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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-39012

 

KURA SUSHI USA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

26-3808434

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

17461 Derian Avenue, Suite 200

Irvine, California

92614

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (657) 333-4100

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.001 par value per share

 

KRUS

 

Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of April 4, 2022, the registrant had 8,719,421 shares of Class A common stock, $0.001 par value per share, outstanding and 1,000,050 shares of Class B common stock, $0.001 par value per share, outstanding.

 

 

 

 

 


 

Table of Contents

 

 

i


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Kura Sushi USA, Inc.

Condensed Balance Sheets

(amounts in thousands, except par value)

(Unaudited)

 

 

 

February 28, 2022

 

 

August 31, 2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,350

 

 

$

40,430

 

Accounts and other receivables

 

 

2,522

 

 

 

2,019

 

Inventories

 

 

880

 

 

 

733

 

Due from affiliate

 

 

11

 

 

 

329

 

Prepaid expenses and other current assets

 

 

6,278

 

 

 

13,957

 

Total current assets

 

 

46,041

 

 

 

57,468

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment – net

 

 

62,867

 

 

 

53,885

 

Operating lease right-of-use assets

 

 

72,341

 

 

 

64,158

 

Deposits and other assets

 

 

2,799

 

 

 

2,158

 

Total assets

 

$

184,048

 

 

$

177,669

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,770

 

 

$

4,920

 

Accrued expenses and other current liabilities

 

 

2,402

 

 

 

2,820

 

Salaries and wages payable

 

 

4,973

 

 

 

4,612

 

Finance leases – current

 

 

768

 

 

 

932

 

Operating lease liabilities – current

 

 

6,830

 

 

 

5,650

 

Due to affiliate

 

 

98

 

 

 

244

 

Sales tax payable

 

 

917

 

 

 

869

 

Total current liabilities

 

 

20,758

 

 

 

20,047

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Finance leases – non-current

 

 

221

 

 

 

546

 

Operating lease liabilities – non-current

 

 

74,001

 

 

 

65,834

 

Other liabilities

 

 

445

 

 

 

398

 

Total liabilities

 

 

95,425

 

 

 

86,825

 

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,

8,716 and 8,700 shares issued and outstanding as of February 28, 2022

and August 31, 2021, respectively

 

 

9

 

 

 

9

 

Class B common stock, $0.001 par value; 10,000 shares authorized,

1,000 shares issued and outstanding as of February 28, 2022

and August 31, 2021

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

116,689

 

 

 

115,756

 

Accumulated deficit

 

 

(28,076

)

 

 

(24,922

)

Total stockholders' equity

 

 

88,623

 

 

 

90,844

 

Total liabilities and stockholders' equity

 

$

184,048

 

 

$

177,669

 

 

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

 

1


 

 

Kura Sushi USA, Inc.

Condensed Statements of Operations

(amounts in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended February 28,

 

 

Six Months Ended February 28,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Sales

 

$

31,290

 

 

$

9,082

 

 

$

61,122

 

 

$

18,496

 

Restaurant operating costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage costs

 

 

9,376

 

 

 

3,175

 

 

 

18,333

 

 

 

6,228

 

Labor and related costs

 

 

10,342

 

 

 

2,061

 

 

 

20,052

 

 

 

6,421

 

Occupancy and related expenses

 

 

2,302

 

 

 

1,627

 

 

 

4,502

 

 

 

3,317

 

Depreciation and amortization expenses

 

 

1,267

 

 

 

1,002

 

 

 

2,438

 

 

 

1,929

 

Other costs

 

 

4,344

 

 

 

2,051

 

 

 

7,954

 

 

 

4,130

 

Total restaurant operating costs

 

 

27,631

 

 

 

9,916

 

 

 

53,279

 

 

 

22,025

 

General and administrative expenses

 

 

5,454

 

 

 

2,874

 

 

 

10,814

 

 

 

6,395

 

Depreciation and amortization expenses

 

 

83

 

 

 

94

 

 

 

171

 

 

 

169

 

Total operating expenses

 

 

33,168

 

 

 

12,884

 

 

 

64,264

 

 

 

28,589

 

Operating loss

 

 

(1,878

)

 

 

(3,802

)

 

 

(3,142

)

 

 

(10,093

)

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

22

 

 

 

53

 

 

 

47

 

 

 

87

 

Interest income

 

 

(24

)

 

 

(3

)

 

 

(50

)

 

 

(7

)

Loss before income taxes

 

 

(1,876

)

 

 

(3,852

)

 

 

(3,139

)

 

 

(10,173

)

Income tax expense

 

 

3

 

 

 

29

 

 

 

15

 

 

 

58

 

Net loss

 

$

(1,879

)

 

$

(3,881

)

 

$

(3,154

)

 

$

(10,231

)

Net loss per Class A and Class B shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.19

)

 

$

(0.46

)

 

$

(0.32

)

 

$

(1.22

)

Diluted

 

$

(0.19

)

 

$

(0.46

)

 

$

(0.32

)

 

$

(1.22

)

Weighted average Class A and Class B shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

9,712

 

 

 

8,379

 

 

 

9,711

 

 

 

8,363

 

Diluted

 

 

9,712

 

 

 

8,379

 

 

 

9,711

 

 

 

8,363

 

 

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, 2021

 

 

8,700

 

 

$

9

 

 

 

1,000

 

 

$

1

 

 

$

115,756

 

 

$

(24,922

)

 

$

90,844

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

443

 

 

 

 

 

 

443

 

Employee stock plan

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

19

 

 

 

 

 

 

19

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,275

)

 

 

(1,275

)

Balances as of November 30, 2021

 

 

8,713

 

 

$

9

 

 

 

1,000

 

 

$

1

 

 

$

116,218

 

 

$

(26,197

)

 

$

90,031

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

596

 

 

 

 

 

 

596

 

Employee stock plan

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

29

 

Taxes paid on vested restricted stock awards

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

(154

)

 

 

 

 

 

(154

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,879

)

 

 

(1,879

)

Balances as of February 28, 2022

 

 

8,716

 

 

$

9

 

 

 

1,000

 

 

$

1

 

 

$

116,689

 

 

$

(28,076

)

 

$

88,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Class A

 

 

Class B

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances as of August 31, 2020

 

 

7,342

 

 

$

7

 

 

 

1,000

 

 

$

1

 

 

$

60,332

 

 

$

(14,627

)

 

$

45,713

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

266

 

 

 

 

 

 

266

 

Exercise of stock options

 

 

22

 

 

 

 

 

 

 

 

 

 

 

 

94

 

 

 

 

 

 

94

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,350

)

 

 

(6,350

)

Balances as of November 30, 2020

 

 

7,364

 

 

 

7

 

 

 

1,000

 

 

 

1

 

 

 

60,692

 

 

 

(20,977

)

 

 

39,723

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

309

 

 

 

 

 

 

309

 

Exercise of stock options

 

 

49

 

 

 

 

 

 

 

 

 

 

 

 

272

 

 

 

 

 

 

272

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,881

)

 

 

(3,881

)

Balances as of February 28, 2021

 

 

7,413

 

 

$

7

 

 

 

1,000

 

 

$

1

 

 

$

61,273

 

 

$

(24,858

)

 

$

36,423

 

 

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

3


 

Kura Sushi USA, Inc.

Condensed Statements of Cash Flows

(amounts in thousands)

(Unaudited)

 

 

 

 

Six Months Ended February 28,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(3,154

)

 

$

(10,231

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,609

 

 

 

2,098

 

Stock-based compensation

 

 

1,039

 

 

 

575

 

Loss on disposal of property and equipment

 

 

 

 

 

29

 

Non-cash lease expense

 

 

1,420

 

 

 

1,380

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

(224

)

 

 

(408

)

Inventories

 

 

(147

)

 

 

(60

)

Due from affiliate

 

 

318

 

 

 

(227

)

Prepaid expenses and other current assets

 

 

7,679

 

 

 

(2,872

)

Deposits and other assets

 

 

(81

)

 

 

53

 

Accounts payable

 

 

201

 

 

 

(67

)

Accrued expenses and other current liabilities

 

 

(123

)

 

 

240

 

Salaries and wages payable

 

 

361

 

 

 

906

 

Operating lease liabilities

 

 

(221

)

 

 

(646

)

Due to affiliate

 

 

(3

)

 

 

192

 

Sales tax payable

 

 

48

 

 

 

106

 

Net cash provided by (used in) operating activities

 

 

9,722

 

 

 

(8,932

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Payments for property and equipment

 

 

(12,298

)

 

 

(9,793

)

Payments for initial direct costs

 

 

(315

)

 

 

 

Payments for purchases of liquor licenses

 

 

(559

)

 

 

(111

)

Net cash used in investing activities

 

 

(13,172

)

 

 

(9,904

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from loan from affiliate

 

 

 

 

 

12,000

 

Repayment of principal on finance leases

 

 

(524

)

 

 

(518

)

Taxes paid on vested restricted stock awards

 

 

(154

)

 

 

 

Proceeds from exercise of stock options

 

 

48

 

 

 

366

 

Net cash (used in) provided by financing activities

 

 

(630

)

 

 

11,848

 

Decrease in cash and cash equivalents

 

 

(4,080

)

 

 

(6,988

)

Cash and cash equivalents, beginning of period

 

 

40,430

 

 

 

9,259

 

Cash and cash equivalents, end of period

 

$

36,350

 

 

$

2,271

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

88

 

 

$

 

Noncash investing activities

 

 

 

 

 

 

 

 

Acquisition of finance leases

 

$

34

 

 

$

 

Amounts unpaid for purchases of property and equipment

 

$

779

 

 

$

160

 

 

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

4


 

Kura Sushi USA, Inc.

Notes to Condensed 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,” and the “Company” refer to Kura Sushi USA, Inc. unless expressly indicated or the context otherwise requires.

 

Effects of COVID-19

The negative effects of the COVID-19 pandemic on the Company’s business have been significant. In March 2020, the World Health Organization declared the novel strain of coronavirus COVID-19 a global pandemic. This contagious virus continues to spread, including recent acceleration of the spread of the Delta and Omicron variants of COVID-19 in the areas in which the Company operates. This has adversely affected workforces, customers, economies and financial markets globally. In response to this outbreak, many state and local authorities mandated the temporary closure of non-essential businesses and dine-in restaurant activity or limited indoor dining capacities during the Company’s previous two fiscal years. COVID-19 and the government measures taken to control it have caused a significant disruption to the Company’s business operation. During the three months ended February 28, 2022, the Company opened three new restaurants in Phoenix, Arizona, Chandler, Arizona, and San Antonio, Texas, and was able to operate all of its 36 restaurants with no government restrictions on indoor dining capacity. Subsequent to February 28, 2022, the Company opened one new restaurant in Watertown, MA. As of the filing date of this Quarterly Report on Form 10-Q, all of the Company’s 37 restaurants were operating with no government restrictions on indoor dining capacity.  

In response to the ongoing COVID-19 pandemic, the Company has prioritized taking steps to protect the health and safety of its employees and customers. The Company has maintained cleaning and sanitizing protocols for its restaurants and has implemented additional training and operational manuals for its restaurant employees, as well as increased handwashing procedures. The Company also provides each restaurant employee with face masks and gloves, and requires each employee to pass a health screening process, which includes a temperature check, before the start of each shift.

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020, and the subsequent extension of the CARES Act, the Company was eligible for refundable employee retention credits subject to certain criteria through the fiscal year ended August 31, 2021. The Company recognized a $2.6 million employee retention credit during the three and six months ended February 28, 2021, of which $2.2 million was included in labor and related costs and $0.4 million was included in general and administrative expenses in the statements of operations. As of August 31, 2021, the Company had recognized and filed for refunds of the amount of $12.1 million employee retention credits. During the six months ended February 28, 2022, and as of the date of this Quarterly Report on Form 10-Q, the Company has received $8.0 million in refunds, and cannot reasonably estimate when it will receive any or all of the remaining $4.1 million in refunds.

Consistent with the Company’s long-term growth strategy, the Company expects to continue to open new restaurants in locations where it believes such restaurants have the potential to achieve profitability. The future sales levels of the Company’s restaurants and its ability to implement its growth strategy, however, remain highly uncertain, as the full impact and duration of the COVID-19 pandemic continues to evolve as of the filing date of this Quarterly Report on Form 10-Q. It is possible that renewed outbreaks, increases in cases and/or new variants of the disease, either as part of a national trend or on a more localized basis, could result in additional COVID-19 related restrictions including capacity restrictions, or otherwise limit the Company’s dine-in services, or negatively affect consumer demand.

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, 2021.

5


 

The accounting policies followed by the Company are set forth in Part II, Item 8, Note 2, Basis of Presentation and Summary of 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, 2021. 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, 2022 or for any other future annual or interim period.

Fiscal Year

The Company’s fiscal year begins on September 1 and ends on August 31, and references made to “fiscal year 2022” and “fiscal year 2021” refer to the Company’s fiscal years ending August 31, 2022 and ended August 31, 2021, respectively.

Use of Estimates

The preparation of 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 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.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) is the same as net income (loss) for all periods presented. Therefore, a separate statement of comprehensive inco