What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-07 compared with 2024-07-09 · 75 added, 155 removed, 193 unchanged (54% of the section changed)

8 unchanged sentences

Business Trends

During the nine months ended May 31, 2024, we opened 13 restaurants and expanded our restaurant base to 63 restaurants in seventeen states and Washington, DC.

During the three months ended November 30, 2024, we opened six restaurants and expanded our restaurant base to 70 restaurants in twenty states and Washington, DC.

We expect to open a total of 14 new restaurants in fiscal year 2025 and therefore, we expect our revenue and restaurant operating costs to increase in fiscal year 2025.

We also expect our general and administrative expenses to increase on a dollar basis in fiscal 2024 to support the growth of the company and the compliance requirements of no longer being an emerging growth company.

We have experienced inflationary pressures affecting our operations in certain areas such as labor, repairs and maintenance, restaurant supplies and energy costs.

We have been able to partially offset these inflationary and other cost pressures to some extent through various actions, such as increasing menu prices, productivity improvements, and supply chain initiatives.

Although inflation has moderated so far in 2024, inflation may continue to affect our results in the near future.

In addition, our restaurant sales have softened since mid-April due to macroeconomic conditions of lower consumer spending.

We also expect our general and administrative expenses to increase on a dollar basis in fiscal 2025 to support the growth of the company.

Key Financial Definitions

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Labor and related expenses.

Labor and related expenses include all restaurant-level management and hourly labor costs, including wages, employee benefits and payroll taxes.

Labor and related expenses include all restaurant-level management and hourly labor costs, including wages, employee benefits, stock-based compensation for restaurant-level employees and payroll taxes.

Similar to the food and beverage costs that we incur, labor and related expenses are expected to grow proportionally as our sales grow.

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Depreciation is determined using the straight-line method over the assets’ estimated useful lives, which range from three to 20 years.

Other costs include credit card processing fees, repairs and maintenance, restaurant-level advertising and promotions, restaurant supplies, royalty payments to Kura Japan, stock-based compensation for restaurant-level employees, utilities and other restaurant-level expenses.

General and administrative expenses.

General and administrative expenses include expenses associated with corporate and regional supervision functions that support the operations of existing restaurants and development of new restaurants, including compensation and benefits, travel expenses, stock-based compensation for corporate-level employees, legal and professional fees, marketing costs, information systems, corporate office rent and other related corporate costs.

General and administrative expenses include expenses associated with corporate and regional supervision functions that support the operations of existing restaurants and development of new restaurants, including compensation and benefits, travel expenses, stock-based compensation for corporate-level employees, legal and professional fees, information systems, corporate office rent and other related corporate costs.

General and administrative expenses are expected to grow as our unit base grows.

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Results of Operations

The following tables present selected comparative results of operations for the three and nine months ended May 31, 2024 and May 31, 2023.

The following tables present selected comparative results of operations for the three months ended November 30, 2024 and 2023.

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 May 31,

(dollar amounts in thousands)

Restaurant operating costs

Food and beverage costs

Labor and related costs

Occupancy and related expenses

Depreciation and amortization expenses

Total restaurant operating costs

General and administrative expenses

Depreciation and amortization expenses

Total operating expenses

Operating (loss) income

Other expense (income):

Interest expense

Interest income

(Loss) income before income taxes

Income tax expense

Net (loss) income

Nine Months Ended May 31,

Three Months Ended November 30,

(dollar amounts in thousands)

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Income tax expense

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

(as a percentage of sales)

8 unchanged sentences

Total operating expenses

Operating (loss) income

Operating loss

Other expense (income):

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Interest income

(Loss) income before income taxes

Income tax expense

Net (loss) income

Three Months Ended May 31, 2024 Compared to Three Months Ended May 31, 2023

Sales were $63.1 million for the three months ended May 31, 2024 compared to $49.2 million for the three months ended May 31, 2023, representing an increase of $13.9 million, or 28.1%.

The increase in sales was primarily driven by the sales resulting from seventeen new restaurants opened subsequent to May 31, 2023, as well as increases in menu prices during the same period.

Comparable restaurant sales increased 0.6% for the three months ended May 31, 2024, as compared to the three months ended May 31, 2023.

Food and beverage costs.

Food and beverage costs were $18.4 million for the three months ended May 31, 2024 compared to $14.8 million for the three months ended May 31, 2023, representing an increase of $3.6 million, or 24.5%.

The increase in food and beverage costs was primarily driven by costs associated with sales from seventeen new restaurants opened subsequent to May 31, 2023.

As a percentage of sales, food and beverage costs decreased to 29.2% in the three months ended May 31, 2024 as compared to 30.0% in the three months ended May 31, 2023, primarily due to increases in menu prices and supply chain initiatives.

Labor and related costs.

Labor and related costs were $20.4 million for the three months ended May 31, 2024 compared to $14.4 million for the three months ended May 31, 2023, representing an increase of $6.0 million, or 41.9%.

This increase in labor and related costs was primarily driven by additional labor costs incurred from seventeen new restaurants opened subsequent to May 31, 2023.

As a percentage of sales, labor and related costs increased to 32.3% in the three months ended May 31, 2024 as compared to 29.2% in the three months ended May 31, 2023.

The increase in cost as a percentage of sales was primarily due to increases in wage rates and higher pre-opening labor costs.

Occupancy and related expenses.

Occupancy and related expenses were $4.3 million for the three months ended May 31, 2024 compared to $3.6 million for the three months ended May 31, 2023, representing an increase of $0.7 million, or 21.5%.

The increase was primarily a result of additional lease expense related to the opening of seventeen new restaurants subsequent to May 31, 2023.

As a percentage of sales, occupancy and related expenses decreased to 6.8% in the three months ended May 31, 2024 as compared to 7.2% in the three months ended May 31, 2023, 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 $3.1 million for the three months ended May 31, 2024 compared to $2.0 million for the three months ended May 31, 2023, representing an increase of $1.1 million, or 58.2%.

The increase consists of depreciation of property and equipment related to the seventeen new restaurants that opened subsequent to May 31, 2023.

As a percentage of sales, depreciation and amortization expenses at the restaurant level increased to 5.0% in the three months ended May 31, 2024 as compared to 4.0% in the three months ended May 31, 2023, primarily driven by increases in depreciation and amortization due to the new restaurants opened as well as accelerated depreciation on planned restaurant remodels.

Depreciation and amortization expenses incurred at the corporate level were $0.1 million for both the three months ended May 31, 2024 and May 31, 2023, and as a percentage of sales were both 0.2%, respectively.

Other costs were $9.1 million for the three months ended May 31, 2024 compared to $6.2 million for the three months ended May 31, 2023, representing an increase of $2.9 million, or 47.2%.

The increase was primarily driven by an increase in costs related to the seventeen new restaurants that opened subsequent to May 31, 2023.

As a percentage of sales, other costs increased to 14.4% in the three months ended May 31, 2024 as compared to 12.5% in the three months ended May 31, 2023, primarily driven by advertising and promotion, software licenses, repairs and maintenance, utilities, operating supplies and travel expenses.

General and administrative expenses.

General and administrative expenses were $8.9 million for the three months ended May 31, 2024 compared to $7.0 million for the three months ended May 31, 2023, representing an increase of $1.9 million, or 26.3%.

This increase was primarily due to increases in $0.7 million in professional fees, $0.6 million in litigation accrual, compensation-related costs of $0.4 million due to additional headcount and $0.2 million in travel expenses.

As a percentage of sales, general and administrative expenses decreased to 14.0% in the three months ended May 31, 2024 as compared to 14.2% in the three months ended May 31, 2023, primarily driven by leverage benefits from the increase in sales.

Interest expense.

Interest expense was $15 thousand for the three months ended May 31, 2024 compared to $23 thousand for the three months ended May 31, 2023, respectively.

Interest income.

Interest income was $686 thousand for the three months ended May 31, 2024 compared to $436 thousand for the three months ended May 31, 2023.

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.

Loss before income taxes

Income tax expense

Income tax expense was $60 thousand for the three months ended May 31, 2024 compared to an income tax expense of $41 thousand for the three months ended May 31, 2023.

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

Income Taxes” in the Notes to Condensed Financial Statements.

Nine Months Ended May 31, 2024 Compared to Nine Months Ended May 31, 2023

Sales were $171.8 million for the nine months ended May 31, 2024 compared to $132.5 million for the nine months ended May 31, 2023, representing an increase of $39.3 million, or 29.7%.

The increase in sales was primarily driven by the sales resulting from seventeen new restaurants opened subsequent to May 31, 2023, as well as increases in menu prices during the same period.

Comparable restaurant sales increased 2.4% for the nine months ended May 31, 2024, as compared to the nine months ended May 31, 2023.

Three Months Ended November 30, 2024 Compared to Three Months Ended November 30, 2023

Sales were $64.5 million for the three months ended November 30, 2024 compared to $51.5 million for the three months ended November 30, 2023, representing an increase of $13.0 million, or 25.2%.

The increase in sales was primarily driven by the sales resulting from sixteen new restaurants opened subsequent to November 30, 2023, as well as increases in menu prices during the same period.

Comparable restaurant sales increased 1.8% for the three months ended November 30, 2024, as compared to the three months ended November 30, 2023.

Food and beverage costs.

Food and beverage costs were $50.7 million for the nine months ended May 31, 2024 compared to $40.4 million for the nine months ended May 31, 2023, representing an increase of $10.3 million, or 25.3%.

The increase in food and beverage costs was primarily driven by costs associated with sales from seventeen new restaurants opened subsequent to May 31, 2023.

As a percentage of sales, food and beverage costs decreased to 29.5% in the nine months ended May 31, 2024 as compared to 30.5% in the nine months ended May 31, 2023, primarily due to increases in menu prices and supply chain initiatives.

Food and beverage costs were $18.7 million for the three months ended November 30, 2024 compared to $15.4 million for the three months ended November 30, 2023, representing an increase of $3.3 million, or 21.5%.

The increase in food and beverage costs was primarily driven by costs associated with sales from sixteen new restaurants opened subsequent to November 30, 2023.

As a percentage of sales, food and beverage costs decreased to 29.0% in the three months ended November 30, 2024 as compared to 29.8% in the three months ended November 30, 2023, primarily due to increases in menu prices, which was partially offset by food cost inflation.

Labor and related costs.

Labor and related costs were $55.4 million for the nine months ended May 31, 2024 compared to $40.8 million for the nine months ended May 31, 2023, representing an increase of $14.6 million, or 36.0%.

This increase in labor and related costs was primarily driven by additional labor costs incurred from seventeen new restaurants opened subsequent to May 31, 2023.

As a percentage of sales, labor and related costs increased to 32.2% in the nine months ended May 31, 2024 as compared to 30.8% in the nine months ended May 31, 2023.

The increase in cost as a percentage of sales was primarily due to increases in wage rates and higher pre-opening labor costs.

Labor and related costs were $21.2 million for the three months ended November 30, 2024 compared to $16.4 million for the three months ended November 30, 2023, representing an increase of $4.8 million, or 29.4%.

This increase in labor and related costs was primarily driven by additional labor costs incurred from sixteen new restaurants opened subsequent to November 30, 2023.

As a percentage of sales, labor and related costs increased to 32.9% in the three months ended November 30, 2024 as compared to 31.9% in the three months ended November 30, 2023.

The increase in cost as a percentage of sales was primarily due to increases in wage rates subsequent to November 30, 2023.

Occupancy and related expenses.

Occupancy and related expenses were $12.2 million for the nine months ended May 31, 2024 compared to $9.5 million for the nine months ended May 31, 2023, representing an increase of $2.7 million, or 28.1%.

The increase was primarily a result of additional lease expense related to the opening of seventeen new restaurants opened subsequent to May 31, 2023.

As a percentage of sales, occupancy and related expenses remained consistent at 7.1% in the nine months ended May 31, 2024, compared to 7.2% in the nine months ended May 31, 2023.

Occupancy and related expenses were $4.8 million for the three months ended November 30, 2024 compared to $3.9 million for the three months ended November 30, 2023, representing an increase of $0.9 million, or 21.6%.

The increase was primarily a result of additional lease expense related to the opening of sixteen new restaurants subsequent to November 30, 2023.

As a percentage of sales, occupancy and related expenses decreased to 7.4% in the three months ended November 30, 2024 as compared to 7.6% in the three months ended November 30, 2023, primarily driven by lower pre-opening lease expenses related to restaurants not yet open.

Depreciation and amortization expenses.

Depreciation and amortization expenses incurred as part of restaurant operating costs were $8.3 million for the nine months ended May 31, 2024 compared to $5.3 million for the nine months ended May 31, 2023, representing an increase of $3.0 million, or 56.2%.

The increase consists of depreciation of property and equipment related to seventeen new restaurants opened subsequent to May 31, 2023.

As a percentage of sales, depreciation and amortization expenses at the restaurant level increased to 4.8% for the nine months ended May 31, 2024 as compared to 4.0% for the nine months ended May 31, 2023, primarily driven by increases in depreciation and amortization due to the new restaurants opened as well as accelerated depreciation on planned restaurant remodels.

Depreciation and amortization expenses incurred at the corporate level were $0.3 million for the nine months ended May 31, 2024 and May 31, 2023, and as a percentage of sales were both 0.2%, respectively.

Other costs were $25.0 million for the nine months ended May 31, 2024 compared to $17.4 million for the nine months ended May 31, 2023, representing an increase of $7.6 million, or 44.2%.

The increase was primarily driven by an increase in costs related to seventeen new restaurants opened subsequent to May 31, 2023.

As a percentage of sales, other costs increased to 14.6% in the nine months ended May 31, 2024 from 13.1% in the nine months ended May 31, 2023, primarily driven by operating supplies, advertising and promotion, software licenses, repairs and maintenance, travel expenses and utilities.

Depreciation and amortization expenses incurred as part of restaurant operating costs were $3.1 million for the three months ended November 30, 2024 compared to $2.5 million for the three months ended November 30, 2023, representing an increase of $0.6 million, or 24.8%.

The increase consists of depreciation of property and equipment related to the sixteen new restaurants that opened subsequent to November 30, 2023.

As a percentage of sales, depreciation and amortization expenses at the restaurant level was 4.8% for the three months ended November 30, 2024 and November 30, 2023.

Depreciation and amortization expenses incurred at the corporate level were $0.1 million for both the three months ended November 30, 2024 and November 30, 2023, and as a percentage of sales were both 0.2%, respectively.

Other costs were $9.3 million for the three months ended November 30, 2024 compared to $7.4 million for the three months ended November 30, 2023, representing an increase of $1.9 million, or 25.5%.

The increase was primarily driven by an increase in costs related to the sixteen new restaurants that opened subsequent to November 30, 2023.

As a percentage of sales, other costs remained consistent at 14.5% in the three months ended November 30, 2024 and November 30, 2023.

General and administrative expenses.

General and administrative expenses were $25.6 million for the nine months ended May 31, 2024 compared to $20.8 million for the nine months ended May 31, 2023, representing an increase of $4.8 million, or 23.4%.

This increase was primarily due to increases in compensation related costs of $1.9 million due to additional headcount, $1.4 million in professional fees, $0.8 million in litigation accrual, $0.4 million in travel expenses and $0.3 in accounts with differences under $0.1 million.

As a percentage of sales, general and administrative expenses decreased to 14.9% in the nine months ended May 31, 2024 from 15.7% in the nine months ended May 31, 2023, primarily driven by leverage benefits from the increase in sales.

General and administrative expenses were $8.7 million for the three months ended November 30, 2024 compared to $8.6 million for the three months ended November 30, 2023, representing an increase of $0.1 million, or 1.4%.

The increase in general and administrative expenses was primarily due to compensation-related costs of $0.4 million due to additional headcount, which was partially offset by decreases of $0.2 million in professional fees and $0.2 million in litigation expenses.

As a percentage of sales, general and administrative expenses decreased to 13.5% in the three months ended November 30, 2024 as compared to 16.7% in the three months ended November 30, 2023, primarily driven by leveraged benefits from the increase in sales.

Interest expense.

Interest expense was $35 thousand for the nine months ended May 31, 2024 compared to $53 thousand for the nine months ended May 31, 2023.

Interest expense was $13 thousand for the three months ended November 30, 2024 compared to $8 thousand for the three months ended November 30, 2023, respectively.

Interest income.

Interest income was $2.3 million for the nine months ended May 31, 2024 compared to $0.6 million for the nine months ended May 31, 2023.

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.

Interest income was $565 thousand for the three months ended November 30, 2024 compared to $840 thousand for the three months ended November 30, 2023 due to lower invested cash during the three months ended November 30, 2024.

Income tax expense.

Income tax expense was $148 thousand for the nine months ended May 31, 2024 compared to $66 thousand for the nine months ended May 31, 2023.

Income tax expense was $39 thousand for the three months ended November 30, 2024 compared to an income tax expense of $38 thousand for the three months ended November 30, 2023.

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

Income Taxes” in the Notes to Condensed Financial Statements.

Key Performance Indicators

In assessing the performance of our business, we consider a variety of financial and performance measures.

The key measures for determining how our business is performing include sales, EBITDA, Adjusted EBITDA, Restaurant-level Operating Profit, Restaurant-level Operating Profit margin, 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 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.

EBITDA and Adjusted EBITDA

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

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

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

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

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.

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.

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In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Our computation of Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA and Adjusted EBITDA margin in the same fashion.

Our computation of Adjusted EBITDA and Adjusted EBITDA margin

may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA and Adjusted EBITDA margin in the same fashion.

Because of these limitations, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

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

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

(amounts in thousands)

Net (loss) income

Interest income, net

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Non-cash lease expense (b)

Litigation accrual (c)

Litigation (c)

Adjusted EBITDA

Adjusted EBITDA margin

(a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in other costs and of corporate-level stock-based compensation included in general and administrative expenses in the statements of operations and comprehensive income (loss).

(a) Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in labor and related costs and of corporate-level stock-based compensation included in general and administrative expenses in the statements of operations and comprehensive loss.

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

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

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

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

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

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

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

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

and Restaurant-level Operating Profit (Loss) margin do not accrue directly to the benefit of stockholders because of corporate-level expenses excluded from such measures.

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

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

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

(amounts in thousands)

Operating (loss) income

Operating loss

Depreciation and amortization expenses

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Restaurant-level operating profit

Operating (loss) income margin

Operating loss margin

Restaurant-level operating profit margin

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

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Comparable restaurant sales performance refers to the change in year-over-year sales for the comparable restaurant base.

We include restaurants in the comparable restaurant base that have been in operation for at least 18 months prior to the start of the accounting period presented due to new restaurants experiencing a period of higher sales upon opening.

We include restaurants in the comparable restaurant base that have been in operation for at least 18 full calendar months prior to the start of the accounting period presented due to new restaurants experiencing a period of higher sales upon opening.

For restaurants that were temporarily closed for consecutive days, which primarily occurs during renovations, the comparative period was also adjusted.

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The following table shows the comparable restaurant sales performance:

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Comparable restaurant sales performance (%)

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The following table shows the growth in our restaurant base:

Three Months Ended May 31,

Nine Months Ended May 31,

Three Months Ended November 30,

Restaurant activity:

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

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.

On November 13, 2024, we completed an underwritten public offering of common stock pursuant to our universal shelf registration statement on Form S-3, selling an aggregate of 800,328 shares of Class A common stock, including the exercise in full of the underwriters’ option to purchase 104,390 additional shares, at the price of $85.00 per share less an underwriting discount of $4.25 per share.

We received aggregate net proceeds of $64.4 million after deducting the underwriting discounts and commissions and offering expenses payable by us.

The proceeds will be used for general corporate purposes, including capital expenditures, working capital, and

other business purposes.

We made no payments 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, 2024, we had no borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.

As of May 31, 2024, 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.

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 the our common stock or to their associates, or to our affiliates.

During the three months ended November 30, 2024, we had no borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining.

As of November 30, 2024, 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.

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, cash equivalents, 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.

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

We also maintain a Revolving Credit Agreement with Kura Japan, which is currently set to expire on April 10, 2025.

Summary of Cash Flows

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

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

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

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

Nine Months Ended May 31,

Three Months Ended November 30,

Statement of Cash Flow data:

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Cash Flows Provided by Operating Activities

Net cash provided by operating activities during the nine months ended May 31, 2024 was $14.9 million, primarily due to a net loss of $3.6 million, non-cash charges of $8.6 million for depreciation and amortization, $3.2 million for stock-based compensation, and $3.4 million in non-cash lease expense, and net cash outflows of $3.4 million from changes in operating assets and liabilities.

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 three months ended November 30, 2024 was $4.4 million, primarily due to a net loss of $1.0 million, non-cash charges of $3.2 million for depreciation and amortization, $1.1 million for stock-based compensation, and $1.3 million in non-cash lease expense, and net cash outflows of $0.3 million from changes in operating assets and liabilities.

Net cash provided by operating activities during the three months ended November 30, 2023 was $2.4 million, primarily due to a net loss of $2.0 million, non-cash charges of $2.6 million for depreciation and amortization, $1.0 million for stock-based compensation, and $1.1 million in non-cash lease expense, and net cash outflows of $0.2 million from changes in operating assets and liabilities.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the nine months ended May 31, 2024 was $27.3 million, primarily due to $3.3 million in purchases of short-term investments, $34.0 million in purchases of property and equipment and $0.2 million in purchases of liquor licenses offset by $10.5 million of redemption of short-term investments.

The increase in purchases of property and equipment in the nine months ended May 31, 2024 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 three months ended November 30, 2024 was $12.5 million, primarily due to $11.6 million in purchases of property and equipment and $0.8 million in purchases of liquor licenses.

The increase in purchases of property and equipment in the three months ended November 30, 2024 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, 2023 was $8.0 million, primarily due to $3.0 million in purchases of short-term investments, $9.4 million in purchases of property and equipment and $0.1 million in purchases of liquor licenses offset by $4.5 million of redemption of short-term investments.

The increase in purchases of property and equipment in the three months ended November 30, 2023 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 Financing Activities

Net cash provided by financing activities during the nine months ended May 31, 2024 was $2.0 million and is primarily due to $2.3 million of proceeds from exercise of stock options offset by $0.2 million in taxes paid on vested RSUs.

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 provided by financing activities during the three months ended November 30, 2024 was $64.8 million and is primarily due to aggregate net proceeds from the issuance of stock of $64.4 million after deducting the underwriting discounts and commissions and offering expenses payable and $0.5 million of proceeds from exercise of stock options.

Net cash provided by financing activities during the three months ended November 30, 2023 was $56 thousand and is primarily due to $110 thousand of proceeds from exercise of stock options offset by $54 thousand in repayments of principal on finance leases.

Material Cash Requirements

As of May 31, 2024, we had $13.0 million in contractual obligations relating to the construction of new restaurants and purchase commitments for goods related to restaurant operations.

As of November 30, 2024, we had $9.7 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.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” of our Annual Report on Form 10‑K for the fiscal year ended August 31, 2024 for a discussion of our critical accounting policies and estimates.

Jumpstart Our Business Startups Act of 2012

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Subject to certain conditions set forth in the JOBS Act, we are also eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

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

We will continue to be an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which our annual gross revenues exceed $1.235 billion during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering, or August 31, 2024.

Quantitative and Qualitati ve Disclosures About Market Risk.

There have been no material changes to our market risk during the nine months ended May 31, 2024.

There have been no material changes to our market risk during the three months ended November 30, 2024.

For a discussion of our exposure to market risk, refer to our market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2024 Form 10-K.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis