What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-07-06 compared with 2023-04-04 · 206 added, 158 removed, 603 unchanged (38% of the section changed)

3 unchanged sentences

(amounts in thousands, except par value)

February 28, 2023

August 31, 2022

1 unchanged sentence

Cash and cash equivalents

Short-term investments

Accounts and other receivables

28 unchanged sentences

50,000 shares authorized,

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

10,101 and 8,788 shares issued and outstanding as of May 31, 2023

and August 31, 2022, respectively

1 unchanged sentence

10,000 shares authorized,

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

1,000 shares issued and outstanding as of May 31, 2023

and August 31, 2022

1 unchanged sentence

Accumulated deficit

Accumulated other comprehensive loss

Total stockholders' equity

2 unchanged sentences

Kura Sushi USA, Inc.

Condensed Statements of Operations

Condensed Statements of Operations and Comprehensive Income (Loss)

(amounts in thousands, except per share data)

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31,

Nine Months Ended May 31,

Restaurant operating costs:

7 unchanged sentences

Total operating expenses

Operating loss

Operating income (loss)

Other expense (income):

1 unchanged sentence

Interest income

Loss before income taxes

Income tax expense

Net loss per Class A and Class B shares

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

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

Weighted average Class A and Class B shares outstanding

Other comprehensive income (loss):

Unrealized loss on short-term investments

Comprehensive income (loss)

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

2 unchanged sentences

(amounts in thousands)

Comprehensive

Stockholders'

6 unchanged sentences

Balances as of February 28, 2023

Stock-based compensation

Employee stock plan

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

Other comprehensive loss

Balances as of May 31, 2023

Stockholders'

7 unchanged sentences

Balances as of February 28, 2022

Stock-based compensation

Employee stock plan

Balances as of May 31, 2022

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

2 unchanged sentences

(amounts in thousands)

Six Months Ended February 28,

Nine Months Ended May 31,

Cash flows from operating activities

20 unchanged sentences

Payments for purchases of liquor licenses

Purchases of short-term investments

Net cash used in investing activities

3 unchanged sentences

Proceeds from exercise of stock options

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

Payments of costs related to the follow-on offering

Net cash provided by (used in) financing activities

Decrease in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

35 unchanged sentences

Actual results could differ materially from those estimates and assumptions.

Short-Term Investments

Short-term investments consist of certificates of deposits and Treasury bills.

The Company considers all highly liquid investments with an original maturity date greater than three months but less than one year as short-term investments.

The carrying value of the short-term investments is equivalent to their amortized cost basis.

As of May 31, 2023 and August 31, 2022, short-term investments were $ 8.7 million and none , respectively.

The certificates of deposits are deposited at Federal Deposit Insurance Corporation (“FDIC”) insured banks.

The certificates of deposits are in amounts of $ 250,000 in multiple banks so that the entire deposit balance is eligible for FDIC insurance.

Certificates of deposits and Treasury bills are classified as available-for-sale debt securities which are measured at fair value with unrealized gains or losses recorded in other comprehensive income (loss).

As of May 31, 2023, the Company recorded $ 7 thousand in unrealized losses on short-term investments in comprehensive income (loss).

Based on the evaluation of credit risk factors, the Company has concluded that an allowance for credit losses is unnecessary for its short-term investments.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Comprehensive income (loss) is the same as net income (loss) for all periods presented.

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

The Company’s short-term investments consist of certificates of deposits and Treasury bills that are classified as available-for-sale debt securities which are measured at fair value with unrealized gains or losses recorded in other comprehensive income (loss).

Recently Adopted Accounting Pronouncement

5 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.

Follow-On Offering

On April 13, 2023, the Company completed an underwritten public offering of common stock pursuant to the Company’s universal shelf registration statement on Form S-3, selling an aggregate of 1,265,000 shares of Class A common stock, including the exercise in full of the underwriters’

option to purchase 165,000 additional shares, at the price of $ 54.00 per share less an underwriting discount of $ 2.70 per share.

The Company received aggregate net proceeds of $ 64.3 million after deducting the underwriting discounts and commissions and offering expenses payable by the Company.

The proceeds are to be used for general corporate purposes, including capital expenditures, working capital, and other business purposes .

No payments were made by the Company to directors, officers or persons owning 10 % or more of the Company’s common stock or to their associates, or to the Company’s affiliates.

Balance Sheet Components

Accounts and Other Receivables

February 28, 2023

August 31, 2022

4 unchanged sentences

Property and Equipment - net

February 28, 2023

August 31, 2022

7 unchanged sentences

Total property and equipment –

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.

Depreciation and amortization expense for property and equipment was $ 2.1 million and $ 1.5 million for the three months ended May 31, 2023 and May 31, 2022, respectively, and was $ 5.6 million and $ 4.1 million for the nine months ended May 31, 2023 and May 31, 2022 , respectively.

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

The Company’s leases have remaining lease terms of less than 1 year to 20 years, some of which include options to extend the leases.

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

Three Months Ended February 28,

Six Months Ended February 28,

Lease related costs recognized in the statements of operations and comprehensive income (loss) are as follows:

Three Months Ended May 31,

Nine Months Ended May 31,

(amounts in thousands)

6 unchanged sentences

Total finance lease cost

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31,

Nine Months Ended May 31,

(amounts in thousands)

8 unchanged sentences

Operating Leases

February 28, 2023

August 31, 2022

5 unchanged sentences

Finance Lease Assets –

February 28, 2023

August 31, 2022

4 unchanged sentences

Finance Leases Liabilities

February 28, 2023

August 31, 2022

3 unchanged sentences

Total finance lease liabilities

Six months ended February 28,

Nine months ended May 31,

Weighted Average Remaining Lease Term (Years)

5 unchanged sentences

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

Six Months Ended February 28,

Nine Months Ended May 31,

(amounts in thousands)

1 unchanged sentence

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

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.

As of May 31, 2023, the Company has an additional $ 39.0 million of operating leases related to restaurants for which the Company has not yet taken possession.

Subsequent to May 31, 2023, the Company entered into an additional operating lease related to a restaurant for which the Company has not yet taken possession.

The lease liability associated with the lease after May 31, 2023 is $ 0.6 million .

The operating lease is expected to commence in fiscal year 2024, with a lease term of 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 statement of operations.

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

In August 2019, the Company entered into an Amended and Restated Exclusive License Agreement (the “License Agreement”) with Kura Japan.

Pursuant to the License Agreement, the Company pays Kura Japan a royalty fee of 0.5 % of the Company’s net sales in exchange for an exclusive, royalty-bearing license for use of certain of Kura Japan’s intellectual property rights, including, but not limited to, Kura Japan’s trademarks “Kura Sushi”

Fresh”

and “Kura Revolving Sushi Bar,”

1 unchanged sentence

Fresh protective dome, among other intellectual property rights necessary to continue operation of the Company’s restaurants.

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

Royalty payments to Kura Japan are included in other costs at the restaurant level in the accompanying statements of operations and comprehensive income (loss).

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 $ 45.0 million (the “Revolving Credit Agreement”).

2 unchanged sentences

Balances with Kura Japan are as follows:

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 February 28,

Six Months Ended February 28,

Three Months Ended May 31,

Nine Months Ended May 31,

(amounts in thousands)

5 unchanged sentences

Total related party transactions

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.

Reimbursements by Kura Japan to the Company were $ 7 thousand and none for the three months ended May 31, 2023 and May 31, 2022, respectively, and were $ 67 thousand and $ 28 thousand for the nine months ended May 31, 2023 and May 31, 2022, respectively.

The reimbursements were for professional fees, travel and other administrative expenses.

Stock-based Compensation

17 unchanged sentences

February 28, 2023

Options granted

Options exercised

Options canceled/forfeited

Outstanding —

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

RSU Outstanding

Number of Shares

9 unchanged sentences

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 February 28,

Six Months Ended February 28,

RSU's canceled/forfeited

Outstanding —

The total stock-based compensation recognized under the Stock Incentive Plan in the statements of operations and comprehensive income (loss) is as follows:

Three Months Ended May 31,

Nine Months Ended May 31,

(amounts in thousands)

6 unchanged sentences

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

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.

As of May 31, 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.

Related Party Transactions.”

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.

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.

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 loss per share:

Three Months Ended February 28,

Six Months Ended February 28,

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,

(amounts in thousands, except per share data)

Net loss attributable to common stockholders

Net income (loss) attributable to common stockholders –

Weighted average common shares outstanding –

1 unchanged sentence

Weighted average common shares outstanding –

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.

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 and restricted stock units.

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.

For the three months ended May 31, 2023 and May 31, 2022, there were 201 thousand and 250 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 nine months ended May 31, 2023 and May 31, 2022, there were 729 thousand and 762 thousand shares of common stock subject to outstanding employee stock options and RSU’s that were excluded from the calculation of diluted loss 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.

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.

5 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 $ 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 recorded an income tax expense of $ 41 thousand and an income tax benefit of $ 2 thousand for the three months ended May 31, 2023 and May 31, 2022, respectively, and income tax expense of $ 66 thousand and $ 13 thousand for the nine months ended May 31, 2023 and May 31, 2022, respectively.

The Company’s effective tax rates for the three and nine months ended May 31, 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 February 28, 2023 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 May 31, 2023 was appropriate.

Fair Value Measurements

The following table sets forth the Company’s assets measured at fair value on a recurring basis as of May 31, 2023.

The Company did no t have any assets and liabilities measured at fair value on a recurring basis as of August 31, 2022.

(amounts in thousands)

Certificates of deposits

Treasury bills

Total assets at fair value

The Company’s cash and cash equivalents include cash on hand, deposits in banks, certificates of deposits and money market funds.

Due to their short-term nature, the carrying amounts reported in the accompanying balance sheets approximate the fair value of cash and cash equivalents.

The fair value of our certificates of deposits are estimated using Level 2 of the fair value hierarchy.

Level 2 inputs are based on market data that include factors such as interest rates, market and pricing activity and other market-based valuation techniques.

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

50 unchanged sentences

Results of Operations

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

The following tables present selected comparative results of operations for the three and nine months ended May 31, 2023 and May 31, 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 February 28,

Three Months Ended May 31,

(dollar amounts in thousands)

8 unchanged sentences

Total operating expenses

Operating loss

Operating income

Other expense (income):

1 unchanged sentence

Interest income

Loss before income taxes

Income tax expense

Six Months Ended February 28,

Income before income taxes

Income tax expense (benefit)

Nine Months Ended May 31,

(dollar amounts in thousands)

14 unchanged sentences

Income tax expense

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31,

Nine Months Ended May 31,

(as a percentage of sales)

8 unchanged sentences

Total operating expenses

Operating loss

Operating income (loss)

Other expense (income):

1 unchanged sentence

Interest income

Loss before income taxes

Income (loss) before income taxes

Income tax expense

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.

Net income (loss)

Three Months Ended May 31, 2023 Compared to Three Months Ended May 31, 2022

Sales were $49.2 million for the three months ended May 31, 2023 compared to $38.0 million for the three months ended May 31, 2022, representing an increase of $11.2 million, or 29.7%.

Comparable restaurant sales increased 10.3% for the three months ended May 31, 2023, as compared to the three months ended May 31, 2022.

The increase in sales was primarily driven by the sales resulting from nine new restaurants opened subsequent to May 31, 2022, as well as increases in menu prices during the same period.

Food and beverage costs.

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.

Food and beverage costs were $14.8 million for the three months ended May 31, 2023 compared to $11.3 million for the three months ended May 31, 2022, representing an increase of $3.5 million, or 30.9%.

The increase in food and beverage costs was primarily driven by costs associated with sales from nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, food and beverage costs increased to 30.0% in the three months ended May 31, 2023 as compared to 29.7% in the three months ended May 31, 2022, primarily due to food cost inflation partially offset by increases in menu prices.

Labor and related costs.

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.

Labor and related costs were $14.4 million for the three months ended May 31, 2023 compared to $11.8 million for the three months ended May 31, 2022, representing an increase of $2.6 million, or 21.8%.

This increase in labor and related costs was primarily driven by additional labor costs incurred from nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, labor and related costs decreased to 29.2% in the three months ended May 31, 2023 as compared to 31.0% in the three months ended May 31, 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 $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.

Occupancy and related expenses were $3.6 million for the three months ended May 31, 2023 compared to $2.7 million for the three months ended May 31, 2022, representing an increase of $0.9 million, or 32.0%.

The increase was primarily a result of additional lease expense related to the opening of nine new restaurants subsequent to May 31, 2022.

As a percentage of sales, occupancy and related expenses remained consistent at 7.2% in the three months ended May 31, 2023 as compared to 7.1% in the three months ended May 31, 2022.

Depreciation and amortization expenses.

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.

Depreciation and amortization expenses incurred as part of restaurant operating costs were $2.0 million for the three months ended May 31, 2023 compared to $1.4 million for the three months ended May 31, 2022, representing an increase of $0.6 million, or 43.5%.

The increase was primarily due to depreciation of property and equipment related to the nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, depreciation and amortization expenses at the restaurant level increased to 4.0% in the three months ended May 31, 2023 as compared to 3.6% in the three months ended May 31, 2022.

Depreciation and amortization expenses incurred at the corporate level were $0.1 million for both the three months ended May 31, 2023 and May 31, 2022, and as a percentage of sales were both 0.2%, respectively.

Other costs were $6.2 million for the three months ended May 31, 2023 compared to $4.4 million for the three months ended May 31, 2022, representing an increase of $1.8 million, or 41.0%.

The increase was primarily driven by an increase in costs related to nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, other costs increased to 12.5% in the three months ended May 31, 2023 as compared to 11.5% in the three months ended May 31, 2022, primarily driven by advertising, repair and maintenance and travel costs.

General and administrative expenses.

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%.

General and administrative expenses were $7.0 million for the three months ended May 31, 2023 compared to $5.9 million for the three months ended May 31, 2022, representing an increase of $1.1 million, or 18.8%.

This increase was primarily due to increases in compensation related costs of $0.7 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.

As a percentage of sales, general and administrative expenses decreased to 14.2% in the three months ended May 31, 2023 from 15.5% in the three months ended May 31, 2022, primarily driven by leverage benefits from the increase in sales.

Interest expense.

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 expense was $23 thousand for both the three months ended May 31, 2023 and May 31, 2022, respectively.

Interest income.

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.

Interest income was $436 thousand for the three months ended May 31, 2023 compared to $25 thousand for the three months ended May 31, 2022.

The increase was primarily driven by investing our net cash proceeds from our $64.3 million follow-on offering completed in April 2023 into cash and cash equivalents and short-term investments.

Income tax expense.

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.

Income tax expense was $41 thousand for the three months ended May 31, 2023 compared to an income tax benefit of $2 thousand for the three months ended May 31, 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.

Nine Months Ended May 31, 2023 Compared to Nine Months Ended May 31, 2022

Sales were $132.5 million for the nine months ended May 31, 2023 compared to $99.1 million for the nine months ended May 31, 2022, representing an increase of $33.4 million, or 33.7%.

Comparable restaurant sales increased 11.0% for the nine months ended May 31, 2023, as compared to the nine months ended May 31, 2022.

The increase in sales was primarily driven by the sales resulting from nine new restaurants opened subsequent to May 31, 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.

Food and beverage costs were $40.4 million for the nine months ended May 31, 2023 compared to $29.6 million for the nine months ended May 31, 2022, representing an increase of $10.8 million, or 36.6%.

The increase in food and beverage costs was primarily driven by costs associated with sales from nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, food and beverage costs increased to 30.5% in the nine months ended May 31, 2023 as compared to 29.9% in the nine months ended May 31, 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.

Labor and related costs were $40.8 million for the nine months ended May 31, 2023 compared to $31.8 million for the nine months ended May 31, 2022, representing an increase of $9.0 million, or 28.0%.

This increase in labor and related costs was primarily driven by additional labor costs incurred from nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, labor and related costs decreased to 30.8% in the nine months ended May 31, 2023 as compared to 32.1% in the nine months ended May 31, 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.

Occupancy and related expenses were $9.5 million for the nine months ended May 31, 2023 compared to $7.2 million for the nine months ended May 31, 2022, representing an increase of $2.3 million, or 32.1%.

The increase was primarily a result of additional lease expense related to the opening of nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, occupancy and related expenses remained consistent at 7.2% in the nine months ended May 31, 2023, compared to 7.3% in the nine months ended May 31, 2022.

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.

Depreciation and amortization expenses incurred as part of restaurant operating costs were $5.3 million for the nine months ended May 31, 2023 compared to $3.8 million for the nine months ended May 31, 2022, representing an increase of $1.5 million, or 39.2%.

The increase was primarily due to depreciation of property and equipment related to nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, depreciation and amortization expenses at the restaurant level increased to 4.0% for the nine months ended May 31, 2023 as compared to 3.8% for the nine months ended May 31, 2022.

Depreciation and amortization expenses incurred at the corporate level were $0.3 million for the nine months ended May 31, 2023 and May 31, 2022, and as a percentage of sales were 0.2% and 0.3%, respectively.

Other costs were $17.4 million for the nine months ended May 31, 2023 compared to $12.3 million for the nine months ended May 31, 2022, representing an increase of $5.1 million, or 40.8%.

The increase was primarily driven by an increase in costs related to nine new restaurants opened subsequent to May 31, 2022.

As a percentage of sales, other costs increased to 13.1% in the nine months ended May 31, 2023 from 12.4% in the nine months ended May 31, 2022, primarily driven by advertising, repair and maintenance 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%.

General and administrative expenses were $20.8 million for the nine months ended May 31, 2023 compared to $16.7 million for the nine months ended May 31, 2022, representing an increase of $4.1 million, or 24.3%.

This increase was primarily due to increases in compensation related costs of $3.3 million due to additional headcount and $0.5 million in travel expenses and $0.3 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.

As a percentage of sales, general and administrative expenses decreased to 15.7% in the nine months ended May 31, 2023 from 16.9% in the nine months ended May 31, 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 expense was $53 thousand for the nine months ended May 31, 2023 compared to $70 thousand for the nine months ended May 31, 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.

Interest income was $593 thousand for the nine months ended May 31, 2023 compared to $75 thousand for the nine months ended May 31, 2022.

The increase was primarily driven by investing our net cash proceeds from our $64.3 million follow-on offering completed in April 2023 into cash and cash equivalents and short-term investments.

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.

Income tax expense was $66 thousand for the nine months ended May 31, 2023 compared to $13 thousand for the nine months ended May 31, 2022.

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

4 unchanged sentences

The key measures for determining how our business is performing include sales, EBITDA, Adjusted EBITDA, Restaurant-level Operating Profit, Restaurant-level Operating Profit margin, Average Unit Volumes (“AUVs”), comparable restaurant sales performance, and the number of restaurant openings.

Sales represents sales of food and beverages in restaurants, as shown on our statements of operations.

Sales represents sales of food and beverages in restaurants, as shown on our statements of operations and comprehensive income (loss).

Several factors affect our restaurant sales in any given period, including the number of restaurants in operation, guest traffic and average check.

4 unchanged sentences

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are 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 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.

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.

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.

6 unchanged sentences

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

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31,

Nine Months Ended May 31,

(amounts in thousands)

Net income (loss)

Interest income, net

Income tax expense

Income tax expense (benefit)

Depreciation and amortization expenses

3 unchanged sentences

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.

23 unchanged sentences

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

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31,

Nine Months Ended May 31,

(amounts in thousands)

Operating loss

Operating income (loss)

Depreciation and amortization expenses

5 unchanged sentences

Restaurant-level operating profit

Operating loss margin

Operating income (loss) margin

Restaurant-level operating profit margin

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

19 unchanged sentences

The following table shows the comparable restaurant sales performance:

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31,

Nine Months Ended May 31,

Comparable restaurant sales performance (%)

6 unchanged sentences

The following table shows the growth in our restaurant base:

Three Months Ended February 28,

Six Months Ended February 28,

Three Months Ended May 31,

Nine Months Ended May 31,

Restaurant activity:

3 unchanged sentences

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 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.

On April 13, 2023, we completed an underwritten public offering of common stock pursuant to our universal shelf registration statement on Form S-3, selling an aggregate of 1,265,000 shares of Class A common stock, including the exercise in full of the underwriters’

option to purchase 165,000 additional shares, at the price of $54.00 per share less an underwriting discount of $2.70 per share.

We received aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable by us.

The proceeds are to be used for general corporate purposes, including capital expenditures, working capital,

and other business purposes.

No payments were made by us to directors, officers or persons owning 10% or more of our common stock or to their associates, or to our affiliates.

During the nine months ended May 31, 2023, we had no borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.

As of May 31, 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, receivables and short-term investments reduced by accounts payable and accrued expenses.

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, while we typically have longer payment terms with our vendors.

We believe that cash provided by operating activities, cash on hand and availability under our existing Revolving Credit Agreement will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months.

We believe that cash provided by operating activities, cash on hand, short-term investments and availability under our existing Revolving Credit Agreement, will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months.

Summary of Cash Flows

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

Our primary sources of liquidity and cash flows are operating cash flows, cash on hand and short-term investments.

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

1 unchanged sentence

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

Six Months Ended February 28,

Nine Months Ended May 31,

Statement of Cash Flow data:

4 unchanged sentences

Cash Flows Provided by Operating Activities

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.

Net cash provided by operating activities during the nine months ended May 31, 2023 was $7.1 million, which results from a net loss of $1.4 million, non-cash charges of $5.6 million for depreciation and amortization, $2.6 million for stock-based compensation, and $2.8 million in non-cash lease expense, and net cash outflows of $2.5 million from changes in operating assets and liabilities.

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.

Cash Flows Used in Investing Activities

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.

Net cash used in investing activities during the nine months ended May 31, 2023 was $37.2 million, primarily due to $8.7 million in purchases of short-term investments, $27.2 million in purchases of property and equipment and $0.9 million in purchases of liquor licenses.

The purchases of property and equipment in the nine months ended May 31, 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 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.

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.

Net cash provided by financing activities during the nine months ended May 31, 2023 was $64.9 million and is primarily due to aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable, and $1.0 million of proceeds from exercise of stock options offset by $0.4 million in repayments of principal on finance leases.

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.

Material Cash Requirements

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.

As of May 31, 2023, we had $11.4 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.

47 unchanged sentences

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