KURA SUSHI USA, INC. 10-Q

Item 1. Financial Statements. Kura Sushi USA, Inc. Condensed Balance Sheets (amounts in thousands, except for par value) (Unaudited) May 31, 2025 August 31, 2024 Assets Current assets: Cash and cash equivalents $ 47,132 $ 50,986 Short-term investments 13,371 — Accounts and other receivables 5,123 4,573 Inventories 2,293 2,219 Due from affiliate 13 166 Prepaid expenses and other current assets 4,094 3,391 Total current assets 72,026 61,335 Non-current assets: Property and equipment – net 164,909 138,589 Operating lease right-of-use assets 143,717 123,682 Long-term investments 32,534 — Deposits and other assets 6,187 4,916 Total assets $ 419,373 $ 328,522 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 9,304 $ 8,977 Accrued expenses and other current liabilities 3,343 4,261 Salaries and wages payable 9,925 8,310 Operating lease liabilities – current 13,279 10,674 Due to affiliate 597 373 Sales tax payable 2,100 1,904 Total current liabilities 38,548 34,499 Non-current liabilities: Operating lease liabilities – non-current 152,757 130,677 Other liabilities 1,064 808 Total liabilities 192,369 165,984 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, 11,088 and 10,253 shares issued and outstanding as of May 31, 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 May 31, 2025 and August 31, 2024 1 1 Additional paid-in capital 264,165 195,515 Accumulated deficit ( 37,165 ) ( 32,988 ) Accumulated other comprehensive loss ( 8 ) — Total stockholders' equity 227,004 162,538 Total liabilities and stockholders' equity $ 419,373 $ 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 Income (Loss) (amounts in thousands, except for per share data) (Unaudited) Three Months Ended May 31, Nine Months Ended May 31, 2025 2024 2025 2024 Sales $ 73,965 $ 63,082 $ 203,315 $ 171,848 Restaurant operating costs: Food and beverage costs 20,928 18,391 58,225 50,691 Labor and related costs 24,478 20,534 68,306 55,906 Occupancy and related expenses 5,538 4,318 15,391 12,179 Depreciation and amortization expenses 3,450 3,124 9,827 8,294 Other costs 10,883 8,920 29,004 24,526 Total restaurant operating costs 65,277 55,287 180,753 151,596 General and administrative expenses 8,741 8,857 28,459 25,634 Depreciation and amortization expenses 109 107 328 318 Total operating expenses 74,127 64,251 209,540 177,548 Operating loss ( 162 ) ( 1,169 ) ( 6,225 ) ( 5,700 ) Other expense (income): Interest expense 30 15 56 35 Interest income ( 812 ) ( 686 ) ( 2,236 ) ( 2,280 ) Income (loss) before income taxes 620 ( 498 ) ( 4,045 ) ( 3,455 ) Income tax expense 55 60 132 148 Net income (loss) $ 565 $ ( 558 ) $ ( 4,177 ) $ ( 3,603 ) Net income (loss) per Class A and Class B shares Basic $ 0.05 $ ( 0.05 ) $ ( 0.35 ) $ ( 0.32 ) Diluted $ 0.05 $ ( 0.05 ) $ ( 0.35 ) $ ( 0.32 ) Weighted average Class A and Class B shares outstanding Basic 12,086 11,188 11,855 11,167 Diluted 12,311 11,188 11,855 11,167 Other comprehensive income (loss): Unrealized loss on short-term investments $ ( 8 ) $ ( 76 ) $ ( 8 ) $ ( 43 ) Comprehensive income (loss) $ 557 $ ( 634 ) $ ( 4,185 ) $ ( 3,646 ) 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 Accumulated Total Class A Class B Paid-in Accumulated Other Comprehensive Stockholders' Shares Amount Shares Amount Capital Deficit Loss 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 Stock-based compensation — — — — 1,356 — — 1,356 Employee stock plan 3 — — — 46 — — 46 Net income — — — — — 565 — 565 Other comprehensive loss — — — — — — ( 8 ) ( 8 ) Balances as of May 31, 2025 11,088 $ 11 1,000 $ 1 $ 264,165 $ ( 37,165 ) $ ( 8 ) $ 227,004 Common Stock Additional Accumulated Total Class A Class B Paid-in Accumulated Other Comprehensive Stockholders' Shares Amount Shares Amount Capital Deficit Income/(Loss) 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 Stock-based compensation — — — — 1,236 — — 1,236 Employee stock plan 17 — — — 544 — — 544 Net loss — — — — — ( 558 ) — ( 558 ) Other comprehensive loss — — — — — — ( 76 ) ( 76 ) Balances as of May 31, 2024 10,243 $ 10 1,000 $ 1 $ 194,202 $ ( 27,787 ) $ — $ 166,426 3 The accompanying notes are an integral part of these condensed financial statements. 4 Kura Sushi USA, Inc. Condensed Stateme nts of Cash Flows (amounts in thousands) (Unaudited) Nine Months Ended May 31, 2025 2024 Cash flows from operating activities Net loss $ ( 4,177 ) $ ( 3,603 ) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 10,155 8,612 Stock-based compensation, net of amounts capitalized 3,501 3,169 Bond premium amortization 284 — Changes in operating assets and liabilities: Accounts and other receivables ( 473 ) ( 587 ) Inventories ( 74 ) ( 385 ) Due from affiliate 153 104 Prepaid expenses and other current assets ( 298 ) 1,326 Deposits and other assets ( 261 ) 443 Accounts payable 343 11 Accrued expenses and other current liabilities ( 448 ) 1,485 Salaries and wages payable 1,615 1,001 Operating lease liabilities and assets 4,851 3,410 Due to affiliate 6 ( 23 ) Sales tax payable 161 ( 20 ) Net cash provided by operating activities 15,338 14,943 Cash flows from investing activities Payments for property and equipment ( 36,698 ) ( 33,977 ) Payments for initial direct costs ( 277 ) ( 309 ) Purchases of liquor licenses ( 1,011 ) ( 219 ) Purchases of investments ( 70,197 ) ( 3,251 ) Maturities and redemptions of investments 24,000 10,499 Net cash used in investing activities ( 84,183 ) ( 27,257 ) Cash flows from financing activities Repayment of principal on finance leases ( 49 ) ( 60 ) Taxes paid on vested restricted stock awards ( 256 ) ( 217 ) Proceeds from exercise of stock options 942 2,299 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 64,991 2,022 Decrease in cash and cash equivalents ( 3,854 ) ( 10,292 ) Cash and cash equivalents, beginning of period 50,986 69,697 Cash and cash equivalents, end of period $ 47,132 $ 59,405 Supplemental disclosures of cash flow information Cash paid for income taxes $ 231 $ 282 Noncash investing activities Acquisition of finance leases $ 114 $ — Amounts unpaid for purchases of property and equipment $ 2,574 $ 1,706 Stock-based compensation capitalized to property and equipment, net $ 110 $ 181 The accompanying notes are an integral part of these condensed financial statements. 5 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, persons owning 10 % or more of the Company’s common stock, 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 6 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. Investments The Company invests in a range of securities, including certificates of deposit, Treasury bills, and U.S. Government Agency debt securities. Investment classification is determined based on the accounting guidance as available for sale or held to maturity. Certificates of deposit and Treasury bills are classified as available-for-sale debt securities and measured at fair value, with unrealized gains or losses recorded in other comprehensive income (loss). U.S. Government Agency debt securities are classified as held-to-maturity and measured at amortized cost. The classification of these investments as either short-term or long-term is based on their original maturity dates, with short-term investments having maturities greater than three months but less than one year, and long-term investments having maturities greater than one year. As of May 31, 2025 and August 31, 2024, short-term investments were $ 13.4 million and no ne, respectively, of which $ 0.5 million consists of cash that is restricted to funding a collateral account relating to a standby letter of credit. Realized gains or losses are determined on a specific identification basis. As of May 31, 2025 and August 31, 2024, long-term investments were $ 32.5 million and no ne, respectively. As of May 31, 2025, the Company’s holds a portfolio of held to maturity debt securities with an amortized cost basis of $ 32.5 million , a fair value of $ 32.4 million and gross unrealized holding gains 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 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 its 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 its 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 its 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 May 31, 2025 August 31, 2024 (amounts in thousands) Lease receivables $ 1,778 $ 1,701 Credit card and other receivables 3,345 2,872 Total accounts and other receivables $ 5,123 $ 4,573 7 Property and Equipment - net May 31, 2025 August 31, 2024 (amounts in thousands) Leasehold improvements $ 123,702 $ 100,345 Furniture and fixtures 71,516 57,059 Computer equipment 4,467 3,714 Vehicles 343 243 Software 1,017 1,017 Construction in progress 12,642 15,080 Property and equipment – gross 213,687 177,458 Less: accumulated depreciation and amortization ( 48,778 ) ( 38,869 ) Total property and equipment – net $ 164,909 $ 138,589 Depreciation and amortization expense for property and equipment was $ 3.6 million and $ 3.2 million for the three months ended May 31, 2025 and May 31, 2024 , respectively, and was $ 10.2 milli on and $ 8.6 million for the nine months ended May 31, 2025 and May 31, 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 considered 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 income (loss) are as follows: Three Months Ended May 31, Nine Months Ended May 31, 2025 2024 2025 2024 (amounts in thousands) Operating lease cost Classification Operating lease cost Occupancy and related expenses, other costs and general and administrative expenses $ 4,285 $ 3,380 $ 12,120 $ 9,678 Variable lease cost Occupancy and related expenses, and general and administrative expenses 1,271 992 3,292 2,567 Total operating lease cost $ 5,556 $ 4,372 $ 15,412 $ 12,245 Supplemental disclosures of cash flow information related to leases are as follows: Nine Months Ended May 31, 2025 2024 (amounts in thousands) Operating cash flows paid for operating lease liabilities $ 10,177 $ 7,769 Operating right-of-use assets obtained in exchange for new operating lease liabilities $ 23,600 $ 17,774 As of May 31, 2025, the Company had an additional $ 44.4 million of operating lease liabilities related to restaurants for which the Company had not yet taken possession. Subsequent to May 31, 2025, the Company entered into one additional operating lease related to a restaurant for which the Company has not yet taken possession. The lease liabilities associated with the lease are $ 5.8 million and are expected to commence in fiscal year 2026 with lease terms of up to 20 years. 8 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 income (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: May 31, 2025 August 31, 2024 (amounts in thousands) Due from affiliate $ 13 $ 166 Due to affiliate $ 597 $ 373 Reimbursements and other payments by the Company to Kura Japan were as follows: Three Months Ended May 31, Nine Months Ended May 31 2025 2024 2025 2024 (amounts in thousands) Related party transactions: Expatriate salaries expense $ 34 $ 33 $ 90 $ 124 Royalty payments 370 314 1,017 859 Travel and other administrative expenses 3 — 46 6 Purchases of equipment 1,646 374 4,058 1,811 Total related party transactions $ 2,053 $ 721 $ 5,211 $ 2,800 Reimbursements by Kura Japan to the Company were $ 60 thousand and $ 42 thousand for the three months ended May 31, 2025 and May 31, 2024, respectively and were $ 290 thousand and $ 264 tho usand for the nine months ended May 31, 2025 and May 31, 2024, respectively. The reimbursements were primarily fo r travel, professional fees and other administrative expenses. 9 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 Granted 8,484 $ 58.06 Exercised ( 2,928 ) $ 15.62 Cancelled/forfeited ( 6,916 ) $ 67.38 Outstanding — May 31, 2025 613,123 $ 43.49 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 Granted — — Vested — — Cancelled/forfeited ( 731 ) $ 85.15 Outstanding — May 31, 2025 55,422 $ 82.06 10 In the second quarter of fiscal 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 income (loss) is as follows: Three Months Ended May 31, Nine Months Ended May 31, 2025 2024 2025 2024 (amounts in thousands) Restaurant-level stock-based compensation included in labor and related costs $ 230 $ 194 $ 608 $ 497 Corporate-level stock-based compensation included in general and administrative expenses 1,063 1,003 2,892 2,672 Stock-based compensation, net of amounts capitalized 1,293 1,197 3,500 3,169 Amount capitalized to property and equipment - net 63 39 110 181 Total stock-based compensation $ 1,356 $ 1,236 $ 3,610 $ 3,350 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 on the date such advance is made. There are no financial covenants under the Revolving Credit Agreement with which the Company must comply. 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. As of May 31, 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.” Note 7 . Income (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. 11 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, 2025 2024 2025 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 income (loss) attributable to common stockholders $ 518 $ 47 $ ( 508 ) $ ( 50 ) $ ( 3,825 ) $ ( 352 ) $ ( 3,280 ) $ ( 323 ) Weighted average common shares outstanding – basic 11,086 1,000 10,188 1,000 10,855 1,000 10,167 1,000 Dilutive effect of stock-based awards 225 — — — — — — — Weighted average common shares outstanding – diluted 11,311 1,000 10,188 1,000 10,855 1,000 10,167 1,000 Net income (loss) per share attributable to common stockholders – basic $ 0.05 $ 0.05 $ ( 0.05 ) $ ( 0.05 ) $ ( 0.35 ) $ ( 0.35 ) $ ( 0.32 ) $ ( 0.32 ) Net income (loss) per share attributable to common stockholders – diluted $ 0.05 $ 0.05 $ ( 0.05 ) $ ( 0.05 ) $ ( 0.35 ) $ ( 0.35 ) $ ( 0.32 ) $ ( 0.32 ) 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, RSUs and PSUs. For the three months ended May 31, 2025, there were 286 thousand shares of common stock subject to outstanding employee stock options, RSUs and PSUs 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, 2025, there were 677 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 nine months ended May 31, 2024 , there were 662 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. 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 expensed $ 5.1 million related to these matters within general and administrative expenses in the condensed statements of operations and comprehensive income (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. On December 9, 2024, a former employee filed a putative class action complaint in the Superior Court of California in Los Angeles, individually and on behalf of others similarly situated, against the Company alleging certain violations of California labor laws. The complaint alleges various wage and hour violations under the California Labor Code and related statutes. Plaintiff has also served a Private Attorneys General Act (“PAGA”) notice for the same alleged wage and hour violations. The Company will continue to vigorously defend its position in this matter. The Company is currently unable to estimate the range of possible losses associated with this proceeding. 12 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 $ 55 thousand and $ 60 thousand for the three months ended May 31, 2025 and May 31, 2024, respectively and income tax expense of $ 132 thousand and $ 148 thousand for the nine months ended May 31, 2025 and May 31, 2024, respectively. The Company’s effective tax rates for the three and nine months ended May 31, 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 differences related to the tax credit for a portion of the Social Security and Medicare taxes (FICA taxes) paid on employer tips. 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 May 31, 2025 was appropriate. 13 Note 10. Fair Value Measurements The following table sets forth the Company’s assets measured at fair value on a recurring basis as of May 31, 2025. Level 1 Level 2 Level 3 Total (amounts in thousands) Assets: Certificate of Deposit $ — $ 524 $ — $ 524 Treasury bills 12,847 — — 12,847 U.S. Government Agency debt securities — 32,378 — 32,378 Total assets at fair value $ 12,847 $ 32,902 $ — $ 45,749 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 Certificate of Deposit and U.S. Government Agency debt securities are valued 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. 14