

$

324,731

 

 

$

304,659

 

 

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

 

1


 

Kura Sushi USA, Inc.

Condensed Statements of Operations and Comprehensive (Loss) Income

(amounts in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended May 31,

 

 

Nine Months Ended May 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Sales

 

$

63,082

 

 

$

49,238

 

 

$

171,848

 

 

$

132,500

 

Restaurant operating costs:

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage costs

 

 

18,391

 

 

 

14,770

 

 

 

50,691

 

 

 

40,440

 

Labor and related costs

 

 

20,378

 

 

 

14,362

 

 

 

55,409

 

 

 

40,751

 

Occupancy and related expenses

 

 

4,318

 

 

 

3,554

 

 

 

12,179

 

 

 

9,504

 

Depreciation and amortization expenses

 

 

3,124

 

 

 

1,975

 

 

 

8,294

 

 

 

5,309

 

Other costs

 

 

9,076

 

 

 

6,165

 

 

 

25,023

 

 

 

17,352

 

Total restaurant operating costs

 

 

55,287

 

 

 

40,826

 

 

 

151,596

 

 

 

113,356

 

General and administrative expenses

 

 

8,857

 

 

 

7,012

 

 

 

25,634

 

 

 

20,776

 

Depreciation and amortization expenses

 

 

107

 

 

 

92

 

 

 

318

 

 

 

265

 

Total operating expenses

 

 

64,251

 

 

 

47,930

 

 

 

177,548

 

 

 

134,397

 

Operating (loss) income

 

 

(1,169

)

 

 

1,308

 

 

 

(5,700

)

 

 

(1,897

)

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

15

 

 

 

23

 

 

 

35

 

 

 

53

 

Interest income

 

 

(686

)

 

 

(436

)

 

 

(2,280

)

 

 

(593

)

(Loss) income before income taxes

 

 

(498

)

 

 

1,721

 

 

 

(3,455

)

 

 

(1,357

)

Income tax expense

 

 

60

 

 

 

41

 

 

 

148

 

 

 

66

 

Net (loss) income

 

$

(558

)

 

$

1,680

 

 

$

(3,603

)

 

$

(1,423

)

Net (loss) income per Class A and Class B shares

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.05

)

 

$

0.16

 

 

$

(0.32

)

 

$

(0.14

)

Diluted

 

$

(0.05

)

 

$

0.16

 

 

$

(0.32

)

 

$

(0.14

)

Weighted average Class A and Class B shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

11,188

 

 

 

10,485

 

 

 

11,167

 

 

 

10,028

 

Diluted

 

 

11,188

 

 

 

10,807

 

 

 

11,167

 

 

 

10,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on short-term investments

 

$

(76

)

 

$

(7

)

 

$

(43

)

 

$

(7

)

Comprehensive (loss) income

 

$

(634

)

 

$

1,673

 

 

$

(3,646

)

 

$

(1,430

)

 

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

 

 

 

 

 

Accumulated

 

 

Total

 

 

 

Class A

 

 

Class B

 

 

Paid-in

 

 

Accumulated

 

 

Other
Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Equity

 

Balances as of August 31, 2023

 

 

10,147

 

 

$

10

 

 

 

1,000

 

 

$

1

 

 

$

188,771

 

 

$

(24,184

)

 

$

43

 

 

$

164,641

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,034

 

 

 

 

 

 

 

 

 

1,034

 

Employee stock plan

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

 

 

 

110

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,047

)

 

 

 

 

 

(2,047

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Balances as of November 30, 2023

 

 

10,155

 

 

$

10

 

 

 

1,000

 

 

$

1

 

 

$

189,915

 

 

$

(26,231

)

 

$

46

 

 

$

163,741

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,080

 

 

 

 

 

 

 

 

 

1,080

 

Employee stock plan

 

 

71

 

 

 

 

 

 

 

 

 

 

 

 

1,427

 

 

 

 

 

 

 

 

 

1,427

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(998

)

 

 

 

 

 

(998

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

30

 

Balances as of February 29, 2024

 

 

10,226

 

 

$

10

 

 

 

1,000

 

 

$

1

 

 

$

192,422

 

 

$

(27,229

)

 

$

76

 

 

$

165,280

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,236

 

 

 

 

 

 

 

 

 

1,236

 

Employee stock plan

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

544

 

 

 

 

 

 

 

 

 

544

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(558

)

 

 

 

 

 

(558

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(76

)

 

 

(76

)

Balances as of May 31, 2024

 

 

10,243

 

 

$

10

 

 

 

1,000

 

 

$

1

 

 

$

194,202

 

 

$

(27,787

)

 

$

 

 

$

166,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Accumulated

 

 

Total

 

 

 

Class A

 

 

Class B

 

 

Paid-in

 

 

Accumulated

 

 

Other
Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

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

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

945

 

 

 

 

 

 

 

 

 

945

 

Employee stock plan

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

533

 

 

 

 

 

 

 

 

 

533

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,015

)

 

 

 

 

 

(1,015

)

Balances as of February 28, 2023

 

 

8,819

 

 

$

9

 

 

 

1,000

 

 

$

1

 

 

$

121,149

 

 

$

(28,789

)

 

$

 

 

$

92,370

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

975

 

 

 

 

 

 

 

 

 

975

 

Employee stock plan

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

423

 

 

 

 

 

 

 

 

 

423

 

Issuance of common stock in connection with follow-on public offering, net of underwriter discounts and issuance costs

 

 

1,265

 

 

 

1

 

 

 

 

 

 

 

 

 

64,298

 

 

 

 

 

 

 

 

 

64,299

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,680

 

 

 

 

 

 

1,680

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

(7

)

Balances as of May 31, 2023

 

 

10,101

 

 

$

10

 

 

 

1,000

 

 

$

1

 

 

$

186,845

 

 

$

(27,109

)

 

$

(7

)

 

$

159,740

 

 

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)

 

 

 

 

Nine Months Ended May 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(3,603

)

 

$

(1,423

)

Adjustments to reconcile net loss to net cash provided by operating activities

 

 

 

 

 

 

Depreciation and amortization

 

 

8,612

 

 

 

5,574

 

Stock-based compensation, net of amounts capitalized

 

 

3,169

 

 

 

2,570

 

Loss on disposal of property and equipment

 

 

 

 

 

53

 

Non-cash lease expense

 

 

3,407

 

 

 

2,820

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts and other receivables

 

 

(587

)

 

 

(230

)

Inventories

 

 

(385

)

 

 

(267

)

Due from affiliate

 

 

104

 

 

 

156

 

Prepaid expenses and other current assets

 

 

1,326

 

 

 

(1,876

)

Deposits and other assets

 

 

443

 

 

 

122

 

Accounts payable

 

 

11

 

 

 

(71

)

Accrued expenses and other current liabilities

 

 

1,485

 

 

 

(1,176

)

Salaries and wages payable

 

 

1,001

 

 

 

977

 

Operating lease liabilities

 

 

3

 

 

 

(341

)

Due to affiliate

 

 

(23

)

 

 

26

 

Sales tax payable

 

 

(20

)

 

 

149

 

Net cash provided by operating activities

 

 

14,943

 

 

 

7,063

 

Cash flows from investing activities

 

 

 

 

 

 

Payments for property and equipment

 

 

(33,977

)

 

 

(27,215

)

Payments for initial direct costs

 

 

(309

)

 

 

(320

)

Payments for purchases of liquor licenses

 

 

(219

)

 

 

(947

)

Purchases of short-term investments

 

 

(3,251

)

 

 

(8,749

)

Redemption of short-term investments

 

 

10,499

 

 

 

 

Net cash used in investing activities

 

 

(27,257

)

 

 

(37,231

)

Cash flows from financing activities

 

 

 

 

 

 

Repayment of principal on finance leases

 

 

(60

)

 

 

(446

)

Taxes paid on vested restricted stock awards

 

 

(217

)

 

 

 

Proceeds from exercise of stock options

 

 

2,299

 

 

 

1,007

 

Proceeds from the follow-on public offering, net of discounts and commissions

 

 

 

 

 

64,895

 

Payments of costs related to the follow-on offering

 

 

 

 

 

(596

)

Net cash provided by financing activities

 

 

2,022

 

 

 

64,860

 

Decrease in cash and cash equivalents

 

 

(10,292

)

 

 

34,692

 

Cash and cash equivalents, beginning of period

 

 

69,697

 

 

 

35,782

 

Cash and cash equivalents, end of period

 

$

59,405

 

 

$

70,474

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

Cash paid for income taxes

 

$

282

 

 

$

185

 

Noncash investing activities

 

 

 

 

 

 

Amounts unpaid for purchases of property and equipment

 

$

1,276

 

 

$

1,706

 

 

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 May 31, 2024 and August 31, 2023, short-term investments were $1.3 million and $8.5 million, respectively. The certificates of deposits are deposited at Federal Deposit Insurance Corporation (“FDIC”) insured banks. The certificates of deposits are in amounts of $250,000 and deposited in multiple banks to ensure that the entire deposit balance is eligible for FDIC insurance. Certificates of deposits and Treasury bills 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). As of May 31, 2024, the Company recorded no unrealized gains or losses on short-term investments in accumulated other comprehensive income (loss). The Company reclassified $76 thousand out of accumulated other comprehensive income into earnings for the period related to maturities of certificates of deposits and a Treasury bill, which consisted of $75 thousand in realized gains on a Treasury bill and $1 thousand in realized gains on certificates of deposits. The Company determines realized gains or losses

5


 

on the available-for-sale debt securities on a specific identification method basis. Based on the evaluation of credit risk factors, the Company has concluded that an allowance for credit losses is unnecessary for its short-term investments.

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

 

 

 

May 31, 2024

 

 

August 31, 2023

 

 

 

(amounts in thousands)

 

Lease receivables

 

$

3,813

 

 

$

3,973

 

Credit card and other receivables

 

 

1,697

 

 

 

1,075

 

Total accounts and other receivables

 

$

5,510

 

 

$

5,048

 

 

Property and Equipment - net

 

 

 

May 31, 2024

 

 

August 31, 2023

 

 

 

(amounts in thousands)

 

Leasehold improvements

 

$

97,827

 

 

$

75,472

 

Lease assets

 

 

6,229

 

 

 

6,247

 

Furniture and fixtures

 

 

49,114

 

 

 

34,213

 

Computer equipment

 

 

3,650

 

 

 

2,792

 

Vehicles

 

 

220

 

 

 

220

 

Software

 

 

1,017

 

 

 

1,016

 

Construction in progress

 

 

8,620

 

 

 

14,369

 

Property and equipment – gross

 

 

166,677

 

 

 

134,329

 

Less: accumulated depreciation and amortization

 

 

(36,014

)

 

 

(27,902

)

Total property and equipment – net

 

$

130,663

 

 

$

106,427

 

 

Depreciation and amortization expense for property and equipment was $3.2 million and $2.1 million for the three months ended May 31, 2024 and May 31, 2023, respectively, and was $8.6 million and $5.6 million for the nine months ended May 31, 2024 and May 31, 2023, 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 finance leases are immaterial. 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 and comprehensive income (loss) are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended May 31,

 

 

Nine Months Ended May 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(amounts in thousands)

 

Operating lease cost

Classification

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

Occupancy and related expenses, other costs and general and administrative expenses

$

3,380

 

 

$

3,208

 

 

$

9,678

 

 

$

7,450

 

Variable lease cost

Occupancy and related expenses, and general and administrative expenses

 

992

 

 

 

1,072

 

 

 

2,567

 

 

 

2,307

 

Total operating lease cost

 

$

4,372

 

 

$

4,280

 

 

$

12,245

 

 

$

9,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental balance sheet information related to leases is as follows:

 

Operating Leases

 

 

 

May 31, 2024

 

 

August 31, 2023

 

 

 

(amounts in thousands)

 

Right-of-use assets

 

$

117,030

 

 

$

103,884

 

 

 

 

 

 

 

 

Lease liabilities – current

 

$

11,734

 

 

$

9,225

 

Lease liabilities – non-current

 

 

123,848

 

 

 

110,234

 

Total lease liabilities

 

$

135,582

 

 

$

119,459

 

 

 

 

 

 

 

 

Nine Months Ended May 31,

 

 

 

2024

 

 

2023

 

Weighted Average Remaining Lease Term (Years)

 

 

 

 

 

 

Operating leases

 

 

16.5

 

 

 

16.3

 

 

 

 

 

 

 

Weighted Average Discount Rate

 

 

 

 

 

 

Operating leases

 

 

7.1

%

 

 

6.6

%

 

Supplemental disclosures of cash flow information related to leases are as follows:

 

 

 

Nine Months Ended May 31,

 

 

 

2024

 

 

2023

 

 

 

(amounts in thousands)

 

Operating cash flows paid for operating lease liabilities

 

$

7,769

 

 

$

5,775

 

Operating right-of-use assets obtained in exchange for new operating lease liabilities

 

$

17,774

 

 

$

18,415

 

 

7


 

 

As of May 31, 2024, the Company had an additional $44.7 million of operating leases related to restaurants for which the Company had not yet taken possession. Subsequent to May 31, 2024, the Company entered into two additional operating leases related to restaurants for which the Company has not yet taken possession. The lease liabilities associated with the leases after May 31, 2024 are $15.6 million. The operating leases are expected to commence in fiscal year 2025, with lease terms of up to 30 years.

 

Maturities of lease liabilities, net of lease receivables, were as follows:

 

 

 

Operating Leases

 

 

 

(amounts in thousands)

 

Remainder of 2024

 

$

380

 

2025

 

 

9,940

 

2026

 

 

12,373