What changed in this filing

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Item 1. Financial Statements

2023-01-05 compared with 2022-07-07 · 160 added, 295 removed, 522 unchanged (47% of the section changed)

3 unchanged sentences

(amounts in thousands, except par value)

November 30, 2022

August 31, 2022

31 unchanged sentences

50,000 shares authorized,

8,734 and 8,700 shares issued and outstanding as of May 31, 2022

8,791 and 8,788 shares issued and outstanding as of November 30, 2022

and August 31, 2022, respectively

1 unchanged sentence

10,000 shares authorized,

1,000 shares issued and outstanding as of May 31, 2022

1,000 shares issued and outstanding as of November 30, 2022

and August 31, 2022

7 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Restaurant operating costs:

7 unchanged sentences

Total operating expenses

Operating income (loss)

Operating loss

Other expense (income):

1 unchanged sentence

Interest income

Income (loss) before income taxes

Income tax (benefit) expense

Net income (loss)

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

Loss before income taxes

Income tax expense

Net loss per Class A and Class B shares

Weighted average Class A and Class B shares outstanding

8 unchanged sentences

Balances as of November 30, 2022

Stock-based compensation

Employee stock plan

Taxes paid on vested restricted stock awards

Balances as of February 28, 2022

Stock-based compensation

Employee stock plan

Balances as of May 31, 2022

Stockholders'

1 unchanged sentence

Stock-based compensation

Exercise of stock options

Employee stock plan

Balances as of November 30, 2021

Stock-based compensation

Exercise of stock options

Balances as of February 28, 2021

Stock-based compensation

Exercise of stock options

Balances as of May 31, 2021

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

2 unchanged sentences

(amounts in thousands)

Nine Months Ended May 31,

Three Months Ended November 30,

Cash flows from operating activities

2 unchanged sentences

Stock-based compensation

Loss on disposal of property and equipment

Non-cash lease expense

10 unchanged sentences

Sales tax payable

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities

4 unchanged sentences

Cash flows from financing activities

Proceeds from loan from affiliate

Repayment of principal on finance leases

Taxes paid on vested restricted stock awards

Proceeds from exercise of stock options

Net cash (used in) provided by financing activities

Decrease in cash and cash equivalents

Net cash used in financing activities

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

3 unchanged sentences

Noncash investing activities

Acquisition of finance leases

Amounts unpaid for purchases of property and equipment

13 unchanged sentences

unless expressly indicated or the context otherwise requires.

Effects of COVID-19

The negative effects of the COVID-19 pandemic on the Company’s business have been significant.

In March 2020, the World Health Organization declared the novel strain of coronavirus COVID-19 a global pandemic.

This contagious virus continues to spread, including acceleration of the spread of certain variants of COVID-19 in the areas in which the Company operates.

This has adversely affected workforces, customers, economies, supply chains and financial markets globally.

In response to this outbreak, many state and local authorities mandated the temporary closure of non-essential businesses and dine-in restaurant activity or limited indoor dining capacities during the Company’s previous two fiscal years.

COVID-19 and the government measures taken to control it have caused a significant disruption to the Company’s business operation.

Since the end of the Company’s fiscal year 2021, it has been able to operate all of its restaurants with no government restrictions on indoor dining capacity.

As of the filing date of this Quarterly Report on Form 10-Q, all of the Company’s restaurants continued to operate with no government restrictions on indoor dining capacity.

In response to the ongoing COVID-19 pandemic, the Company has prioritized taking steps to protect the health and safety of its employees and customers.

The Company has maintained cleaning and sanitizing protocols for its restaurants and has implemented additional training and operational manuals for its restaurant employees, as well as increased handwashing procedures.

The Company also provides each restaurant employee with face masks and gloves, and requires each employee to pass a health screening process, which includes a temperature check, before the start of each shift.

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020, and the subsequent extension of the CARES Act, the Company was eligible for refundable employee retention credits subject to certain criteria through the fiscal year ended August 31, 2021.

The Company recognized $ 6.3 million and $ 8.9 million of employee retention credits during the three and nine months ended May 31, 2021, respectively.

For the three months ended May 31, 2021 , $ 5.8 million was included in labor and related costs and $ 0.5 million was included in general and administrative expenses in the statements of operations, and for the nine months ended May 31, 2021 , $ 8.0 million was included in labor and related costs and $ 0.9 million was included in general and administrative expenses in the statements of operations.

As of August 31, 2021, the Company had recognized and filed for refunds in the amount of $ 12.1 million of employee retention credits.

During the nine months ended May 31, 2022 the Company received $ 8.0 million in refunds, and through the date of this Quarterly Report on Form 10-Q, the Company has received $ 12.1 million in refunds.

Consistent with the Company’s long-term growth strategy, the Company expects to continue to open new restaurants in locations where it believes such restaurants have the potential to achieve profitability.

The future sales levels of the Company’s restaurants and its ability to implement its growth strategy, however, remain highly uncertain, as the full impact and duration of the COVID-19 pandemic continues to evolve as of the filing date of this Quarterly Report on Form 10-Q.

It is possible that renewed outbreaks, increases in cases and/or new variants of the virus, either as part of a national trend or on a more localized basis, could result in additional COVID-19 related restrictions, including capacity restrictions, or otherwise limit the Company’s dine-in services, or negatively affect consumer demand.

Basis of Presentation

2 unchanged sentences

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 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, 2021.

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.

13 unchanged sentences

Therefore, a separate statement of comprehensive income (loss) is not included in the accompanying financial statements.

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncement

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832):

2 unchanged sentences

The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted.

ASU 2021-10 is effective for the Company beginning in fiscal year 2023.

The Company is currently in the process of evaluating the effects of this pronouncement on its financial statements.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes,”

which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The Company adopted this update effective September 1, 2022.

The adoption of this update did not impact the consolidated financial statements.

The adoption of this update did not have a material impact to the consolidated financial statements.

Balance Sheet Components

Accounts and Other Receivables

November 30, 2022

August 31, 2022

4 unchanged sentences

Prepaid Expenses and Other Current Assets

November 30, 2022

August 31, 2022

5 unchanged sentences

Property and Equipment - net

November 30, 2022

August 31, 2022

7 unchanged sentences

Total property and equipment –

Depreciation and amortization expense for property and equipment was $ 1.5 million and $ 1.2 million for the three months ended May 31, 2022 and May 31, 2021, respectively, and was $ 4.1 million and $ 3.3 million for the nine months ended May 31, 2022 and May 31, 2021 , respectively.

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.

The Company has operating and finance leases for its corporate office, restaurant locations, office equipment, kitchen equipment and automobiles.

1 unchanged sentence

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

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

(amounts in thousands)

6 unchanged sentences

Total finance lease cost

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

(amounts in thousands)

8 unchanged sentences

Operating Leases

November 30, 2022

August 31, 2022

5 unchanged sentences

Finance Lease Assets –

November 30, 2022

August 31, 2022

4 unchanged sentences

Finance Leases Liabilities

November 30, 2022

August 31, 2022

3 unchanged sentences

Total finance lease liabilities

Nine months ended May 31,

Three months ended November 30,

Weighted Average Remaining Lease Term (Years)

5 unchanged sentences

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

Nine Months Ended May 31,

Three Months Ended November 30,

(amounts in thousands)

1 unchanged sentence

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

As of May 31, 2022, the Company had additional operating lease liabilities of $ 31.2 million related to restaurants for which the Company has not yet taken possession.

These operating leases are expected to commence in fiscal year 2023, with lease terms of 20 years.

Subsequent to May 31, 2022 , the Company entered into additional operating leases related to restaurants for which the Company has not yet taken possession.

The lease liabilities associated with these leases are $ 6.8 million.

These operating leases are expected to commence in fiscal year 2023, with lease terms of 20 years.

As of November 30, 2022, the Company has an additional $ 45.3 million of operating leases related to restaurants for which the Company has not yet taken possession.

Subsequent to November 30, 2022, the Company entered into additional operating leases related to restaurants for which the Company has not yet taken possession.

The lease liabilities associated with these leases after November 30, 2022 are $ 9.2 million .

These operating leases are expected to commence in fiscal years 2023 and 2024, with lease terms of 15 to 20 years.

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

14 unchanged sentences

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.

Purchases of equipment from Kura Japan are included in property and equipment in the accompanying balance sheets.

5 unchanged sentences

Royalty payments to Kura Japan are included in other costs at the restaurant level in the accompanying statements of operations.

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 $ 45 million.

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 $ 45 million (the “Revolving Credit Agreement”).

For additional information, see “Note 6.

1 unchanged sentence

Balances with Kura Japan are as follows:

November 30, 2022

August 31, 2022

3 unchanged sentences

Reimbursements and other payments by the Company to Kura Japan were as follows:

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

(amounts in thousands)

Related party transactions:

Purchases of administrative supplies

Expatriate salaries expense

2 unchanged sentences

Purchases of equipment

Interest expense

Total related party transactions

Reimbursements by Kura Japan to the Company were none and $ 2 thousand for the three months ended May 31, 2022 and May 31, 2021, respectively, and were $ 28 thousand and $ 27 thousand for the nine months ended May 31, 2022 and May 31, 2021 , respectively.

The reimbursements were for travel and other administrative expenses.

Reimbursements by Kura Japan to the Company were $ 34 thousand and $ 17 thousand for the three months ended November 30, 2022 and November 30, 2021 , respectively.

The reimbursements were primarily for D&O insurance and other administrative expenses.

Stock-based Compensation

11 unchanged sentences

Outstanding —

During the nine months ended May 31, 2022 , nine thousand restricted stock awards were issued under the Stock Incentive Plan, in addition to the option grants stated above, for which the Company incurred stock-based compensation of $ 17 thousand and $ 90 thousand for the three and nine months ended May 31, 2022, respectively.

November 30, 2022

During the three months ended November 30, 2022 , approximately one thousand restricted stock units we re issued under the Stock Incentive Plan, in addition to the option grants stated above.

The Company incurred stock-based compensation related to restricted stock units of $ 16 thousand for the three months ended November 30, 2022.

The total stock-based compensation recognized under the Stock Incentive Plan in the statements of operations is as follows:

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

(amounts in thousands)

6 unchanged sentences

There are no financial covenants under the Revolving Credit Agreement with which the Company must comply.

As of May 31, 2022 , the Company had no outstanding balance and $ 45.0 million of availability remaining under the Revolving Credit Agreement.

During the three and nine months ended May 31, 2021 , the Company made no borrowings and made $ 17.0 million in borrowings, respectively.

As of May 31, 2021, the Company had outstanding borrowings of $ 14.0 million at a fixed interest rate of 1.1 % and $ 3.0 million at a fixed interest rate of 2.8 % under the Revolving Credit Agreement.

Interest expense for the three and nine months ended May 31, 2021 was immaterial.

As of November 30, 2022 and August 31, 2022, the Company had no o utstanding balance and $ 45.0 million of availability remaining under the Revolving Credit Agreement.

For additional information, see “Note 4.

Related Party Transactions.”

Income (Loss) Per Share

The net income (loss) per share attributable to common stockholders is allocated based on the contractual participation rights of the Class A common stock and Class B common stock as if the income for the year has been distributed.

Loss Per Share

The net loss per share attributable to common stockholders is allocated based on the contractual participation rights of the Class A common stock and Class B common stock as if the income for the year has been distributed.

As the liquidation and dividend rights for Class A and Class B common stock are identical, the net loss attributable to all common stockholders is allocated on a proportionate basis.

The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share:

Three Months Ended May 31,

Nine Months Ended May 31,

The following table sets forth the computation of the Company’s basic and diluted net loss per share:

Three Months Ended November 30,

(amounts in thousands, except per share data)

Net income (loss) attributable to common stockholders

Net loss attributable to common stockholders

Weighted average common shares outstanding –

1 unchanged sentence

Weighted average common shares outstanding –

Net income (loss) per share attributable to common stockholders –

The Company computes basic income (loss) per common share using net income (loss) and the weighted average number of common shares outstanding during the period, and computes diluted income (loss) per common share using net income (loss) and the weighted average number of common shares and potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares include dilutive outstanding employee stock options.

For the three months ended May 31, 2022 and May 31, 2021, there were 250 thousand and 87 thousand shares of common stock subject to outstanding employee stock options that were excluded from the calculation of diluted income per share because their inclusion would have been anti-dilutive.

For the nine months ended May 31, 2022 and May 31, 2021, there were 762 thousand and 586 thousand shares of common stock subject to outstanding employee stock options that were excluded from the calculation of diluted loss per share because their inclusion would have been anti-dilutive.

Net loss per share attributable to common stockholders –

The Company computes basic loss per common share using net loss and the weighted average number of common shares outstanding during the period, and computes diluted loss per common share using net loss and the weighted average number of common shares and potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares include dilutive outstanding employee stock options and restricted stock units.

For the three months ended November 30, 2022 and November 30, 2021, there were 708 thousand and 623 thousand shares of common stock subject to outstanding employee stock options and restricted stock units that were excluded from the calculation of diluted income per share because their inclusion would have been anti-dilutive.

Commitments and Contingencies

5 unchanged sentences

During the mediation, a settlement was agreed upon in the amount of $ 1.75 million.

The Company recorded an accrued liability of $ 1.78 million, including an estimated $ 30 thousand in employer payroll taxes, related to this settlement within general and administrative expenses in the statements of operations during the fiscal year ended August 31, 2021.

A hearing to obtain the Court's preliminary approval of the settlement occurred on May 9, 2022 and will continue on July 8, 2022.

Th e Company recorded an accrued liability of $ 1.78 million, i ncluding an estimated $ 30 thousand in em ployer payroll taxes, related to this settlement within general and administrative expenses in the statements of operations during the fiscal year ended August 31, 2021.

The court granted final approval of the settlement on November 18, 2022.

In December 2022, pursuant to the court’s order granting final approval of the settlement, the Company deposited $ 1.78 million into an account controlled by a settlement administrator for disbursement to class participants and other parties to the litigation.

A final report regarding the distribution of settlement funds is due on July 6, 2023, and a non-appearance case review is scheduled for July 13, 2023.

The Company is involved from time to time in various legal proceedings that arise in the ordinary course of business, including but not limited to commercial disputes, environmental matters, employee related claims, intellectual property disputes and litigation in connection with transactions including acquisitions and divestitures.

2 unchanged sentences

The Company records a liability when a loss is considered probable, and the amount can be reasonably estimated.

The Company recorded an income tax benefit of $ 2 thousand and an income tax expense of $ 30 thousand for the three months ended May 31, 2022 and May 31, 2021, respectively, and income tax expense of $ 13 thousand and $ 88 thousand for the nine months ended May 31, 2022 and May 31, 2021, respectively.

The Company’s effective tax rates for the three and nine months ended May 31, 2022 substantially differed from the federal statutory tax rate of 21 % primarily due to a valuation allowance for the Company’s deferred tax assets.

The Company recorded an income tax expense of $ 10 thousand and $ 12 thousand for the three months ended November 30, 2022 and November 30, 2021, respectively.

The Company’s effective tax rates for the three months ended November 30, 2022 substantially differed from the federal statutory tax rate of 21 % primarily due to a valuation allowance for the Company’s deferred tax assets.

The Company continually monitors and performs an assessment of the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies.

1 unchanged sentence

In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses.

Based on the Company’s review of this evidence, management determined that a full valuation allowance against all of the Company’s net deferred tax assets at May 31, 2022 was appropriate.

Based on the Company’s review of this evidence, management determined that a full valuation allowance against all of the Company’s net deferred tax assets at November 30, 2022 was appropriate.

Subsequent Event

On December 28, 2022, the Company filed a universal shelf registration statement on Form S-3 (the “Registration Statement”) with the SEC in accordance with the Securities Act of 1933, as amended (the “Securities Act”).

The Registration Statement registers Class A common stock, preferred stock, depositary shares, warrants, subscription rights, share purchase contracts, share purchase units, and any combination of the foregoing, for a maximum aggregate offering price of up to $ 125.0 million, which may be sold from time to time, subject to the Registration Statement being declared effective by the SEC.

The terms of any securities offered under the Registration Statement and intended use of proceeds will be established at the times of the offerings and will be described in prospectus supplements filed with the SEC at the times of the offerings.

The Registration Statement has a three-year term once declared effective by the SEC.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

18 unchanged sentences

Business Trends

Effects of COVID-19 on Our Business

The negative effects of the COVID-19 pandemic on our business have been significant.

In March 2020, the World Health Organization declared the novel strain of coronavirus COVID-19 a global pandemic.

This contagious virus continues to spread, including the acceleration of the spread of certain variants of COVID-19 in the areas in which we operate.

This has adversely affected workforces, customers, economies, supply chains and financial markets globally.

COVID-19 and the government measures taken to control it have caused a significant disruption to our business operation.

Since the end of our fiscal year 2021, we have been able to operate all of our restaurants with no government restrictions on indoor dining capacity.

As of the filing date of this Quarterly Report on Form 10-Q, all of our restaurants continued to operate with no government restrictions on indoor dining capacity.

In response to the ongoing COVID-19 pandemic, we have prioritized taking steps to protect the health and safety of our employees and customers.

We have maintained cleaning and sanitizing protocols for our restaurants and have implemented additional training and operational manuals for our restaurant employees, as well as increased handwashing procedures.

We also provide each restaurant employee with face masks and gloves, and require each employee to pass a health screening process, which includes a temperature check, before the start of each shift.

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020, and the subsequent extension of the CARES Act, we were eligible for refundable employee retention credits subject to certain criteria through the fiscal year ended August 31, 2021.

We recognized $6.3 million and $8.9 million of employee retention credits during the three and nine months ended May 31, 2021, respectively.

For the three months ended May 31, 2021, $5.8 million was included in labor and related costs and $0.5 million was included in general and administrative expenses in the statements of operations, and for the nine months ended May 31, 2021, $8.0 million was included in labor and related costs and $0.9 million was included in general and administrative expenses in the statement of operations.

As of August 31, 2021, we had recognized and filed for refunds of the amount in the amount of $12.1 million of employee retention credits.

During the nine months ended May 31, 2022 we received $8.0 million in refunds, and through the date of this Quarterly Report on Form 10-Q, we received $12.1 million in refunds.

Consistent with our long-term growth strategy, we expect to continue to open new restaurants in locations where we believe such restaurants have the potential to achieve profitability.

The future sales levels of our restaurants and our ability to implement our growth strategy, however, remain highly uncertain, as the full impact and duration of the COVID-19 pandemic continues to evolve as of the filing date of this Quarterly Report on Form 10-Q.

It is possible that renewed outbreaks, increases in cases and/or new variants

of the virus, either as part of a national trend or on a more localized basis, could result in additional COVID-19 related restrictions including capacity restrictions, or otherwise limit our dine-in services, or negatively affect consumer demand.

We have experienced inflationary pressures affecting our operations in certain areas such as food and beverage costs, labor costs, construction costs and energy costs.

We have also experienced temporary shortages in food, equipment and other goods, as well as an increase in freights costs, due in part to supply chain impacts of overall economic conditions in the markets in which we operate.

We have been able to offset to some extent these inflationary and other cost pressures through various actions, such as increasing menu prices, productivity improvements, and supply chain initiatives, however, we expect these inflationary and other cost pressures to continue throughout the remainder of fiscal year 2023.

Key Financial Definitions

24 unchanged sentences

Interest income includes income earned on our money market funds.

Income tax (benefit) expense.

Income tax expense (benefit).

Provision for income taxes represents federal, state and local current and deferred income tax (benefit) expense.

Results of Operations

The following tables present selected comparative results of operations for the three and nine months ended May 31, 2022 and May 31, 2021.

The following tables present selected comparative results of operations for the three months ended November 30, 2022 and 2021.

Our financial results for these periods are not necessarily indicative of the financial results that we will achieve in future periods.

Certain totals for the tables below may not sum to 100% due to rounding.

Three Months Ended May 31,

(dollar amounts in thousands)

Restaurant operating costs

Food and beverage costs

Labor and related costs

Occupancy and related expenses

Depreciation and amortization expenses

Total restaurant operating costs

General and administrative expenses

Depreciation and amortization expenses

Total operating expenses

Operating income

Other expense (income):

Interest expense

Interest income

Income before income taxes

Income tax (benefit) expense

Nine Months Ended May 31,

Certain totals for the tables below may not recalculate or sum to 100% due to rounding.

Three Months Ended November 30,

(dollar amounts in thousands)

14 unchanged sentences

Income tax expense

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

(as a percentage of sales)

8 unchanged sentences

Total operating expenses

Operating income (loss)

Operating loss

Other expense (income):

1 unchanged sentence

Interest income

Income (loss) before income taxes

Loss before income taxes

Income tax expense

Net income (loss)

Three Months Ended May 31, 2022 Compared to Three Months Ended May 31, 2021

Sales were $38.0 million for the three months ended May 31, 2022 compared to $18.5 million for the three months ended May 31, 2021, representing an increase of $19.5 million, or 105.6%.

Comparable restaurant sales increased 65.3% for the three months ended May 31, 2022, as compared to the three months ended May 31, 2021.

The increase in sales was primarily driven by all of our restaurants operating with no government restrictions on indoor dining capacity, as well as the sales resulting from six new restaurants opened subsequent to May 31, 2021, whereas the prior year sales were impacted by indoor dining capacity restrictions mandated by local government regulations in response to the COVID-19 pandemic.

Food and beverage costs.

Food and beverage costs were $11.3 million for the three months ended May 31, 2022 compared to $5.9 million for the three months ended May 31, 2021, representing an increase of $5.4 million, or 92.9%.

The increase in food and beverage costs was primarily driven by all of our restaurants operating with no government restrictions on indoor dining capacity, whereas the prior year was impacted by indoor dining capacity restrictions mandated by local government regulations in response to the COVID-19 pandemic, as well as costs associated with sales from six new restaurants opened subsequent to May 31, 2021.

As a percentage of sales, food and beverage costs decreased to 29.7% in the three months ended May 31, 2022 as compared to 31.7% in the three months ended May 31, 2021, primarily due to an increase in menu prices, partially offset by food cost inflation, as well as higher inventory spoilage in the prior year.

Labor and related costs.

Labor and related costs were $11.8 million for the three months ended May 31, 2022 compared to $1.6 million for the three months ended May 31, 2021, representing an increase of $10.2 million, or 614.9%.

This increase in labor and related costs was primarily driven by $5.8 million in employee retention credits recognized under the CARES Act extension during the three months ended May 31, 2021, all of our restaurants operating with no government restrictions on indoor dining capacity as the prior year was impacted by indoor dining capacity restrictions mandated by local government regulations in response to the COVID-19 pandemic, as well as additional labor costs incurred from six new restaurants opened subsequent to May 31, 2021, partially offset by $0.7 million in retention and new hire bonuses during the three months ended May 31, 2021.

As a percentage of sales, labor and related costs increased to 31.0% in the three months ended May 31, 2022 as compared to 8.9% in the three months ended May 31, 2021.

The increase in cost as a percentage of sales was primarily driven by the employee retention credits recognized under the CARES Act extension during the three months ended May 31, 2021.

Excluding the impact of the employee retention credit and retention and new hire bonuses, labor and related costs as a percentage of sales for the three months ended May 31, 2021 would have been 36.6%, primarily due to minimum staffing required to operate the restaurants at significantly reduced operating capacities in the prior year.

Occupancy and related expenses.

Occupancy and related expenses were $2.7 million for the three months ended May 31, 2022 compared to $1.9 million for the three months ended May 31, 2021, representing an increase of $0.8 million, or 42.9%.

The increase was primarily a result of additional lease expense related to the opening of six new restaurants subsequent to May 31, 2021, as well as incremental pre-opening lease expense.

As a percentage of sales, occupancy and related expenses decreased to 7.1% in the three months ended May 31, 2022 as compared to 10.2% in the three months ended May 31, 2021, primarily driven by leverage benefits from the increase in sales.

Depreciation and amortization expenses.

Depreciation and amortization expenses incurred as part of restaurant operating costs were $1.4 million for the three months ended May 31, 2022 compared to $1.1 million for the three months ended May 31, 2021, representing an increase of $0.3 million, or 26.7%.

The increase was primarily due to depreciation of property and equipment related to the six new restaurants opened subsequent to May 31, 2021.

As a percentage of sales, depreciation and amortization expenses at the restaurant level decreased to 3.6% in the three months ended May 31, 2022 as compared to 5.9% in the three months ended May 31, 2021, primarily driven by leverage benefits from the increase in sales.

Depreciation and amortization expenses incurred at the corporate level were $0.1 million for the three and nine months ended May 31, 2022 and May 31, 2021, and as a percentage of sales were 0.2% and 0.7%, respectively.

Other costs were $4.4 million for the three months ended May 31, 2022 compared to $2.7 million for the three months ended May 31, 2021, representing an increase of $1.7 million, or 61.2%.

The increase was primarily driven by an increase in credit card fees, utilities and supplies due to higher sales, as well as costs related to six new restaurants opened subsequent to May 31, 2021.

As a percentage of sales, other costs decreased to 11.5% in the three months ended May 31, 2022 as compared to 14.7% in the three months ended May 31, 2021, primarily driven by leverage benefits from the increase in sales.

General and administrative expenses.

General and administrative expenses were $5.9 million for the three months ended May 31, 2022 compared to $4.3 million for the three months ended May 31, 2021, representing an increase of $1.6 million, or 37.5%.

This increase was primarily due to an increase of $1.7 million in compensation-related expenses due to an increase in headcount, a $0.2 million increase in travel expenses and a $0.2 million increase in other costs, as well as $0.5 million in employee retention credits recognized under the CARES Act extension in the three months ended May 31, 2021, offset by a $1.0 million litigation expense in the three months ended May 31, 2021.

As a percentage of sales, general and administrative expenses decreased to 15.5% in the three months ended May 31, 2022 from 23.2% in the three months ended May 31, 2021, primarily driven by leverage benefits from the increase in sales.

Interest expense.

Interest expense was $23 thousand for the three months ended May 31, 2022 compared to $67 thousand for the three months ended May 31, 2021.

Interest income.

Interest income was $25 thousand for the three months ended May 31, 2022 compared to $1 thousand for the three months ended May 31, 2021.

Income tax (benefit) expense.

Income tax benefit was $2 thousand for the three months ended May 31, 2022 compared to income tax expense of $30 thousand for the three months ended May 31, 2021.

For further discussion of our income taxes, see “Note 9.

Income Taxes”

in the Notes to Condensed Financial Statements.

Nine Months Ended May 31, 2022 Compared to Nine Months Ended May 31, 2021

Sales were $99.1 million for the nine months ended May 31, 2022 compared to $37.0 million for the nine months ended May 31, 2021, representing an increase of $62.1 million, or 168.1%.

Comparable restaurant sales increased 118.7% for the nine months ended May 31, 2022, as compared to the nine months ended May 31, 2021.

Three Months Ended November 30, 2022 Compared to Three Months Ended November 30, 2021

Sales were $39.3 million for the three months ended November 30, 2022 compared to $29.8 million for the three months ended November 30, 2021, representing an increase of $9.5 million, or 31.8%.

Comparable restaurant sales increased 6.9% for the three months ended November 30, 2022, as compared to the three months ended November 30, 2021.

The increase in sales was primarily driven by the sales resulting from nine new restaurants opened subsequent to November 30, 2021, as well as increases in menu prices during the same period.

Food and beverage costs.

Food and beverage costs were $29.6 million for the nine months ended May 31, 2022 compared to $12.1 million for the nine months ended May 31, 2021, representing an increase of $17.5 million, or 145.2%.

As a percentage of sales, food and beverage costs decreased to 29.9% in the nine months ended May 31, 2022 as compared to 32.7% in the nine months ended May 31, 2021, primarily due to an increase in menu prices, partially offset by food cost inflation, as well as higher inventory spoilage in the prior year.

Food and beverage costs were $12.4 million for the three months ended November 30, 2022 compared to $9.0 million for the three months ended November 30, 2021, representing an increase of $3.4 million, or 38.8%.

The increase in food and beverage costs was primarily driven by costs associated with sales from nine new restaurants opened subsequent to November 30, 2021.

As a percentage of sales, food and beverage costs increased to 31.6% in the three months ended November 30, 2022 as compared to 30.0% in the three months ended November 30, 2021, primarily due to food cost inflation partially offset by increases in menu prices.

Labor and related costs.

Labor and related costs were $31.8 million for the nine months ended May 31, 2022 compared to $8.1 million for the nine months ended May 31, 2021, representing an increase of $23.7 million, or 294.5%.

This increase in labor and related costs was primarily driven by $8.0 million in employee retention credits recognized under the CARES Act extension during the nine months ended May 31, 2021, all of our restaurants operating with no government restrictions on indoor dining capacity as the prior year was impacted by indoor dining capacity restrictions mandated by local government regulations in response to the COVID-19 pandemic, as well as additional labor costs incurred from six new restaurants opened subsequent to May 31, 2021, partially offset by $0.7 million in retention and new hire bonuses during the nine months ended May 31, 2021.

As a percentage of sales, labor and related costs increased to 32.1% in the nine months ended May 31, 2022 as compared to 21.8% in the nine months ended May 31, 2021.

The increase in cost as a percentage of sales was primarily driven by the employee retention credits recognized under the CARES Act extension during the nine months ended May 31, 2021.

Excluding the impact of the employee retention credit and retention and new hire bonuses, the percentage of labor and related costs as a percentage of sales for the nine months ended May 31, 2021 would have been 41.6%.

The decrease in cost as a percentage of sales was primarily driven by leverage benefits from the increase in sales.

Labor and related costs were $12.5 million for the three months ended November 30, 2022 compared to $9.7 million for the three months ended November 30, 2021, representing an increase of $2.8 million, or 29.1%.

This increase in labor and related costs was primarily driven by additional labor costs incurred from nine new restaurants opened subsequent to November 30, 2021.

As a percentage of sales, labor and related costs decreased to 31.9% in the three months ended November 30, 2022 as compared to 32.5% in the three months ended November 30, 2021.

The decrease in cost as a percentage of sales was primarily due to increases in menu prices and technological initiatives, partially offset by increases in wages rates and incremental pre-opening labor.

Occupancy and related expenses.

Occupancy and related expenses were $7.2 million for the nine months ended May 31, 2022 compared to $5.2 million for the nine months ended May 31, 2021, representing an increase of $2.0 million, or 38.3%.

The increase was primarily a result of additional lease expense related to the opening of six new restaurants subsequent to May 31, 2021, as well as incremental pre-opening lease expense.

As a percentage of sales, occupancy and related expenses decreased to 7.3% in the nine months ended May 31, 2022, compared to 14.1% in the nine months ended May 31, 2021, primarily driven by leverage benefits from the increase in sales.

Occupancy and related expenses were $2.9 million for the three months ended November 30, 2022 compared to $2.2 million for the three months ended November 30, 2021, representing an increase of $0.7 million, or 31.1%.

The increase was primarily a result of additional lease expense related to the opening of nine new restaurants subsequent to November 30, 2021.

As a percentage of sales, occupancy and related expenses decreased to 7.3% in the three months ended November 30, 2022 as compared to 7.4% in the three months ended November 30, 2021, primarily driven by leverage benefits from the increase in sales.

Depreciation and amortization expenses.

Depreciation and amortization expenses incurred as part of restaurant operating costs were $3.8 million for the nine months ended May 31, 2022 compared to $3.0 million for the nine months ended May 31, 2021, representing an increase of $0.8 million, or 26.5%.

The increase was primarily due to depreciation of property and equipment related to the six new restaurants opened subsequent to May 31, 2021.

As a percentage of sales, depreciation and amortization expenses at the restaurant level decreased to 3.8% in the nine months ended May 31, 2022 as compared to 8.2% in the nine months ended May 31, 2021, primarily driven by leverage benefits from the increase in sales.

Depreciation and amortization expenses incurred at the corporate level were $0.3 million for the nine months ended May 31, 2022 and May 31, 2021, and as a percentage of sales were 0.3% and 0.8%, respectively.

Other costs were $12.3 million for the nine months ended May 31, 2022 compared to $6.8 million for the nine months ended May 31, 2021, representing an increase of $5.5 million, or 80.1%.

The increase was primarily driven by an increase in credit card fees, utilities and supplies due to higher sales, as well as costs related to six new restaurants opened subsequent to May 31, 2021.

As a percentage of sales, other costs decreased to 12.4% in the nine months ended May 31, 2022 from 18.5% in the nine months ended May 31, 2021, primarily driven by leverage benefits from the increase in sales.

Depreciation and amortization expenses incurred as part of restaurant operating costs were $1.6 million for the three months ended November 30, 2022 compared to $1.2 million for the three months ended November 30, 2021, representing an increase of $0.4 million, or 34.6%.

The increase was primarily due to depreciation of property and equipment related to the nine new restaurants opened subsequent to November 30, 2021.

As a percentage of sales, depreciation and amortization expenses at the restaurant level increased to 4.0% in the three months ended November 30, 2022 as compared to 3.9% in the three months ended November 30, 2021.

Depreciation and amortization expenses incurred at the corporate level were $0.1 million for both the three months ended November 30, 2022 and November 30, 2021, and as a percentage of sales were 0.2% and 0.3%, respectively.

Other costs were $5.3 million for the three months ended November 30, 2022 compared to $3.6 million for the three months ended November 30, 2021, representing an increase of $1.7 million, or 47.4%.

The increase was primarily driven by an increase in costs related to nine new restaurants opened subsequent to November 30, 2021.

As a percentage of sales, other costs increased to 13.5% in the three months ended November 30, 2022 as compared to 12.1% in the three months ended November 30, 2021, primarily driven by increases in pre-opening costs, advertising and promotional costs and repair and maintenance costs.

General and administrative expenses.

General and administrative expenses were $16.7 million for the nine months ended May 31, 2022 compared to $10.7 million for the nine months ended May 31, 2021, representing an increase of $6.0 million, or 56.4%.

This increase was primarily due to an increase of $4.8 million in compensation-related expenses due to an increase in headcount, a $0.7 million increase in travel expenses, a $0.2 million increase in recruiting costs, a $0.2 million increase in legal and consulting fees and $0.2 increase in insurance costs, as well as $0.9 million in employee retention credits recognized under the CARES Act extension in the nine months ended May 31, 2021, offset by a $1.0 million litigation expense in the nine months ended May 31, 2021.

As a percentage of sales, general and administrative expenses decreased to 16.9% in the nine months ended May 31, 2022 from 28.9% in the nine months ended May 31, 2021, primarily driven by leverage benefits from the increase in sales.

General and administrative expenses were $6.6 million for the three months ended November 30, 2022 compared to $5.4 million for the three months ended November 30, 2021, representing an increase of $1.2 million, or 23.9%.

This increase was primarily due to increases in compensation related costs of $1.4 million due to additional headcount and $0.2 million in travel expenses, offset by reductions of $0.2 million in recruiting costs and $0.2 million in legal fees, insurance and other costs.

As a percentage of sales, general and administrative expenses decreased to 16.9% in the three months ended November 30, 2022 from 18.0% in the three months ended November 30, 2021, primarily driven by leverage benefits from the increase in sales.

Interest expense.

Interest expense was $70 thousand for the nine months ended May 31, 2022 compared to $154 thousand for the nine months ended May 31, 2021.

Interest expense was $16 thousand for the three months ended November 30, 2022 compared to $25 thousand for the three months ended November 30, 2021.

Interest income.

Interest income was $75 thousand for the nine months ended May 31, 2022 compared to $8 thousand for the nine months ended May 31, 2021.

Interest income was $94 thousand for the three months ended November 30, 2022 compared to $26 thousand for the three months ended November 30, 2021.

Income tax expense.

Income tax expense was $13 thousand for the nine months ended May 31, 2022 compared to $88 thousand for the nine months ended May 31, 2021.

Income tax expense was $10 thousand for the three months ended November 30, 2022 compared to $12 thousand for the three months ended November 30, 2021.

For further discussion of our income taxes, see “Note 9.

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EBITDA is defined as net income (loss) before interest, income taxes and depreciation and amortization.

Adjusted EBITDA is defined as EBITDA plus stock-based compensation expense, non-cash lease expense and asset disposals, closure costs and restaurant impairments, as well as certain items, such as employee retention credits, litigation accrual, and certain executive transition costs, that we believe are not indicative of our core operating results.

Adjusted EBITDA is defined as EBITDA plus stock-based compensation expense, non-cash lease expense and asset disposals, closure costs and restaurant impairments, that we believe are not indicative of our core operating results.

Adjusted EBITDA margin is defined as Adjusted EBITDA divided by sales.

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We believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results.

However, these measures may not provide a complete understanding of the operating results of the Company as a whole and such measures should be reviewed in conjunction with our GAAP financial results.

However, these measures may not

provide a complete understanding of the operating results of the Company as a whole and such measures should be reviewed in conjunction with our GAAP financial results.

We believe that the use of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors.

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You should review the reconciliation of net income (loss) to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin below and not rely on any single financial measure to evaluate our business.

The following table reconciles net income (loss) to EBITDA and Adjusted EBITDA:

Three Months Ended May 31,

Nine Months Ended May 31,

The following table reconciles net loss to EBITDA and Adjusted EBITDA:

Three Months Ended November 30,

(amounts in thousands)

Net income (loss)

Interest (income) expense, net

Income tax (benefit) expense

Interest income, net

Income tax expense

Depreciation and amortization expenses

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Non-cash lease expense (b)

Executive transition costs (c)

Employee retention credit (d)

Litigation accrual (e)

Adjusted EBITDA

Adjusted EBITDA margin

(a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in other costs and of corporate-level stock-based compensation included in general and

administrative expenses in the statements of operations.

For further details of stock-based compensation, see “Note 5.

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(b) Non-cash lease expense includes lease expense from the date of possession of our restaurants that did not require cash outlay in the respective periods.

(c) Executive transition costs include severance and search fees associated with the transition of our former Chief Financial Officer.

(d) Employee retention credit includes a refundable credit recognized under the provisions of the CARES Act extension.

(e) Litigation accrual consists of an expense related to a litigation claim.

See “Note 8.

Commitments and Contingencies”

to the financial statements includes in this Quarterly Report on Form 10-Q.

Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) Margin

Restaurant-level Operating Profit and Restaurant-level Operating Profit Margin

Restaurant-level Operating Profit (Loss) is defined as operating income (loss) plus depreciation and amortization;

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non-cash lease expense;

and asset disposals, closure costs and restaurant impairments;

less corporate-level stock-based compensation expense and employee retention credits recognized within general and administrative expenses.

asset disposals, closure costs and restaurant impairments;

less corporate-level stock-based compensation expense recognized within general and administrative expenses.

Restaurant-level Operating Profit (Loss) margin is defined as Restaurant-level Operating Profit (Loss) divided by sales.

Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin are intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP.

We believe that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as these measures depict normal, recurring cash operating expenses essential to supporting the development and operations of our restaurants.

Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin non-GAAP measures which are intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP.

We believe that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as this measure depicts normal, recurring cash operating expenses essential to supporting the development and operations of our restaurants.

We expect Restaurant-level Operating Profit (Loss) to increase in proportion to the number of new restaurants we open and upon comparable restaurant sales growth, if any.

We expect Restaurant-level Operating Profit (Loss) to increase in proportion to the number of new restaurants we open and our comparable restaurant sales growth.

We present Restaurant-level Operating Profit (Loss) because it excludes the impact of general and administrative expenses, which are not incurred at the restaurant level.

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Restaurant-level Operating Profit (Loss) margin allows us to evaluate the level of Restaurant-level Operating Profit (Loss) generated from sales.

However, you should be aware that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin are financial measures which are not indicative of overall results for the Company, and Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin do not accrue directly to the benefit of stockholders because of corporate-level and certain other expenses excluded from such measures.

In addition, when evaluating Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin, you should be aware that in the future we may incur expenses similar to those excluded when calculating these measures.

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Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.

The following table reconciles operating income (loss) to Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin:

Three Months Ended May 31,

Nine Months Ended May 31,

The following table reconciles operating loss to Restaurant-level Operating Profit and Restaurant-level Operating Profit margin:

Three Months Ended November 30,

(amounts in thousands)

Operating income (loss)

Operating loss

Depreciation and amortization expenses

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Non-cash lease expense (c)

Employee retention credit (d)

General and administrative expenses

Corporate-level stock-based compensation and employee retention credit in general and administrative expenses

Restaurant-level operating profit (loss)

Operating profit (loss) margin

Restaurant-level operating profit (loss) margin

Corporate-level stock-based compensation in general and administrative expenses

Restaurant-level operating profit

Operating loss margin

Restaurant-level operating profit margin

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(c) Non-cash lease expense includes lease expense from the date of possession of our restaurants that did not require cash outlay in the respective periods.

(d) Employee retention credit includes a refundable credit recognized under the provisions of the CARES Act extension.

Comparable Restaurant Sales Performance

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For restaurants that were temporarily closed for renovations during the year, we make fractional adjustments to sales such that sales are annualized in the associated period.

We did not make any adjustments for the temporary restaurant closures due to COVID-19 during the three and nine months ended May 31, 2021.

Measuring our comparable restaurant sales performance allows us to evaluate the performance of our existing restaurant base.

Various factors impact comparable restaurant sales, including:

government restrictions on indoor dining capacity due to COVID-19;

consumer recognition of our brand and our ability to respond to changing consumer preferences;

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The following table shows the comparable restaurant sales performance:

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Comparable restaurant sales performance (%)

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The following table shows the growth in our restaurant base:

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Restaurant activity:

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End of period

Subsequent to November 30, 2022, we opened one new restaurant in Philadelphia, PA.

Liquidity and Capital Resources

Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, and costs incurred for restaurant remodels and restaurant fixtures.

Historically, our main sources of liquidity have been cash flows from operations, cash proceeds from our initial public offering in fiscal 2019 and our secondary offering in fiscal 2021 and availability under our Revolving Credit Agreement.

The ongoing impact of the COVID-19 pandemic remains highly uncertain and may have a material adverse impact on our business, financial condition, liquidity and financial results.

For further discussion, see above “Business Trends;

Effects of COVID-19 on our Business.”

During the nine months ended May 31, 2022, we had no borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.

During the nine months ended May 31, 2021, we had borrowed $17.0 million under the Revolving Credit Agreement and had $28.0 million of availability remaining.

Our primary uses of cash are for operational expenditures and capital investments, including new restaurants, costs incurred for restaurant remodels and restaurant fixtures.

On December 28, 2022, we filed a universal shelf registration statement on Form S-3 (the “Registration Statement”) with the SEC in accordance with the Securities Act of 1933, as amended (the “Securities Act”).

The Registration Statement registers Class A common stock, preferred stock, depositary shares, warrants, subscription rights, share purchase contracts, share purchase units, and any combination of the foregoing, for a maximum aggregate offering price of up to $125.0 million, which may be sold from time to time, subject to the Registration Statement being declared effective by the SEC.

The terms of any securities offered under the Registration Statement and intended use of proceeds will be established at the times of the offerings and will be described in

prospectus supplements filed with the SEC at the times of the offerings.

The Registration Statement has a three-year term once declared effective by the SEC.

During the three months ended November 30, 2022, we had no borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.

As of November 30, 2022, we did not have any material off-balance sheet arrangements.

The significant components of our working capital are liquid assets such as cash, cash equivalents and receivables, reduced by accounts payable and accrued expenses.

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Summary of Cash Flows

Our primary sources of liquidity and cash flows are operating cash flows, cash on hand and proceeds from our Revolving Credit Agreement.

We use this to fund investing expenditures for new restaurant openings, reinvest in our existing restaurants, and contribute to our working capital.

Our working capital position is impacted by collecting cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, whereas we typically have at least 30 days to pay our vendors.

Our primary sources of liquidity and cash flows are operating cash flows and cash on hand.

We use this to fund investing expenditures for new restaurant openings, reinvest in our existing restaurants, and increase our working capital.

Our working capital position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors.

The following table summarizes our cash flows for the periods presented:

Nine Months Ended May 31,

Three Months Ended November 30,

Statement of Cash Flow data:

(amounts in thousands)

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Cash Flows Provided by (Used in) Operating Activities

Net cash provided by operating activities during the nine months ended May 31, 2022 was $17.0 million, which results from a net loss of $2.7 million, non-cash charges of $4.1 million for depreciation and amortization, $1.8 million for stock-based compensation, and $2.3 million in non-cash lease expense, and net cash inflows of $11.5 million from changes in operating assets and liabilities.

The net cash inflows from changes in operating assets and liabilities were primarily the result of decreases of $7.8 million in prepaid expenses and other current assets, which was primarily due to collection of $8.0 million of employee retention credits.

Net cash used in operating activities during the nine months ended May 31, 2021 was $9.7 million, which results from net loss of $9.5 million, non-cash charges of $3.3 million for depreciation and amortization, $1.0 million for stock-based compensation, and $2.0 million in non-cash lease expense, and net cash outflows of approximately $6.6 million from changes in operating assets and liabilities.

The net cash outflows from changes in operating assets and liabilities were primarily the result of increases of $9.0 million in prepaid expenses and other current assets, and $1.2 million in accounts and other receivables, and a decrease of $1.0 million in operating lease liabilities, partially offset by increases of $3.0 million in salaries and wages payable, $1.1 million in accrued expenses and other current liabilities and $0.5 million sales tax payable.

The increase in prepaid expenses and other current assets was primarily due to the employee retention credit recognized under the CARES Act extension.

Net cash used in financing activities

Cash Flows Provided by Operating Activities

Net cash provided by operating activities during the three months ended November 30, 2022 was $0.5 million, which results from a net loss of $2.1 million, non-cash charges of $1.7 million for depreciation and amortization, $0.7 million for stock-based compensation, and $0.8 million in non-cash lease expense, and net cash outflows of $0.5 million from changes in operating assets and liabilities.

Net cash provided by operating activities during the three months ended November 30, 2021 was $10.6 million, which results from a net loss of $1.3 million offset by non-cash charges of $1.3 million for depreciation and amortization, $0.4 million for stock-based compensation, and $0.7 million in non-cash lease expense, and net cash inflows of approximately $9.4 million from changes in operating assets and liabilities.

The net cash inflows from changes in operating assets and liabilities were primarily the result of $8.3 million in prepaid expenses and other current assets, $0.1 million in accounts and other receivables, an increase of $0.2 million in operating lease liabilities and $0.3 million in due from our affiliate Kura Japan.

The change in prepaid expenses and other current assets was primarily due to the receipt of employee retention credits under the CARES Act extension during the three months ended November 30, 2021.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the nine months ended May 31, 2022 was $20.7 million, primarily due to $19.5 million in purchases of property and equipment, $0.8 million in purchases of liquor licenses and $0.4 million in payments for initial direct costs.

The purchases of property and equipment in the nine months ended May 31, 2022 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.

Net cash used in investing activities during the nine months ended May 31, 2021 was $11.5 million, primarily due to purchases of property and equipment.

The purchases of property and equipment in the nine months ended May 31, 2021 was primarily related to capital expenditures for current and future restaurant openings, renovations, maintaining our existing restaurants and other projects.

Cash Flows (Used in) Provided by Financing Activities

Net cash used in financing activities during the nine months ended May 31, 2022 was $0.7 million and is primarily due to $0.8 million in repayments of principal on finance leases.

Net cash provided by financing activities during the nine months ended May 31, 2021 was $16.7 million primarily due to $17.0 million in loan proceeds from our Revolving Credit Agreement.

Contractual Obligations

As of May 31, 2022, we had $3.2 million in contractual obligations relating to the construction of new restaurants and purchase commitments for goods related to restaurant operations.

All contractual obligations are expected to be paid during the next 12 months.

Net cash used in investing activities during the three months ended November 30, 2022 was $9.3 million, primarily due to $8.3 million in purchases of property and equipment and $0.8 million in purchases of liquor licenses.

The purchases of property and equipment in the three months ended November 30, 2022 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.

Net cash used in investing activities during the three months ended November 30, 2021 was $6.3 million, primarily due to purchases of property and equipment.

The purchases of property and equipment in the three months ended November 30, 2021 was primarily related to capital expenditures for current and future restaurant openings, renovations, maintaining our existing restaurants and other projects.

Cash Flows Used in Financing Activities

Net cash used in financing activities during the three months ended November 30, 2022 was $0.1 million and is primarily due to $0.2 million in repayments of principal on finance leases.

Net cash used in financing activities during the three months ended November 30, 2021 was $0.2 million and is primarily due to $0.3 million in repayments of principal on finance leases.

Material Cash Requirements

As of November 30, 2022, we had $7.5 million in contractual obligations relating to the construction of new restaurants and purchase commitments for goods related to restaurant operations.

All contractual obligations are expected to be paid during the fiscal year 2023 utilizing cash and cash equivalents on hand and provided by operations.

For operating and finance lease obligations, see “Note 3.

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Recent Accounting Pronouncements

For a description of recently issued accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, see “Part I, Item 1, Note 1.

For a description of our recently adopted accounting pronouncement, including the respective date of adoption and expected effect on our results of operations and financial condition, see “Part I, Item 1, Note 1.

Organization and Basis of Presentation”

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Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates.

We believe the impairment of long-lived assets estimate is affected by significant judgments and estimates used in the preparation of our financial statements and that the judgments and estimates are reasonable.

We believe the assessment of potential impairments of long-lived assets is affected by significant judgments and estimates used in the preparation of our financial statements and that the judgments and estimates are reasonable.

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10‑K for the fiscal year ended August 31, 2022.

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We may take advantage of these exemptions until we are no longer an emerging growth company.

We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we had total annual gross revenue of $1 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO.

We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which our annual gross revenues exceed $1.235 billion during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering.

Quantitative and Qualitati ve Disclosures About Market Risk.

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Inflation Risk

The primary inflationary factors affecting our operations are food and beverage costs, labor costs, and energy costs.

The primary inflationary factors affecting our operations are food and beverage costs, labor costs, construction costs and energy costs.

Our restaurant operations are subject to federal and state minimum wage and other laws governing such matters as working conditions, overtime and tip credits.

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Substantial increases in costs and expenses could impact our operating results to the extent such increases cannot be passed through to our guests.

Historically, inflation has not had a material effect on our results of operations, although inflationary pressures have increased across our business, including with respect to food and beverage costs, due in part to supply chain impacts of the pandemic and overall economic conditions in the markets in which we operate.

Historically, inflation has not had a material effect on our results of operations, although inflationary pressures have increased across our business, including with respect to food and beverage costs, due in part to supply chain impacts of overall economic conditions in the markets in which we operate.

Severe increases in inflation, however, could affect the global and U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements