What changed in this filing

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Item 1. Financial Statements

2023-04-04 compared with 2023-01-05 · 185 added, 106 removed, 576 unchanged (34% of the section changed)

3 unchanged sentences

(amounts in thousands, except par value)

November 30, 2022

February 28, 2023

August 31, 2022

31 unchanged sentences

50,000 shares authorized,

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

8,819 and 8,788 shares issued and outstanding as of February 28, 2023

and August 31, 2022, respectively

1 unchanged sentence

10,000 shares authorized,

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

1,000 shares issued and outstanding as of February 28, 2023

and August 31, 2022

7 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

Restaurant operating costs:

24 unchanged sentences

Balances as of November 30, 2022

Stock-based compensation

Employee stock plan

Balances as of February 28, 2023

Stockholders'

3 unchanged sentences

Balances as of November 30, 2021

Stock-based compensation

Employee stock plan

Taxes paid on vested restricted stock awards

Balances as of February 28, 2022

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

2 unchanged sentences

(amounts in thousands)

Three Months Ended November 30,

Six Months Ended February 28,

Cash flows from operating activities

Adjustments to reconcile net loss to net cash provided by (used in) operating activities

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

Depreciation and amortization

Stock-based compensation

Loss on disposal of property and equipment

Non-cash lease expense

18 unchanged sentences

Repayment of principal on finance leases

Taxes paid on vested restricted stock awards

Proceeds from exercise of stock options

Net cash used in financing activities

(Decrease) increase in cash and cash equivalents

Net cash provided by (used in) financing activities

Decrease 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

40 unchanged sentences

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

S-3 Registration Statement

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 was declared effective on January 6, 2023, and registered 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.

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 from the date of effectiveness.

Balance Sheet Components

Accounts and Other Receivables

November 30, 2022

February 28, 2023

August 31, 2022

3 unchanged sentences

Total accounts and other receivables

Prepaid Expenses and Other Current Assets

November 30, 2022

August 31, 2022

(amounts in thousands)

Employee retention credit

Prepaid expenses

Other current assets

Total prepaid expenses and other current assets

Property and Equipment - net

November 30, 2022

February 28, 2023

August 31, 2022

7 unchanged sentences

Total property and equipment –

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.

Depreciation and amortization expense for property and equipment was $ 1.8 million and $ 1.4 million for the three months ended February 28, 2023 and February 28, 2022, respectively, and was $ 3.5 million and $ 2.6 million for the six months ended February 28, 2023 and February 28, 2022 , 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 November 30,

Three Months Ended February 28,

Six Months Ended February 28,

(amounts in thousands)

6 unchanged sentences

Total finance lease cost

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

(amounts in thousands)

8 unchanged sentences

Operating Leases

November 30, 2022

February 28, 2023

August 31, 2022

5 unchanged sentences

Finance Lease Assets –

November 30, 2022

February 28, 2023

August 31, 2022

4 unchanged sentences

Finance Leases Liabilities

November 30, 2022

February 28, 2023

August 31, 2022

3 unchanged sentences

Total finance lease liabilities

Three months ended November 30,

Six months ended February 28,

Weighted Average Remaining Lease Term (Years)

5 unchanged sentences

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

Three Months Ended November 30,

Six Months Ended February 28,

(amounts in thousands)

1 unchanged sentence

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

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.

As of February 28, 2023, the Company has an additional $ 41.1 million of operating leases related to restaurants for which the Company has not yet taken possession.

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

8 unchanged sentences

Kura Sushi, Inc.

(“Kura Japan”) is the majority shareholder of the Company and is incorporated and headquartered in Japan.

(“Kura Japan”) is the majority stockholder of the Company and is incorporated and headquartered in Japan.

In August 2019, the Company entered into a Shared Services Agreement with Kura Japan, pursuant to which Kura Japan provides the Company with certain strategic, operational and other support services, including assigning certain employees to work for the Company as expatriates to provide support to the Company’s operations, sending its employees to the Company on a short-term basis to provide support for the opening of new restaurants or renovation of existing restaurants, and providing the Company with certain supplies, parts and equipment for use in the Company’s restaurants.

15 unchanged sentences

Balances with Kura Japan are as follows:

November 30, 2022

February 28, 2023

August 31, 2022

3 unchanged sentences

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

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

(amounts in thousands)

5 unchanged sentences

Total related party transactions

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.

Reimbursements by Kura Japan to the Company were $ 26 thousand and $ 11 thousand for the three months ended February 28, 2023 and February 28, 2022, respectively, and were $ 60 thousand and $ 28 thousand for the six months ended February 28, 2023 and February 28, 2022, respectively.

The reimbursements were primarily for travel and other administrative expenses.

Stock-based Compensation

12 unchanged sentences

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.

Options granted

Options exercised

Options canceled/forfeited

Outstanding —

February 28, 2023

The following table summarizes the restricted stock unit (“RSU”) activity under the Stock Incentive Plan:

RSU Outstanding

Number of Shares

Outstanding RSU

Weighted Average

Outstanding —

August 31, 2022

RSU's granted

Outstanding —

November 30, 2022

RSU's granted

Outstanding —

February 28, 2023

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

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

(amounts in thousands)

6 unchanged sentences

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

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.

As of February 28, 2023 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.

4 unchanged sentences

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

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

(amounts in thousands, except per share data)

7 unchanged sentences

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.

For the three and six months ended February 28, 2023 and February 28, 2022, there were 768 thousand and 762 thousand shares of common stock subject to outstanding employee stock options and restricted stock units that were excluded from the calculation of diluted loss per share because their inclusion would have been anti-dilutive.

Commitments and Contingencies

13 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 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 recorded an income tax expense of $ 15 thousand and $ 3 thousand for the three months ended February 28, 2023 and February 28, 2022, respectively, and income tax expense of $ 25 thousand and $ 15 thousand for the six months ended February 28, 2023 and February 28, 2022, respectively.

The Company’s effective tax rates for the three and six months ended February 28, 2023 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 November 30, 2022 was appropriate.

Subsequent Event

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

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 February 28, 2023 was appropriate.

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

48 unchanged sentences

Income tax expense (benefit).

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

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

Results of Operations

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

The following tables present selected comparative results of operations for the three and six months ended February 28, 2023 and February 28, 2022.

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 recalculate or sum to 100% due to rounding.

Three Months Ended November 30,

Three Months Ended February 28,

(dollar amounts in thousands)

14 unchanged sentences

Income tax expense

Three Months Ended November 30,

Six Months Ended February 28,

(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 loss

Other expense (income):

Interest expense

Interest income

Loss before income taxes

Income tax expense

Three Months Ended February 28,

Six Months Ended February 28,

(as a percentage of sales)

14 unchanged sentences

Income tax expense

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.

Three Months Ended February 28, 2023 Compared to Three Months Ended February 28, 2022

Sales were $43.9 million for the three months ended February 28, 2023 compared to $31.3 million for the three months ended February 28, 2022, representing an increase of $12.6 million, or 40.4%.

Comparable restaurant sales increased 17.4% for the three months ended February 28, 2023, as compared to the three months ended February 28, 2022.

The increase in sales was primarily driven by the sales resulting from nine new restaurants opened subsequent to February 28, 2022, as well as increases in menu prices during the same period.

Food and beverage costs.

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.

Food and beverage costs were $13.2 million for the three months ended February 28, 2023 compared to $9.4 million for the three months ended February 28, 2022, representing an increase of $3.8 million, or 41.2%.

The increase in food and beverage costs was primarily driven by costs associated with sales from nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, food and beverage costs increased to 30.1% in the three months ended February 28, 2023 as compared to 30.0% in the three months ended February 28, 2022, primarily due to food cost inflation partially offset by increases in menu prices.

Labor and related costs.

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.

Labor and related costs were $13.9 million for the three months ended February 28, 2023 compared to $10.3 million for the three months ended February 28, 2022, representing an increase of $3.6 million, or 34.0%.

This increase in labor and related costs was primarily driven by additional labor costs incurred from nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, labor and related costs decreased to 31.5% in the three months ended February 28, 2023 as compared to 33.1% in the three months ended February 28, 2022.

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 wage rates.

Occupancy and related expenses.

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.

Occupancy and related expenses were $3.1 million for the three months ended February 28, 2023 compared to $2.3 million for the three months ended February 28, 2022, representing an increase of $0.8 million, or 33.1%.

The increase was primarily a result of additional lease expense related to the opening of nine new restaurants subsequent to February 28, 2022.

As a percentage of sales, occupancy and related expenses decreased to 7.0% in the three months ended February 28, 2023 as compared to 7.4% in the three months ended February 28, 2022, 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 $1.6 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.

Depreciation and amortization expenses incurred as part of restaurant operating costs were $1.8 million for the three months ended February 28, 2023 compared to $1.3 million for the three months ended February 28, 2022, representing an increase of $0.5 million, or 38.8%.

The increase was primarily due to depreciation of property and equipment related to the nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, depreciation and amortization expenses at the restaurant level remained consistent at 4.0% in the three months ended February 28, 2023 and February 28, 2022.

Depreciation and amortization expenses incurred at the corporate level were $0.1 million for both the three months ended February 28, 2023 and February 28, 2022, and as a percentage of sales were 0.2% and 0.3%, respectively.

Other costs were $5.9 million for the three months ended February 28, 2023 compared to $4.3 million for the three months ended February 28, 2022, representing an increase of $1.6 million, or 35.0%.

The increase was primarily driven by an increase in costs related to nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, other costs decreased to 13.3% in the three months ended February 28, 2023 as compared to 13.9% in the three months ended February 28, 2022, primarily driven by leverage benefits from the increase in sales.

General and administrative expenses.

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.

General and administrative expenses were $7.1 million for the three months ended February 28, 2023 compared to $5.5 million for the three months ended February 28, 2022, representing an increase of $1.6 million, or 30.6%.

This increase was primarily due to increases in compensation related costs of $1.3 million due to additional headcount, $0.2 million of professional fees and $0.1 million in travel expenses.

As a percentage of sales, general and administrative expenses decreased to 16.2% in the three months ended February 28, 2023 from 17.4% in the three months ended February 28, 2022, primarily driven by leverage benefits from the increase in sales.

Interest expense.

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 expense was $14 thousand for the three months ended February 28, 2023 compared to $22 thousand for the three months ended February 28, 2022.

Interest income.

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.

Interest income was $63 thousand for the three months ended February 28, 2023 compared to $24 thousand for the three months ended February 28, 2022.

Income tax expense.

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.

Income tax expense was $15 thousand for the three months ended February 28, 2023 compared to $3 thousand for the three months ended February 28, 2022.

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

1 unchanged sentence

in the Notes to Condensed Financial Statements.

Six Months Ended February 28, 2023 Compared to Six Months Ended February 28, 2022

Sales were $83.3 million for the six months ended February 28, 2023 compared to $61.1 million for the six months ended February 28, 2022, representing an increase of $22.2 million, or 36.2%.

Comparable restaurant sales increased 11.8% for the six months ended February 28, 2023, as compared to the six months ended February 28, 2022.

The increase in sales was primarily driven by the sales resulting from nine new restaurants opened subsequent to February 28, 2022, as well as increases in menu prices during the same period.

Food and beverage costs.

Food and beverage costs were $25.7 million for the six months ended February 28, 2023 compared to $18.3 million for the six months ended February 28, 2022, representing an increase of $7.4 million, or 40.0%.

The increase in food and beverage costs was primarily driven by costs associated with sales from nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, food and beverage costs increased to 30.8% in the six months ended February 28, 2023 as compared to 30.0% in the six months ended February 28, 2022, primarily due to food cost inflation partially offset by increases in menu prices.

Labor and related costs.

Labor and related costs were $26.4 million for the six months ended February 28, 2023 compared to $20.1 million for the six months ended February 28, 2022, representing an increase of $6.3 million, or 31.6%.

This increase in labor and related costs was primarily driven by additional labor costs incurred from nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, labor and related costs decreased to 31.7% in the six months ended February 28, 2023 as compared to 32.8% in the six months ended February 28, 2022.

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 wage rates.

Occupancy and related expenses.

Occupancy and related expenses were $6.0 million for the six months ended February 28, 2023 compared to $4.5 million for the six months ended February 28, 2022, representing an increase of $1.5 million, or 32.2%.

The increase was primarily a result of additional lease expense related to the opening of nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, occupancy and related expenses decreased to 7.1% in the six months ended February 28, 2023, compared to 7.4% in the six months ended February 28, 2022, 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 $3.3 million for the six months ended February 28, 2023 compared to $2.4 million for the six months ended February 28, 2022, representing an increase of $0.9 million, or 36.8%.

The increase was primarily due to depreciation of property and equipment related to nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, depreciation and amortization expenses at the restaurant level was 4.0% for the six months ended February 28, 2023 and February 28, 2022.

Depreciation and amortization expenses incurred at the corporate level were $0.2 million for the six months ended February 28, 2023 and February 28, 2022, and as a percentage of sales were 0.2% and 0.3%, respectively.

Other costs were $11.2 million for the six months ended February 28, 2023 compared to $8.0 million for the six months ended February 28, 2022, representing an increase of $3.2 million, or 40.6%.

The increase was primarily driven by an increase in costs related to nine new restaurants opened subsequent to February 28, 2022.

As a percentage of sales, other costs increased to 13.4% in the six months ended February 28, 2023 from 13.0% in the six months ended February 28, 2022, primarily driven by increases in repair and maintenance costs and travel costs.

General and administrative expenses.

General and administrative expenses were $13.8 million for the six months ended February 28, 2023 compared to $10.8 million for the six months ended February 28, 2022, representing an increase of $3.0 million, or 27.3%.

This increase was primarily due to increases in compensation related costs of $2.6 million due to additional headcount and $0.3 million in travel expenses and $0.1 million in professional fees.

As a percentage of sales, general and administrative expenses decreased to 16.5% in the six months ended February 28, 2023 from 17.7% in the six months ended February 28, 2022, primarily driven by leverage benefits from the increase in sales.

Interest expense.

Interest expense was $30 thousand for the six months ended February 28, 2023 compared to $47 thousand for the six months ended February 28, 2022.

Interest income.

Interest income was $157 thousand for the six months ended February 28, 2023 compared to $50 thousand for the six months ended February 28, 2022.

Income tax expense.

Income tax expense was $25 thousand for the six months ended February 28, 2023 compared to $15 thousand for the six months ended February 28, 2022.

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

Income Taxes”

in the Notes to Condensed Financial Statements.

Key Performance Indicators

19 unchanged sentences

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

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

(amounts in thousands)

32 unchanged sentences

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

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

(amounts in thousands)

31 unchanged sentences

The following table shows the comparable restaurant sales performance:

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

Comparable restaurant sales performance (%)

6 unchanged sentences

The following table shows the growth in our restaurant base:

Three Months Ended November 30,

Three Months Ended February 28,

Six Months Ended February 28,

Restaurant activity:

1 unchanged sentence

End of period

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

Liquidity and Capital Resources

1 unchanged sentence

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 Registration Statement was declared effective on January 6, 2023, and registered 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.

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 from the date of effectiveness.

During the six months ended February 28, 2023, we had no borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.

As of February 28, 2023, 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.

6 unchanged sentences

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

Three Months Ended November 30,

Six Months Ended February 28,

Statement of Cash Flow data:

2 unchanged sentences

Net cash used in investing activities

Net cash used in financing activities

Net cash provided by (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.

Net cash provided by operating activities during the six months ended February 28, 2023 was $1.7 million, which results from a net loss of $3.1 million, non-cash charges of $3.5 million for depreciation and amortization, $1.6 million for stock-based compensation, and $1.8 million in non-cash lease expense, and net cash outflows of $2.1 million from changes in operating assets and liabilities.

Net cash provided by operating activities during the six months ended February 28, 2022 was $9.7 million, which results from a net loss of $3.2 million offset by non-cash charges of $2.6 million for depreciation and amortization, $1.0 million for stock-based compensation, and $1.4 million in non-cash lease expense, and net cash inflows of $7.8 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 $7.7 million in prepaid expenses and other current assets, which was primarily due to collection of $8.0 million of our total of $12.0 million of employee retention credits.

Cash Flows Used in Investing Activities

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.

Net cash used in investing activities during the six months ended February 28, 2023 was $15.4 million, primarily due to $14.3 million in purchases of property and equipment and $0.8 million in purchases of liquor licenses.

The purchases of property and equipment in the six months ended February 28, 2023 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 six months ended February 28, 2022 was $13.2 million, primarily due to $12.3 million in purchases of property and equipment, $0.6 million in purchases of liquor licenses and $0.3 in payments for initial direct costs.

The purchases of property and equipment in the six months ended February 28, 2022 is primarily related to capital expenditures for current and future restaurant openings and renovations, maintaining our existing restaurants and other projects.

Cash Flows Provided by (Used in) Financing Activities

Net cash provided by financing activities during the six months ended February 28, 2023 was $0.2 million and is primarily due $0.6 million of proceeds from exercise of stock options offset by $0.2 million in repayments of principal on finance leases.

Net cash used in financing activities during the six months ended February 28, 2022 was $0.6 million and is primarily due to $0.5 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.

As of February 28, 2023, we had $10.0 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 utilizing cash and cash equivalents on hand and provided by operations.

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

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What changed 10-Q

Item 1. Financial Statements