KURA SUSHI USA, INC. 10-Q

Item 1. Financial Statements. Kura Sushi USA, Inc. Condensed Balance Sheets (amounts in thousands, except par value) (Unaudited) February 28, 2025 August 31, 2024 Assets Current assets: Cash and cash equivalents $ 85,171 $ 50,986 Accounts and other receivables 3,704 4,573 Inventories 2,354 2,219 Due from affiliate 14 166 Prepaid expenses and other current assets 3,450 3,391 Total current assets 94,693 61,335 Non-current assets: Property and equipment – net 154,077 138,589 Operating lease right-of-use assets 140,800 123,682 Long-term investments 15,106 — Deposits and other assets 5,696 4,916 Total assets $ 410,372 $ 328,522 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 7,190 $ 8,977 Accrued expenses and other current liabilities 5,226 4,261 Salaries and wages payable 8,022 8,310 Operating lease liabilities – current 12,569 10,674 Due to affiliate 816 373 Sales tax payable 1,642 1,904 Total current liabilities 35,465 34,499 Non-current liabilities: Operating lease liabilities – non-current 148,832 130,677 Other liabilities 1,030 808 Total liabilities 185,327 165,984 Commitments and contingencies (Note 8) Stockholders' equity: Preferred stock, $ 0.001 par value; 1,000 shares authorized, no shares issued or outstanding — — Class A common stock, $ 0.001 par value; 50,000 shares authorized, 11,085 and 10,253 shares issued and outstanding as of February 28, 2025 and August 31, 2024, respectively 11 10 Class B common stock, $ 0.001 par value; 10,000 shares authorized, 1,000 shares issued and outstanding as of February 28, 2025 and August 31, 2024 1 1 Additional paid-in capital 262,763 195,515 Accumulated deficit ( 37,730 ) ( 32,988 ) Total stockholders' equity 225,045 162,538 Total liabilities and stockholders' equity $ 410,372 $ 328,522 The accompanying notes are an integral part of these condensed financial statements. 1 Kura Sushi USA, Inc. Condensed Statements of Operations and Comprehensive Loss (amounts in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024 Sales $ 64,894 $ 57,291 $ 129,350 $ 108,766 Restaurant operating costs: Food and beverage costs 18,630 16,935 37,297 32,300 Labor and related costs 22,593 18,924 43,828 35,334 Occupancy and related expenses 5,099 3,953 9,853 7,861 Depreciation and amortization expenses 3,286 2,694 6,377 5,170 Other costs 8,780 8,200 18,121 15,644 Total restaurant operating costs 58,388 50,706 115,476 96,309 General and administrative expenses 10,985 8,168 19,718 16,777 Depreciation and amortization expenses 110 107 219 211 Total operating expenses 69,483 58,981 135,413 113,297 Operating loss ( 4,589 ) ( 1,690 ) ( 6,063 ) ( 4,531 ) Other expense (income): Interest expense 13 12 26 20 Interest income ( 859 ) ( 754 ) ( 1,424 ) ( 1,594 ) Loss before income taxes ( 3,743 ) ( 948 ) ( 4,665 ) ( 2,957 ) Income tax expense 38 50 77 88 Net loss $ ( 3,781 ) $ ( 998 ) $ ( 4,742 ) $ ( 3,045 ) Net loss per Class A and Class B shares Basic $ ( 0.31 ) $ ( 0.09 ) $ ( 0.40 ) $ ( 0.27 ) Diluted $ ( 0.31 ) $ ( 0.09 ) $ ( 0.40 ) $ ( 0.27 ) Weighted average Class A and Class B shares outstanding Basic 12,073 11,179 11,737 11,162 Diluted 12,073 11,179 11,737 11,162 Other comprehensive income: Unrealized gain on short-term investments $ — $ 30 $ — $ 33 Comprehensive loss $ ( 3,781 ) $ ( 968 ) $ ( 4,742 ) $ ( 3,012 ) The accompanying notes are an integral part of these condensed financial statements. 2 Kura Sushi USA, Inc. Condensed Statements of Stockholders’ Equity (amounts in thousands) (Unaudited) Common Stock Additional Total Class A Class B Paid-in Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Equity Balances as of August 31, 2024 10,253 $ 10 1,000 $ 1 $ 195,515 $ ( 32,988 ) $ 162,538 Stock-based compensation — — — — 1,152 — 1,152 Employee stock plan 11 — — — 493 — 493 Issuance of common stock in connection with follow-on public offering, net of underwriter discounts and issuance costs 800 1 — — 64,354 — 64,355 Net loss — — — — — ( 961 ) ( 961 ) Balances as of November 30, 2024 11,064 $ 11 1,000 $ 1 $ 261,514 $ ( 33,949 ) $ 227,577 Stock-based compensation — — — — 1,102 — 1,102 Employee stock plan 21 — — — 147 — 147 Net loss — — — — — ( 3,781 ) ( 3,781 ) Balances as of February 28, 2025 11,085 $ 11 1,000 $ 1 $ 262,763 $ ( 37,730 ) $ 225,045 Common Stock Additional Accumulated Total Class A Class B Paid-in Accumulated Other Comprehensive Stockholders' Shares Amount Shares Amount Capital Deficit Income Equity Balances as of August 31, 2023 10,147 $ 10 1,000 $ 1 $ 188,771 $ ( 24,184 ) $ 43 $ 164,641 Stock-based compensation — — — — 1,034 — — 1,034 Employee stock plan 8 — — — 110 — — 110 Net loss — — — — — ( 2,047 ) — ( 2,047 ) Other comprehensive income — — — — — — 3 3 Balances as of November 30, 2023 10,155 $ 10 1,000 $ 1 $ 189,915 $ ( 26,231 ) $ 46 $ 163,741 Stock-based compensation — — — — 1,080 — — 1,080 Employee stock plan 71 — — — 1,427 — — 1,427 Net loss — — — — — ( 998 ) — ( 998 ) Other comprehensive income — — — — — — 30 30 Balances as of February 29, 2024 10,226 $ 10 1,000 $ 1 $ 192,422 $ ( 27,229 ) $ 76 $ 165,280 The accompanying notes are an integral part of these condensed financial statements. 3 Kura Sushi USA, Inc. Condensed Stateme nts of Cash Flows (amounts in thousands) (Unaudited) Six Months Ended February 28, 2025 February 29, 2024 Cash flows from operating activities Net loss $ ( 4,742 ) $ ( 3,045 ) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 6,596 5,381 Stock-based compensation, net of amounts capitalized 2,207 1,972 Bond premium amortization 155 — Changes in operating assets and liabilities: Accounts and other receivables 1,020 ( 176 ) Inventories ( 135 ) ( 126 ) Due from affiliate 152 72 Prepaid expenses and other current assets 375 834 Deposits and other assets 112 32 Accounts payable ( 829 ) ( 946 ) Accrued expenses and other current liabilities 1,454 829 Salaries and wages payable ( 288 ) ( 85 ) Operating lease liabilities and assets 2,915 1,704 Due to affiliate ( 6 ) ( 12 ) Sales tax payable ( 363 ) ( 216 ) Net cash provided by operating activities 8,623 6,218 Cash flows from investing activities Payments for property and equipment ( 23,109 ) ( 22,845 ) Payments for initial direct costs ( 135 ) ( 174 ) Purchases of liquor licenses ( 891 ) ( 120 ) Purchases of investments ( 25,261 ) ( 3,500 ) Maturities and redemptions of investments 10,000 5,999 Net cash used in investing activities ( 39,396 ) ( 20,640 ) Cash flows from financing activities Repayment of principal on finance leases ( 36 ) ( 44 ) Taxes paid on vested restricted stock awards ( 256 ) ( 368 ) Proceeds from exercise of stock options 896 1,905 Proceeds from the follow-on public offering, net of discounts and commissions 64,626 — Payments of costs related to the follow-on offering ( 272 ) — Net cash provided by financing activities 64,958 1,493 Increase/ (decrease) in cash and cash equivalents 34,185 ( 12,929 ) Cash and cash equivalents, beginning of period 50,986 69,697 Cash and cash equivalents, end of period $ 85,171 $ 56,768 Supplemental disclosures of cash flow information Cash paid for income taxes $ 34 $ 112 Noncash investing activities Acquisition of finance leases $ 114 $ 28 Amounts unpaid for purchases of property and equipment $ 1,899 $ 2,394 Stock-based compensation capitalized to property and equipment, net $ 47 $ 142 The accompanying notes are an integral part of these condensed financial statements. 4 Kura Sushi USA, Inc. Notes to Conden sed Financial Statements (Unaudited) Note 1. Organization and Basis of Presentation Kura Sushi USA, Inc. is a technology-enabled Japanese restaurant concept that provides guests with a distinctive dining experience by serving authentic Japanese cuisine through an engaging revolving sushi service model, which the Company refers to as the “Kura Experience.” Kura Sushi encourages healthy lifestyles by serving freshly prepared Japanese cuisine using high-quality ingredients that are free from artificial seasonings, sweeteners, colorings, and preservatives. Kura Sushi aims to make quality Japanese cuisine accessible to its guests across the United States through affordable prices and an inviting atmosphere. “Kura Sushi USA,” “Kura Sushi,” “Kura,” “our” and the “Company” refer to Kura Sushi USA, Inc. unless expressly indicated or the context otherwise requires. Follow-On Offering On November 13, 2024, 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 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. The Company received aggregate net proceeds of $ 64.4 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. Basis of Presentation The accompanying unaudited condensed financial statements (the “Condensed Financial Statements”) have been prepared by the Company in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. As such, these Condensed Financial Statements should be read in conjunction with the Company’s audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended August 31, 2024. The accounting policies followed by the Company are set forth in Part II, Item 8, Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Financial Statements included in the Company’s Annual Report on Form 10‑K for the fiscal year ended August 31, 2024. In the opinion of management, all adjustments necessary to fairly state the Condensed Financial Statements have been made. All such adjustments are of a normal, recurring nature. The results of operations for interim periods are not necessarily indicative of results to be expected for the fiscal year ending August 31, 2025 or for any other future annual or interim period. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. Fiscal Year The Company’s fiscal year begins on September 1 and ends on August 31, and references made to “fiscal year 2025” and “fiscal year 2024” refer to the Company’s fiscal years ending August 31, 2025 and ended August 31, 2024, respectively. Use of Estimates Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. Significant items subject to such estimates include asset retirement obligations, stock-based compensation, the useful lives of assets, the assessment of the recoverability of long-lived assets, and income taxes. The Company evaluates its estimates and 5 assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions. Long-Term Investments Long-term investments consist of long-term U.S. Government Agency debt securities. The Company considers all investments with an original maturity date greater than one year as long-term investments. The carrying value of the long-term investments is equivalent to their amortized cost basis. As of February 28, 2025 and August 31, 2024, long-term investments were $ 15.1 million and no ne, respectively. The Company classifies the long-term U.S. Government Agency debt securities as held-to-maturit y. As of February 28, 2025, the Company’s holds a portfolio of held to maturity debt securities with an amortized cost basis of $ 15.1 million , a fair value of $ 15.0 million and gross unrealized holding losses of $ 0.1 million. Based on the evaluation of credit risk factors guaranteed by the U.S. government, the Company has concluded that an allowance for credit losses is unnecessary for its long-term investments. Recently Issued Accounting Pronouncements In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Disaggregation of Income Statement Expenses”, which requires public companies to disaggregate key expense categories such as inventory purchases, employee compensation and depreciation in their financial statements. In January 2025, the FASB issued ASU 2025-01 “Income Statement-Reporting Comprehensive Income- Expense Disaggregation Disclosures- Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company expects to adopt the guidance in our annual report on Form 10-K for the fiscal year ending August 31, 2028. The Company is currently evaluating the effects of this pronouncement on its financial statements and expects the update to result in additional disclosures. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which requires greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid and effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued. The amendments should be applied on a prospective basis although retrospective application is permitted. The Company expects to adopt the guidance in our annual report on Form 10-K for the fiscal year ending August 31, 2026. The Company is currently evaluating the effects of this pronouncement on its financial statements and expects the update to result in additional disclosures. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance in this update is effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company expects to adopt the guidance in our annual report on Form 10-K for the fiscal year ending August 31, 2025. The Company is currently evaluating the effects of this pronouncement on its financial statements and expects the update to result in additional disclosures. Note 2. Balance Sheet Components Accounts and Other Receivables February 28, 2025 August 31, 2024 (amounts in thousands) Lease receivables $ 1,853 $ 1,701 Credit card and other receivables 1,851 2,872 Total accounts and other receivables $ 3,704 $ 4,573 6 Property and Equipment - net February 28, 2025 August 31, 2024 (amounts in thousands) Leasehold improvements $ 117,611 $ 100,345 Lease assets 6,135 6,108 Furniture and fixtures 60,911 50,951 Computer equipment 4,286 3,714 Vehicles 273 243 Software 1,017 1,017 Construction in progress 9,211 15,080 Property and equipment – gross 199,444 177,458 Less: accumulated depreciation and amortization ( 45,367 ) ( 38,869 ) Total property and equipment – net $ 154,077 $ 138,589 Depreciation and amortization expense for property and equipment was $ 3.4 million and $ 2.8 million for the three months ended February 28, 2025 and February 29, 2024 , respectively, and was $ 6.6 milli on and $ 5.4 million for the six months ended February 28, 2025 and February 29, 2024 , respectively. Note 3. Leases The Company has operating and finance leases for its corporate offices, restaurant locations, office equipment, kitchen equipment and automobiles. The Company’s finance leases are not material. The Company’s leases have remaining lease terms of less than 1 year to 30 years, some of which include options to extend the leases. Lease related costs recognized in the condensed statements of operations and comprehensive loss are as follows: Three Months Ended Six Months Ended February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024 (amounts in thousands) Operating lease cost Classification Operating lease cost Occupancy and related expenses, other costs and general and administrative expenses $ 4,031 $ 3,237 $ 7,835 $ 6,298 Variable lease cost Occupancy and related expenses, and general and administrative expenses 1,030 724 2,021 1,575 Total operating lease cost $ 5,061 $ 3,961 $ 9,856 $ 7,873 Supplemental disclosures of cash flow information related to leases are as follows: Six Months Ended February 28, 2025 February 29, 2024 (amounts in thousands) Operating cash flows paid for operating lease liabilities $ 6,581 $ 4,954 Operating right-of-use assets obtained in exchange for new operating lease liabilities $ 19,496 $ 11,893 As of February 28, 2025, the Company had an additional $ 25.0 million of operating lease liabilities related to restaurants for which the Company had not yet taken possession. Subsequent to February 28, 2025, the Company entered into additional operating leases related to restaurants for which the Company has not yet taken possession. The lease liabilities associated with these leases are $ 22.6 million and expected to commence in fiscal year 2025 and 2026 with lease terms of up to 20 years. 7 Note 4. Related Party Transactions Kura Sushi, Inc. (“Kura Japan”) is the majority stockholder of the Company and is incorporated and headquartered in Japan. In August 2019, the Company entered into a Shared Services Agreement with Kura Japan, pursuant to which Kura Japan provides the Company with certain strategic, operational and other support services, including assigning certain employees to work for the Company as expatriates to provide support to the Company’s operations, sending its employees to the Company on a short-term basis to provide support for the opening of new restaurants or renovation of existing restaurants, and providing the Company with certain supplies, parts and equipment for use in the Company’s restaurants. In addition, the Company has agreed to continue to provide Kura Japan with certain translational support services and market research. In exchange for such services, supplies, parts and equipment, the parties pay fees to each other as set forth under the Shared Services Agreement. A right of setoff is not required; however, from time to time, either party will net settle transactions as needed. Purchases of administrative supplies, expatriate salaries and travel and other administrative expenses payable to Kura Japan are included in general and administrative expenses in the accompanying statements of operations and comprehensive loss. 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 the use of certain of Kura Japan’s intellectual property rights, including, but not limited to, Kura Japan’s trademarks for “Kura Sushi,” “Mr. Fresh” and “Kura Revolving Sushi Bar,” and patents for a food management system and the Mr. 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 condensed 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 (as amended, the “Revolving Credit Agreement”). For additional information, see “Note 6. Debt.” Balances with Kura Japan are as follows: February 28, 2025 August 31, 2024 (amounts in thousands) Due from affiliate $ 14 $ 166 Due to affiliate $ 816 $ 373 Reimbursements and other payments by the Company to Kura Japan were as follows: Three Months Ended Six Months Ended February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024 (amounts in thousands) Related party transactions: Expatriate salaries expense $ 27 $ 48 $ 56 $ 91 Royalty payments 325 287 647 545 Travel and other administrative expenses 1 — 43 5 Purchases of equipment 1,148 797 2,412 1,437 Total related party transactions $ 1,501 $ 1,132 $ 3,158 $ 2,078 Reimbursements by Kura Japan to the Company were $ 43 thousand and $ 65 thousand for the three months ended February 28, 2025 and February 29, 2024, respectively and were $ 230 thousand and $ 222 thousand for the six months ended February 28, 2025 and February 29, 2024, respectively. The reimbursements were primarily for travel, professional fees and other administrative expenses. 8 Note 5. Stock-based Compensation The following table summarizes the stock option activity under the Company’s 2018 Incentive Compensation Plan, as amended and restated (the “Stock Incentive Plan”): Options Outstanding Number of Shares Underlying Outstanding Options Weighted Average Exercise Price Per Share Outstanding — August 31, 2024 610,514 $ 41.11 Granted 2,195 $ 77.53 Exercised ( 11,006 ) $ 44.84 Cancelled/forfeited ( 5,919 ) $ 56.32 Outstanding — November 30, 2024 595,784 $ 41.03 Granted 38,457 $ 80.61 Exercised ( 13,581 ) $ 29.69 Cancelled/forfeited ( 6,177 ) $ 73.93 Outstanding — February 28, 2025 614,483 $ 43.42 The following table summarizes the restricted stock unit (“RSU”) activity under the Stock Incentive Plan: Number of Shares Underlying Outstanding RSU Weighted Average Grant Date Fair Value Outstanding — August 31, 2024 36,120 $ 84.01 Granted — — Vested — — Cancelled/forfeited ( 873 ) $ 81.89 Outstanding — November 30, 2024 35,247 $ 84.06 Granted 33,021 $ 80.00 Vested ( 10,499 ) $ 81.11 Cancelled/forfeited ( 1,616 ) $ 88.44 Outstanding — February 28, 2025 56,153 $ 82.10 During the three months ended February 28, 2025 , the Company granted 8,724 performance restricted stock units (“PSUs”) with a three-year performance vesting period and a weighted average grant date fair value of $ 80.00 . The total stock-based compensation recognized under the Stock Incentive Plan in the condensed statements of operations and comprehensive loss is as follows: Three Months Ended Six Months Ended February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024 (amounts in thousands) Restaurant-level stock-based compensation included in labor and related costs $ 199 $ 156 $ 378 $ 303 Corporate-level stock-based compensation included in general and administrative expenses 882 810 1,829 1,669 Stock-based compensation, net of amounts capitalized 1,081 966 2,207 1,972 Amount capitalized to property and equipment - net 21 114 47 142 Total stock-based compensation $ 1,102 $ 1,080 $ 2,254 $ 2,114 9 Note 6. Debt On April 10, 2020, the Company and Kura Japan entered into a Revolving Credit Agreement, as amended, establishing a $ 45.0 million revolving credit line for the Company. The maturity date for each advance is 60 months from the date of disbursement and the last day of the period of availability for advances is April 10, 2025. The Revolving Credit Note under the Revolving Credit Agreement has an interest rate for advances (made on or after April 10, 2021) fixed at 130 % of the Annual Compounding Long-Term Applicable Federal Rate (“AFR”) on the date such advance is made. There are no financial covenants under the Revolving Credit Agreement with which the Company must comply. As of February 28, 2025 and August 31, 2024, 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.” On April 4, 2025, the Company and Kura Japan entered into a Third Amendment to Revolving Credit Agreement (the “Third Amendment”) to extend the last day of the period of availability for the advances under the credit line from April 10, 2025 to April 10, 2028. In connection with the Third Amendment, the Revolving Credit Note under the Revolving Credit Agreement was also amended by incorporating the same amendments as provided under the Third Amendment. Note 7 . 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 loss for the year had 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 Six Months Ended February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024 Class A Class B Class A Class B Class A Class B Class A Class B (amounts in thousands, except per share data) Net loss attributable to common stockholders $ ( 3,468 ) $ ( 313 ) $ ( 909 ) $ ( 89 ) $ ( 4,338 ) $ ( 404 ) $ ( 2,772 ) $ ( 273 ) Weighted average common shares outstanding – basic 11,073 1,000 10,179 1,000 10,737 1,000 10,162 1,000 Dilutive effect of stock-based awards — — — — — — — — Weighted average common shares outstanding – diluted 11,073 1,000 10,179 1,000 10,737 1,000 10,162 1,000 Net loss per share attributable to common stockholders – basic $ ( 0.31 ) $ ( 0.31 ) $ ( 0.09 ) $ ( 0.09 ) $ ( 0.40 ) $ ( 0.40 ) $ ( 0.27 ) $ ( 0.27 ) Net loss per share attributable to common stockholders – diluted $ ( 0.31 ) $ ( 0.31 ) $ ( 0.09 ) $ ( 0.09 ) $ ( 0.40 ) $ ( 0.40 ) $ ( 0.27 ) $ ( 0.27 ) The Company computes basic loss per common share using net loss and the weighted average number of common shares outstanding during the period, and computes diluted loss per common share using net loss and the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include dilutive outstanding employee stock options and restricted stock units. For the three and six months ended February 28, 2025, there were 679 thousand shares of common stock subject to outstanding employee stock options, RSUs and PSUs that were excluded from the calculation of diluted loss per share because their inclusion would have been anti-dilutive. For the three and six months ended February 29, 2024 , there were 678 thousand shares of common stock subject to outstanding employee stock options and RSUs that were excluded from the calculation of diluted loss per share because their inclusion would have been anti-dilutive. 10 Note 8. Commitments and Contingencies On January 19, 2024, two former employees initiated arbitration against the Company. Subsequently, on February 26, 2024, three additional former employees initiated a separate arbitration against the Company. Both sets of claimants allege violations of the Fair Labor Standards Act (“FLSA”) and violations of certain Washington, D.C. wage laws. In both arbitrations, claimants purported to raise collective claims on behalf of other similarly situated employees and former employees. In August 2024, the Company settled the claims with these five former employees, as well as 58 other current and former employees asserting similar claims (some under the laws of Pennsylvania, Virginia and Massachusetts), for approximately $ 3.9 million. Since that time, other current and former employees have asserted claims under the FLSA and applicable state laws (including Pennsylvania, New Jersey and Massachusetts) through counsel. In October 2024, the Company agreed to settle those claims for approximately $ 1.2 million. The Company expens ed $ 5.1 million rela ted to these matters within general and administrative expenses in the condensed statements of operations and comprehensive loss and paid $ 3.9 million during the fiscal year ended August 31, 2024. The Company paid the remaining accrued liability of $ 1.2 million related to these matters in October 2024. In February 2025, the Company agreed to settle additional claims for approximately $ 2.1 million, which was paid in March 2025. The Company is involved from time to time in various legal proceedings that arise in the ordinary course of business, including but not limited to commercial disputes, environmental matters, employee related claims, intellectual property disputes and litigation in connection with transactions, including acquisitions and divestitures. In the opinion of management, the Company does not believe that such litigation, claims, and administrative proceedings will have a material adverse effect on its business, financial position, results of operations or cash flows. However, a significant increase in the number of these claims or an increase in amounts owing under successful claims, including the putative class action referenced above, could materially and adversely affect its business, financial condition, results of operations or cash flows. The Company records a liability when a loss is considered probable, and the amount can be reasonably estimated. Note 9. Income Taxes The Company recorded an income tax expense of $ 38 thousand and $ 50 thousand for the three months ended February 28, 2025 and February 29, 2024, respectively and income tax expense of $ 77 thousand and $ 88 thousand for the six months ended February 28, 2025 and February 29, 2024, respectively. The Company’s effective tax rates for the three and six months ended February 28, 2025 substantially differed from the federal statutory tax rate of 21 % primarily due to a valuation allowance for the Company’s deferred tax assets and permanent difference related to employer tip credit. 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. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. 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, 2025 was appropriate. 11 Note 10. Fair Value Measurements The following table sets forth the Company’s assets measured at fair value on a recurring basis as of February 28, 2025. Level 1 Level 2 Level 3 Total (amounts in thousands) Assets: U.S. Government Agency debt securities $ — $ 15,011 $ — $ 15,011 Total assets at fair value $ — $ 15,011 $ — $ 15,011 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 U.S. Government Agency debt securities are considered using Level 2 inputs 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. 12