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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the “Selected Financial Data” and our financial statements and the related notes and other financial information included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Special Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

The following MD&A includes a discussion comparing our results in fiscal year 2024 to fiscal year 2023. For a discussion of our results of operations comparing fiscal year 2023 to fiscal year 2022 and a discussion of our cash flows for fiscal year 2022, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, filed with the SEC on November 9, 2023.

Overview

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 we refer to as the “Kura Experience.” We encourage healthy lifestyles by serving freshly prepared Japanese cuisine using high-quality ingredients that are free from artificial seasonings, sweeteners, colorings, and preservatives. We aim to make quality Japanese cuisine accessible to our guests across the United States through affordable prices and an inviting atmosphere.

Business Trends

During fiscal year 2024, we opened fourteen restaurants and expanded our restaurant base to 64 restaurants in seventeen states and Washington, DC as of the end of fiscal year 2024. We expect to open 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 year 2025 to support the growth of the company.

Key Financial Definitions

Sales. Sales represent sales of food and beverages in restaurants. Restaurant sales in a given period are directly impacted by the number of restaurants we operate and comparable restaurant sales growth.

Food and beverage costs. Food and beverage costs are variable in nature, change with sales volume and are influenced by menu mix and subject to increases or decreases based on fluctuations in commodity costs. Other important factors causing fluctuations in food and beverage costs include seasonality and restaurant-level management of food waste. Food and beverage costs are a substantial expense and are expected to grow proportionally as our sales grow.

Labor and related expenses. Labor and related expenses include all restaurant-level management and hourly labor costs, including wages, employee benefits 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. Factors that influence fluctuations in our labor and related expenses include minimum wage and payroll tax legislation, the frequency and severity of workers’ compensation claims, healthcare costs and the performance of our restaurants.

Occupancy and related expenses. Occupancy and related expenses include rent for all restaurant locations and related taxes.

Depreciation and amortization expenses. Depreciation and amortization expenses are periodic non-cash charges that consist of depreciation of fixed assets, including equipment and capitalized leasehold improvements. Depreciation is determined using the straight-line method over the assets’ estimated useful lives, ranging from three to 20 years.

Other costs. Other costs include utilities, repairs and maintenance, credit card fees, royalty payments to Kura Japan, stock-based compensation expenses for restaurant-level employees 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 the development of new restaurants, including compensation and benefits, travel expenses, stock-based compensation expenses for corporate-level employees, legal and professional fees, marketing costs, information systems, corporate office rent and other related corporate costs. General and administrative expenses are expected to grow as our unit base grows.

Impairment of long-lived assets. Impairment of long-lived assets include the resulting charges when facts and circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an indicator of impairment exists, an estimate of the aggregate undiscounted cash flows is compared to the carrying value of the asset. If an asset is determined to be impaired, the loss is recorded as the excess of the carrying amount of the asset over its fair value.

Interest expense. Interest expense includes cash and non-cash charges related to our line of credit and finance lease obligations.

Interest income. Interest income includes income earned on our investments.

Income tax expense (benefit). Provision for income taxes represents federal, state and local current and deferred income tax expense.

Results of Operations

The following table presents selected comparative results of operations from our audited financial statements for the fiscal year ended August 31, 2024 compared to the fiscal year ended August 31, 2023. Our financial results for these periods are not necessarily indicative of the financial results that we will achieve in future periods. Certain percentage totals for the table below may not sum due to rounding.

Fiscal Years Ended August 31,

(dollar amounts in thousands)

Restaurant operating costs:

Depreciation and amortization expenses 425 410 15 3.7

Impairment of long-lived assets 1,553 — 1,553 —

Other expense (income):

Fiscal Years Ended August 31,

(as a percentage of sales)

Restaurant operating costs

Food and beverage costs 29.2 30.2

Labor and related costs 31.9 30.2

Occupancy and related expenses 7.1 7.0

Depreciation and amortization expenses 4.8 4.0

Total restaurant operating costs 87.6 84.6

General and administrative expenses 16.4 15.0

Depreciation and amortization expenses 0.2 0.2

Impairment of long-lived assets 0.7 —

Operating income (loss) (4.8 ) 0.2

Other expense (income):

Interest expense 0.0 0.0

Interest income (1.2 ) (0.8 )

Income (loss) before income taxes (3.6 ) 0.9

Income tax expense 0.1 0.1

Net income (loss) (3.7 ) % 0.8 %

Fiscal Year Ended August 31, 2024 Compared to Fiscal Year Ended August 31, 2023

Sales. Sales were $237.9 million for fiscal year 2024 compared to $187.4 million for fiscal year 2023, representing an increase of $50.5 million, or 26.9%. Comparable restaurant sales increased 0.7% for fiscal year 2024 as compared to fiscal year 2023. AUV was $4.2 million for fiscal year 2024 compared to $4.3 million for fiscal year 2023. The increase in sales was primarily driven by the sales resulting from fourteen new restaurants opened during fiscal year 2024, as well as increases in menu prices during the same period.

Food and beverage costs. Food and beverage costs were $69.5 million for fiscal year 2024 compared to $56.6 million for fiscal year 2023, representing an increase of $12.9 million, or 22.7%. This increase was primarily driven by costs associated with sales from fourteen new restaurants opened during fiscal year 2024. As a percentage of sales, food and beverage costs decreased to 29.2% in fiscal year 2024, as compared to 30.2% in fiscal year 2023, primarily due to increases in menu prices and supply chain initiatives.

Labor and related costs. Labor and related costs were $75.9 million for fiscal year 2024 compared to $56.5 million for fiscal year 2023, representing an increase of $19.4 million, or 34.3%. This increase in labor and related costs was primarily driven by additional labor costs incurred from fourteen new restaurants opened during fiscal year 2024 coupled with wage rate increases during the same period. As a percentage of sales, labor and related costs increased to 31.9% in fiscal year 2024, compared to 30.2% in fiscal year 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 $16.8 million for fiscal year 2024 compared to $13.1 million for fiscal year 2023, representing an increase of $3.7 million, or 27.8%. This increase was primarily a result of additional lease expense incurred with respect to fourteen new restaurants that opened during fiscal year 2024. As a percentage of sales, occupancy and other operating expenses remained consistent at 7.1% in fiscal year 2024 and 7.0% in fiscal year 2023.

Depreciation and amortization expenses. Depreciation and amortization expenses incurred as part of restaurant operating costs were $11.4 million for fiscal year 2024 compared to $7.4 million for fiscal year 2023, representing an increase of $4.0 million or 53.1%. This increase was primarily due to the depreciation of property and equipment related to the opening of fourteen new restaurants in fiscal year 2024 as well as accelerated depreciation on planned restaurant remodels. As a percentage of sales, depreciation and amortization expenses at the restaurant-level increased to 4.8% in fiscal year 2024 as compared to 4.0% in fiscal year 2023. Depreciation and amortization expenses incurred at the corporate level were $0.4 million for fiscal year 2024 and fiscal year 2023, and as a percentage of sales were 0.2%, respectively.

Other costs. Other costs were $34.7 million for the fiscal year 2024 compared to $24.9 million for fiscal year 2023, representing an increase of $9.8 million, or 39.5%. The increase was primarily driven by an increase in costs related to fourteen new restaurants opened in fiscal year 2024. As a percentage of sales, other costs increased to 14.6% in fiscal year 2024 from 13.3% in fiscal year 2023, primarily driven by increases in advertising and promotion, software licenses, repairs and maintenance, utilities, operating supplies and travel expenses.

General and administrative expenses. General and administrative expenses were $39.1 million for fiscal year 2024 compared to $28.0 million for fiscal year 2023, representing an increase of $11.1 million, or 39.3%. This increase was primarily due to $5.5 million in litigation costs, an increase in compensation-related costs of $3.2 million due to additional headcount, $2.0 million in professional fees, and $0.4 million in travel expenses. As a percentage of sales, general and administrative expenses increased to 16.4% in fiscal year 2024 from 15.0% in fiscal year 2023, primarily driven by litigation costs.

Impairment of long-lived assets. Impairment of long-lived assets was $1.6 million for fiscal year 2024 due to impairment charges related to the property and equipment on one underperforming restaurant location.

Interest expense. Interest expense was $47 thousand for fiscal year 2024 and $69 thousand for fiscal year 2023.

Interest income. Interest income was $2.9 million for fiscal year 2024 and $1.5 million for fiscal year 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.

Income tax expense. Income tax expense was $0.2 million for both fiscal years 2024 and 2023. For further discussion of our income taxes, see “Note 12 — Income Taxes.”

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, Average Unit Volumes (“AUVs”), comparable restaurant sales performance, and the number of restaurant openings.

Sales

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, 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. However, these measures may not provide a complete understanding of the operating results of the Company as a whole and such measures should be reviewed in conjunction with our GAAP financial results.

We believe that the use of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware when evaluating EBITDA, Adjusted EBITDA and Adjusted EBITDA margin that in the future we may incur expenses similar to those excluded when calculating these measures. 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.

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. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA, Adjusted EBITDA and Adjusted EBITDA margin on a supplemental basis. You should review the reconciliation of net (loss) income to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin below and not rely on any single financial measure to evaluate our business.

The following table reconciles net income (loss) to EBITDA, Adjusted EBITDA and Adjusted EBITDA margin for the fiscal years ended August 31, 2024 and August 31, 2023:

Fiscal Years Ended August 31,

(amounts in thousands)

Stock-based compensation expense(a) 4,314 3,550

Impairment of long-lived assets(c) 1,553 —

Litigation(d) 5,450 —

Adjusted EBITDA margin 6.1 % 7.7 %

_______________

(a)

Stock-based compensation expense includes non-cash stock-based compensation, which is comprised of restaurant-level stock-based compensation included in other costs in the statements of operations and comprehensive income (loss) and of corporate-level stock-based compensation included in general and administrative expenses in the statements of operations and comprehensive income (loss), see “Note 6 — Stock-based Compensation” to the financial statements in this Annual Report on Form 10-K.

(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.

(c)

Impairment of long-lived assets include losses incurred due to the impairment of property and equipment on one underperforming restaurant location.

(d)

Litigation includes expenses related to legal claims or settlements.

Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) Margin

Restaurant-level Operating Profit (Loss) is defined as operating income (loss) plus depreciation and amortization; stock-based compensation expense; pre-opening costs and general and administrative expenses which are considered normal, recurring, cash operating expensesand are essential to support the development and operations of our restaurants; non-cash lease expense; asset disposals, closure costs and restaurant impairments; less corporate-level stock-based compensation expense recognized within general and administrative expenses. Restaurant-level Operating Profit (Loss) margin is defined as Restaurant-level Operating Profit (Loss) divided by sales. Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin are intended as supplemental measures of our performance and are neither required by, nor presented in accordance with, GAAP. We believe that Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results, as this measure depicts normal, recurring cash operating expenses essential to supporting the development and operations of our restaurants. However, these measures may not provide a complete understanding of the operating results of the Company as a whole and such measures should be reviewed in conjunction with our GAAP financial results. We 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. We also use Restaurant-level Operating Profit (Loss) to measure operating performance and returns from opening new restaurants. 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 which 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.

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. 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 Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin in the same fashion. Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.

The following table reconciles operating income (loss) to Restaurant-level Operating Profit (Loss) and Restaurant-level Operating Profit (Loss) margin for the fiscal years ended August 31, 2024 and August 31, 2023:

Fiscal Years Ended August 31,

(amounts in thousands)

Operating income (loss) $ (11,505 ) $ 332

Stock-based compensation expense(a) 4,314 3,550

Impairment of long-lived assets(d) 1,553 —

Restaurant-level operating profit $ 47,703 $ 41,063

Operating income (loss) margin (4.8 )% 0.2 %

Restaurant-level operating profit margin 20.1 % 21.9 %

_______________

(a)

(b)

Pre-opening costs consist of labor costs and travel expenses for new employees and trainers during the training period, recruitment fees, legal fees, cash-based lease expenses incurred between the date of possession and opening day of our restaurants, and other related pre-opening costs.

(c)

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.

(d)

Impairment of long-lived assets include losses incurred due to the impairment of property and equipment on one underperforming restaurant location.

Average Unit Volumes (“AUVs”)

“Average Unit Volumes” or “AUVs” consist of the average annual sales of all restaurants that have been open for 18 full calendar months or longer at the end of the fiscal year presented due to new restaurants experiencing a period of higher sales upon opening. AUVs are calculated by dividing (x) annual sales for the fiscal year presented for all such restaurants by (y) the total number of restaurants in that base. We make fractional adjustments to sales for restaurants that were not open for the entire fiscal year presented (such as a restaurant closed for renovation) to

annualize sales for such associated period. This measurement allows management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base.

The following table shows the AUVs for the fiscal years ended August 31, 2024 and August 31, 2023:

Fiscal Years Ended August 31,

(amounts in thousands)

Comparable Restaurant Sales Performance

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 full calendar months prior to the start of the accounting period presented due to new restaurants experiencing a period of higher sales upon opening, including those temporarily closed for renovations during the year. For restaurants that were temporarily closed for renovations during the year, we make fractional adjustments to sales such that sales are annualized in the associated period.

Measuring our comparable restaurant sales performance allows us to evaluate the performance of our existing restaurant base. Various factors impact comparable restaurant sales, including:

•

consumer recognition of our brand and our ability to respond to changing consumer preferences and spending behavior;

•

overall economic trends, particularly those related to consumer spending;

•

our ability to operate restaurants effectively and efficiently to meet consumer expectations;

•

pricing;

•

guest traffic;

•

per-guest spend and average check;

•

marketing and promotional efforts;

•

local competition; and

•

opening of new restaurants in the vicinity of existing locations.

Since opening new restaurants will be a significant component of our sales growth, comparable restaurant sales performance is only one measure of how we evaluate our performance. The following table shows the comparable restaurant sales performance for the fiscal years ended August 31, 2024 and August 31, 2023:

Fiscal Years Ended August 31,

Comparable restaurant sales performance (%) 0.7 % 9.5 %

Comparable restaurant base 43 30

Number of Restaurant Openings

The number of restaurant openings reflects the number of restaurants opened during a particular reporting period. Before we open new restaurants, we incur pre-opening costs. New restaurants may not be profitable, and their sales performance may not follow historical patterns. The number and timing of restaurant openings has had, and is expected to continue to have, an impact on our results of operations. The following table shows thegrowth in our restaurant base for the fiscal years ended August 31, 2024 and August 31, 2023:

Fiscal Years Ended August 31,

Restaurant activity:

Beginning of period 50 40

Liquidity and Capital Resources

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

On April 13, 2023, we completed an underwritten public offering of common stock pursuant to our universal shelf registration statement on Form S-3, selling an aggregate of 1,265,000 shares of Class A common stock, including the exercise in full of the underwriters’ option to purchase 165,000 additional shares, at the price of $54.00 per share less an underwriting discount of $2.70 per share. We received aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable by us. The proceeds are to be used for general corporate purposes, including capital expenditures, working capital, and other business purposes. No payments were made by us to directors, officers or persons owning 10% or more of our common stock or to their associates, or to our affiliates.

As of August 31, 2024, we had no outstanding borrowings under the Revolving Credit Agreement and have $45.0 million of availability remaining. As of August 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, 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 and cash equivalents on hand and availability under our existing line of credit will be sufficient to fund our lease obligations, capital expenditures and working capital needs for at least the next 12 months.

Summary of Cash Flows

Our primary sources of liquidity and cash flows are operating cash flows, cash on hand and short-term investments. We use this to fund investing expenditures for new restaurant openings, reinvest in our existing restaurants, and increase our working capital. 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, and we typically have at least 30 days to pay our vendors.

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

Fiscal Years Ended August 31,

(amounts in thousands)

Statement of Cash Flow Data:

Net cash provided by operating activities $ 15,612 $ 18,064

Net cash used in investing activities (36,460 ) (49,903 )

Net cash provided by financing activities 2,137 65,754

Cash Flows Provided by Operating Activities

Net cash provided by operating activities during the fiscal year 2024 was $15.6 million, which primarily results from net loss of $8.8 million, non-cash charges of $11.8 million for depreciation and amortization, $4.3 million for stock-based compensation, $4.6 million in noncash lease expense, $1.6 million in impairment of long-lived assets, and net cash inflows of $2.1 million from changes in operating assets and liabilities.

Net cash provided by operating activities during the fiscal year 2023 was $18.1 million, which primarily results from net income of $1.5 million, non-cash charges of $7.8 million for depreciation and amortization, $3.6 million for stock-based compensation, $3.7 million in noncash lease expense, and net cash inflows of $1.3 million from changes in operating assets and liabilities.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the fiscal year 2024 was $36.5 million, primarily due to $44.3 million in purchases of property and equipment $3.5 million in purchases of short-term investments, and $0.4 million for payments of initial direct costs, $0.3 million in purchases of liquor licenses offset by $12.0 million of redemption of short-term investments. The increase in purchases of property and equipment in fiscal year 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 fiscal year 2023 was $49.9 million, primarily due to $9.3 million in purchases of short-term investments, $39.1 million in purchases of property and equipment and $1.7 million in purchases of liquor licenses offset by $0.8 million of redemption of short-term investments. The increase in purchases of property and equipment in fiscal year 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 fiscal year 2024 was $2.1 million, primarily due to $2.5 million of proceeds from exercise of stock options offset by $0.3 million in tax payments in relation to vested restricted stock awards.

Net cash provided by financing activities during fiscal year 2023 was $65.8 million, primarily due to aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable, and $2.0 million of proceeds from exercise of stock options offset by $0.5 million in repayments of principal on finance leases.

Material Cash Requirements

As of August 31, 2024, we had $11.1 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. For operating and finance lease obligations, see “Note 4 — Leases” to the financial statements included in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Our discussion and analysis of operating results and financial condition are based upon our financial statements. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

Our critical accounting policies are those that materially affect our financial statements. Our critical accounting estimates are those estimates that are made in accordance with GAAP, involve subjective or complex judgments by management, and are reasonably likely to have a material impact on our financial statements or results of operations. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may be materially different from the estimates. We believe the following impairment of long-lived assets estimate is affected by significant judgments and estimates used in the preparation of our financial statements and that the judgments and estimates are reasonable.

Operating Leases

We currently lease all of our restaurant locations and our corporate office. At the commencement of a lease, we determine the appropriate classification as an operating lease or a finance lease. All of our restaurant and office leases are classified as operating leases.

Our office leases provide for fixed minimum rent payments. Most of our restaurants provide for fixed minimum rent payments and some require additional contingent rent payments based upon sales in excess of specified thresholds. When such sales thresholds are deemed probable, contingent rent is accrued in proportion to the sales recognized in the period. We recognize rent expense based on the straight-line method for operating leases that include free-rent periods and rent escalation clauses. For the purpose of calculating rent expenses under the straight-line method, the lease term commences on the date we obtain control of the property. Lease incentives used to fund leasehold improvements are recognized when probable of being earned upon signing the lease and reduce the operating right-of-use asset related to the lease. These incentives are amortized through the operating right-of-use asset as reductions of expense over the lease term. Restaurant lease expense is included in the occupancy and related expenses financial statement line item, while office lease expense is included in general and administrative expenses financial statement line item, on the accompanying financial statements.

Impairment of Long-Lived Assets

We assess potential impairments of our long-lived assets, which includes property and equipment and operating lease right-of-use assets, in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360—Property, Plant and Equipment. An impairment test is performed on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level. Assets are grouped at the individual restaurant level for purposes of the impairment assessment because a restaurant represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its estimated undiscounted forecasted restaurant cash flows expected to be generated by the asset group. Factors considered by us in estimating future cash flows include but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes

in the manner of use of the acquired assets; and significant negative industry or economic trends. The estimated undiscounted forecasted cash flows include assumptions made by management regarding certain items such as revenue, food and beverage costs, labor costs, occupancy costs, and other restaurant operating costs and therefore are subject to uncertainty as our actual results may differ from our estimates. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined by the cost approach method.

As of fiscal year-end August 31, 2024, the Company performed an impairment assessment and determined that the carrying value of an asset group at one individual restaurant may not be recoverable due to underperforming historical and projected future operating results. Based on the impairment testing, the Company recorded impairment charges of $1.6 millionrelated to property and equipment. There was no impairment test performed for the fiscal year ended August 31, 2023, and no impairment loss was recognized during fiscal years ended August 31, 2023 and August 31, 2022.

Item 7A. Quantitative and Qualitative Disclosure of Market Risks

Commodity and Food Price Risks

Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including food and beverages and other commodities. We have been able topartially offset cost increases resulting from a number of factors, including market conditions, shortages or interruptions in supply due to weather or other conditions beyond our control, governmental regulations, and inflation, by increasing our menu prices, as well as making other operational adjustments that increase productivity. However, substantial increases in costs and expenses could impact our operating results to the extent that menu prices increase or operational adjustments cannot offset such increases.

Inflation Risk

The primary inflationary factors affecting our operations are food and beverage costs, labor costs, construction costs and energy costs. Our restaurant operations are subject to federal and state minimum wage and other laws governing working conditions, overtime and tip credits. Significant numbers of our restaurant personnel are paid at rates related to the federal and/or state minimum wage and, accordingly, increases in the minimum wage increase our labor costs. To the extent permitted by competition and the economy, we have mitigated increased costs by increasing menu prices and may continue to do so if deemed necessary in future years. Substantial increases in costs and expenses could impact our operating results to the extent such increases cannot be passed through to our guests. Severe increases in inflation, however, could affect the global and U.S. economies and could have an adverse impact on our business, financial condition or results of operations.

While we have been able to partially offset inflation and other changes in the costs of core operating resources by gradually increasing menu prices, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions could limit our menu pricing flexibility. In addition, macroeconomic conditions could make additional menu price increases imprudent. There can be no assurance that increased menu prices can offset future cost increases or that our guests will fully absorb increased menu prices without any resulting change to their visit frequencies or purchasing patterns. In addition, there can be no assurance that we will generate the same sales growth in an amount sufficient to offset inflationary or other cost pressures.

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm 53

Balance Sheets 55

Statements of Operations and Comprehensive Income (Loss) 56

Statements of Stockholders’ Equity 57

Statements of Cash Flows 58

Notes to Financial Statements 59

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Kura Sushi USA, Inc.:

Opinions on the Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying balance sheets of Kura Sushi USA, Inc. (the Company) as of August 31, 2024 and 2023, the related statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended August 31, 2024, and the related notes (collectively, the financial statements). We also have audited the Company’s internal control over financial reporting as of August 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of August 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended August 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of incremental borrowing rates for new operating leases

As discussed in Note 2 to the financial statements, the Company recognizes right-of-use (ROU) assets and lease liabilities for operating leases. The measurement of the ROU assets and lease liabilities requires the Company to estimate an incremental borrowing rate corresponding to the maturities of the leases. The Company’s estimate of an incremental borrowing rate is based on prevailing financial market conditions, a synthetic credit rating, credit analysis, and management judgment.

We identified the evaluation of incremental borrowing rates for new operating leases in the current fiscal year as a critical audit matter. Subjective auditor judgment and the need to involve valuation professionals with specialized skills and knowledge was required to evaluate the incremental borrowing rate because the Company has no outstanding debt and does not have a directly observable company specific credit rating.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and operating effectiveness of certain internal controls related to the Company’s process for determining the incremental borrowing rates. We involved valuation professionals with specialized skills and knowledge, who assisted in:

•

developing an independent estimate of the synthetic credit rating and comparing it with the synthetic credit rating used by the Company in developing its incremental borrowing rates, and

•

obtaining market yield curves associated with the estimated synthetic credit rating used to derive incremental borrowing rates associated with the new operating lease terms and comparing them to the estimated incremental borrowing rates developed by the Company for the same lease terms.

/s/ KPMG LLP

We have served as the Company’s auditor since 2020.

Irvine, California

November 8, 2024

Kura Sushi USA, Inc.

Balance Sheets

(amounts in thousands, except par value)

As of August 31,

Assets

Current assets:

Short-term investments — 8,542

Accounts and other receivables 4,573 5,048

Prepaid expenses and other current assets 3,391 4,233

Non-current assets:

Liabilities and stockholders' equity

Current liabilities:

Accrued expenses and other current liabilities 4,261 2,821

Operating lease liabilities – current 10,674 9,225

Non-current liabilities:

Commitments and contingencies (Note 11)

Stockholders' equity:

Accumulated other comprehensive income — 43

Total liabilities and stockholders' equity $ 328,522 $ 304,659

See accompanying notes to financial statements

Kura Sushi USA, Inc.

Statements of Operations and Comprehensive Income (Loss)

(amounts in thousands, except income (loss) per share data)

Fiscal Years Ended August 31,

Restaurant operating costs:

Depreciation and amortization expenses 425 410 355

Impairment of long-lived assets 1,553 — —

Other expense (income):

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

Weighted average Class A and Class B shares

Other comprehensive income:

Unrealized gain (loss) on short-term investments $ (43 ) $ 43 $ —

See accompanying notes to financial statements

Kura Sushi USA, Inc.

Statements of Stockholders’ Equity

(amounts in thousands)

Common Stock Additional Accumulated Total

Class A Class B Paid-in (Accumulated Other Comprehensive Stockholders'

Shares Amount Shares Amount Capital Deficit) Income Equity

Taxes paid on vested restricted stock awards — — — — (154 ) — — (154 )

Net loss — — — — — (764 ) — (764 )

Stock-based compensation — — — — 3,550 — — 3,550

Other comprehensive income — — — — — — 43 43

Stock-based compensation — — — — 4,532 — — 4,532

Other comprehensive loss — — — — — — (43 ) (43 )

See accompanying notes to financial statements

Kura Sushi USA, Inc.

Statements of Cash Flows

(amounts in thousands)

Fiscal Years Ended August 31,

Cash flows from operating activities

Gain on short-term investments — 43 —

Loss on disposal of property and equipment 22 53 12

Impairment of long-lived assets 1,553 — —

Changes in operating assets and liabilities:

Accounts and other receivables (1,798 ) (353 ) (131 )

Accrued expenses and other current liabilities 1,198 (336 ) 912

Operating lease liabilities 206 (113 ) (61 )

Cash flows from investing activities

Payments for initial direct costs (432 ) (550 ) (510 )

Payments for purchases of liquor licenses (275 ) (1,743 ) (896 )

Purchases of short-term investments (3,501 ) (9,292 ) —

Redemption of short- term investments 11,999 750 —

Cash flows from financing activities

Repayment of principal on finance leases (75 ) (498 ) (975 )

Taxes paid on vested restricted stock awards (280 ) — (154 )

Payments of costs related to the follow-on offering — (600 ) —

Net cash provided by (used in) financing activities 2,137 65,754 (170 )

(Decrease) increase in cash and cash equivalents (18,711 ) 33,915 (4,648 )

Supplemental disclosures of cash flow information

Cash paid for interest $ — $ — $ —

Cash paid for income taxes (net of refunds) $ 265 $ 108 $ 206

Noncash investing activities

Acquisition of finance leases $ 34 $ 61 $ 34

Amounts unpaid for purchases of property and equipment $ 2,758 $ 1,621 $ 1,933

See accompanying notes to financial statements

Kura Sushi USA, Inc.

Notes to Financial Statements

Note 1—Organization and Description of Business

Kura Sushi USA, Inc. (the “Company”) 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.

Follow-On Offering

On April 13, 2023, the Company completed an underwritten public offering of common stock pursuant to the Company’s universal shelf registration statement on Form S-3, selling an aggregate of 1,265,000 shares of Class A common stock, including the exercise in full of the underwriters’ option to purchase 165,000 additional shares, at the price of $54.00 per share less an underwriting discount of $2.70 per share. The Company received aggregate net proceeds of $64.3 million after deducting the underwriting discounts and commissions and offering expenses payable by the Company. The proceeds are to be used for general corporate purposes, including capital expenditures, working capital, and other business purposes. No payments were made by the Company to directors, officers or persons owning 10% or more of the Company’s common stock or to their associates, or to the Company’s affiliates.

Note 2—Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s fiscal year begins on September 1 and ends on August 31 and references made to “fiscal year 2024”, “fiscal year 2023” and “fiscal year 2022” refer to the Company’s fiscal years ended August 31, 2024, August 31, 2023 and August 31, 2022, 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, short-term investments, 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.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents with financial institutions and, at times, the balance may exceed the Federal Deposit Insurance Corporation federally insured limits. The Company has never experienced any losses related to these balances.

Concentration of Significant Suppliers

The Company relies on third parties for specified food products and supplies. In instances where these parties fail to perform their obligations, the Company may be unable to find alternative suppliers. The Company is subject to supplier concentration risk as JFC International Inc., a subsidiary of Kikkoman Corporation and the Company’s largest supplier, accounted for 55%, 49%, and 52% of total food and beverage costs for fiscal years 2024, 2023 and 2022, respectively. The Company’s purchases from Mutual Trading Co., Inc were 34% of our total food and beverage for fiscal year 2024 and were not significant in 2023 and 2022.

Segment Information

Management has determined that the Company has one operating segment and therefore one reportable segment. The Company’s chief operating decision maker, its Chief Executive Officer, reviews financial performance and allocates resources. All of the Company’s sales are derived in the United States of America.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash on hand, deposits with banks, money market funds, certificates of deposits and term deposits. As of August 31, 2024 and August 31, 2023, cash and cash equivalents were $51.0 million and $69.7 million, respectively. Due to the short-term maturities and their relatively low interest rates, the carrying value of the money market funds approximates their fair value. Cash and cash equivalents are maintained at financial institutions with strong credit ratings. The Company considers all highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

Short-Term Investments

Short-term investments consist of certificates of deposits and Treasury bills. The Company considers all highly liquid investments with an original maturity date greater than three months but less than one year as short-term investments. The carrying value of the short-term investments is equivalent to their amortized cost basis. As of August 31, 2024, all of the Company’s short-term investments had reached full maturity. As of August 31, 2023, short-term investments were $8.5 million. The certificates of deposits were deposited at Federal Deposit Insurance Corporation (“FDIC”) insured banks. The certificates of deposits were in amounts of $250,000 in multiple banks so that the entire deposit balance is eligible for FDIC insurance. Certificates of deposits and Treasury bills were classified as available-for-sale debt securities which are measured at fair value with unrealized gains or losses recorded in other comprehensive income (loss). During the year ended August 31, 2024, the Company reclassified $43 thousand out of accumulated other comprehensive income and into earnings for the period related to maturities of certificates of deposits and treasury bills. As of August 31, 2023, the Company recorded $43thousand in unrealized gains on short-term investments in comprehensive loss, which consisted of $48 thousand in unrealized gains on Treasury bills and $5 thousand in unrealized losses on certificates of deposits. During the year ended August 31, 2023, the Company reclassified $16 thousand out of accumulated other comprehensive income into earnings for the period related to maturities of certificates of deposits. The Company determines realized gains or losses on the available-for-sale debt securities on a specific identification method. Based on the evaluation of credit risk factors, the Company has concluded that an allowance for credit losses was unnecessary for its short-term investments.

Accounts and Other Receivables

Accounts and other receivables consist primarily of receivables from landlords for tenant allowances and credit card receivables. The Company does not extend credit to guests and thus does not have credit risk from guests. Accounts and other receivables balances are stated at the amounts management expects to collect from balances outstanding at fiscal year-end, and no allowance for doubtful accounts is recorded as of August 31, 2024 and August 31, 2023.

Inventories

Inventories consist of food and beverages and are stated at the lower of cost or net realizable value, with cost determined on an average cost basis.

Property and Equipment

Property and equipment consists of computer equipment, vehicles, software, furniture and fixtures, equipment, leasehold improvements and leased assets. Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization on property and equipment is calculated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the remaining lease term or estimated life of the improvements. The following table represents the various types of property and equipment and their respective useful lives:

Property and Equipment Useful Life

Computer equipment 3 – 5 years

Vehicles 5 years

Software 5 years

Furniture, fixtures and equipment 5 - 10 years

Leasehold improvements Shorter of useful life or remaining lease term

Lease assets Fixed lease term

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its estimated fair value.

Liquor Licenses

Liquor licenses are deemed to have indefinite useful lives and are subject to annual impairment testing. Liquor licenses are included in deposits and other assets in the accompanying balance sheets.

Asset Retirement Obligations

Asset retirement obligations (“ARO”) represents the estimated present value of future expenses the Company expects to incur at the end of a lease to restore the location to its original condition. The ARO is recorded as a liability at its estimated present value at inception with an offsetting increase in the carrying amount of the related property and equipment in the accompanying balance sheet. Periodic accretion of the discount of the estimated liability is recorded as interest expense in the accompanying statements of operations and comprehensive income (loss). Asset retirement obligations are amortized on a straight-line basis over the shorter of the remaining lease term or estimated life of the leasehold improvements. The Company’s ARO liability is $0.8 million and $0.6 million as of August 31, 2024 and August 31, 2023, respectively and is included in other liabilities in the accompanying balance sheets.

Impairment of Long-lived Assets

The Company assesses potential impairments of its long-lived assets, which includes property and equipment and operating lease right-of-use assets, in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360—Property, Plant and Equipment. An impairment test is performed on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level. Assets are grouped at the individual restaurant level for purposes of the impairment assessment because a restaurant represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its estimated undiscounted forecasted restaurant cash flows expected to be generated by the asset group. Factors considered by the Company in estimating future cash flows include but are not limited to: significant underperformance relative to expected historical or projected future operating results;

significant changes in the manner of use of the acquired assets; and significant negative industry or economic trends. The estimated undiscounted forecasted cash flows include assumptions made by management regarding certain items such as revenue, food and beverage costs, labor costs, occupancy costs, and other restaurant operating costs and therefore are subject to uncertainty as the Company’s actual results may differ from its estimates. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is determined by the cost approach method.

As of fiscal-year end August 31, 2024, the Company performed an impairment assessment and determined that the carrying value of an asset group at one individual restaurant may not be recoverable due to underperforming historical and projected future operating results. Based on impairment testing, the Company recorded impairment charges of$1.6 millionrelated to the property and equipment. There was no impairment test performed for the fiscal year ended August 31, 2023, and no impairment loss was recognized during the fiscal years ended August 31, 2023, and August 31, 2022.

Income Taxes

The provision for income taxes, income taxes payable, and deferred income taxes are determined using the asset and liability method. Deferred income tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. The Company establishes a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be recoverable against future taxable income. Income tax expense or benefit is the income tax payable or refundable for the period, plus or minus the change during the period to deferred income tax assets and liabilities.

The Company regularly evaluates the likelihood of realizing the benefit for income tax positions it has taken in federal and state filings by considering all facts, circumstances, and information available. For those benefits that the Company believes it is more likely than not will be sustained, it recognizes the largest amount it believes is cumulatively greater than 50% likely to be realized.

Revenue Recognition

Revenue from sales is recognized when food and beverages are sold to customers. Sales are presented net of discounts and sales taxes collected from customers.

Sales Taxes

Sales taxes are imposed by state, county, and city governmental authorities, collected from customers and remitted to the appropriate governmental agency. The Company’s policy is to record the sales taxes collected as a liability on the books and then remove the liability when the sales tax is remitted. There is no impact on the statements of operations and comprehensive income (loss) as restaurant sales are recorded net of sales tax.

Operating and Finance Leases

At inception of a contract, the Company assesses whether the contract is a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease classification, measurement, and recognition are determined at lease commencement, which is the date the underlying asset is available for use by the Company. The accounting classification of a lease is based on whether the arrangement is effectively a financed purchase of the underlying asset (finance lease) or not (operating lease). The Company has operating and finance leases for its corporate office, restaurant locations, office equipment, kitchen equipment and automobiles. The leases have remaining lease terms of less than 1 year to 20 years, some of which include options to extend the leases. For leases with renewal periods at the Company’s option, the Company determines the expected lease period based on whether the renewal of any options is reasonably assured at the inception of the lease.

Operating leases are accounted for on the balance sheet with the right-of-use (“ROU”) assets and lease liabilities recognized in “Operating lease right-of-use assets,” “Operating lease liabilities - current” and “Operating lease liabilities - noncurrent” on the balance sheet, respectively. Finance leases are accounted for on the balance

sheet with ROU assets and lease liabilities recognized in “Property and equipment, net,” “Other current liabilities” and “Other liabilities” on the balance sheet, respectively.

Lease assets and liabilities are recognized at the lease commencement date. All lease liabilities are measured at the present value of the lease payments not yet paid. To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates corresponding to the maturities of the leases. As the Company has no outstanding debt, it estimates this rate based on prevailing financial market conditions, a synthetic credit rating, credit analysis, and management judgment. ROU assets, for both operating and finance leases, are initially measured based on the lease liability, adjusted for initial direct costs, prepaid or deferred rent, and lease incentives. The operating lease ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for initial direct costs, prepaid or accrued lease payments, and lease incentives. Depreciation of the finance lease ROU assets are subsequently calculated using the straight-line method over the shorter of the estimated useful lives or the expected lease terms and recorded in “Depreciation and amortization expense” on the statement of operations.

The Company accounts for lease and non-lease components as a single component for its entire population of operating lease assets.The Company recognizes the short-term lease exemption for all applicable classes of underlying assets. Short-term disclosures include only those leases with a term greater than one month and twelve months or less, and expense is recognized on a straight-line basis over the lease term. Leases with an initial term of twelve months or less, that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise, are not recorded on the balance sheet.

The Company recognizes expense for these leases on a straight-line basis over the lease term. In addition to the fixed minimum payments required under the lease arrangements, certain leases require variable lease payments, such as common area maintenance, insurance and real estate taxes, which are recognized when the associated activity occurs. Additionally, contingent rental payments based on sales thresholds for certain of its restaurants are accrued based on estimated sales.

Other Costs

Other costs in restaurant operating costs in the accompanying statements of operations and comprehensive income (loss) include utilities, repairs and maintenance, credit card fees, royalty payments, stock-based compensation for restaurant-level employees, advertising costs and other restaurant-level expenses. The Company incurred $34.7 million, $24.9 million and $17.5 million in other costs for the fiscal years ended August 31, 2024, August 31, 2023 and August 31, 2022, respectively.

Advertising Costs

Advertising costs are expensed as incurred and are included in other costs in the accompanying statements of operations and comprehensive income (loss). The Company incurred $3.0 million, $2.7 million and $1.3 million in advertising expenses for the fiscal years ended August 31, 2024, August 31, 2023 and August 31, 2022, respectively.

Fair Value Measurements

The Company defines fair value as the exchange price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value measurement accounting guidance creates a fair value hierarchy to prioritize the inputs used to measure fair value into three categories. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement, where Level 1 is the highest and Level 3 is the lowest. The three levels are defined as follows:

Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Observable inputs other than Level 1 prices, such as unadjusted quoted prices for similar assets or liabilities in active markets, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on the Company’s own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation.

The Company’s financial statements include cash and cash equivalents, accounts and other receivables, accounts payable, accrued expenses and other current liabilities, and salaries and wages payable for which the carrying amounts approximate fair value due to their short-term maturity. The fair value of our short-term investments, specifically certificates of deposits are considered Level 2 inputs of the fair value hierarchy. The fair value of payments due to or from Kura Japan is not determinable due to its related-party nature.

Stock-based Compensation

Stock-based compensation consists of stock options and restricted stock units (“RSUs”) issued to employees and non-employees. The Company measures and recognizes stock-based compensation based on the grant date fair value of the award. The fair value of stock options is estimated using the Black-Scholes option-pricing model and is impacted by the fair value of the Company’s common stock, as well as changes in assumptions regarding certain subjective variables. These variables include, but are not limited to, the expected common stock price volatility over the term of the stock option awards, the expected term of the awards, risk-free interest rates and the expected dividend yield. The fair value of restricted stock awards is based on the closing market price of the Company’s stock on the date of grant. Forfeitures are recognized as they occur.

For stock options that are based on a service requirement, the cost is recognized on a straight-line basis over the requisite service period, which is typically the vesting period. Stock options and RSUs granted in fiscal years 2024, 2023 and 2022 have vesting periods ranging from12 months to 48 months. Each award expires on such date as shall be determined at the date of grant; however, the maximum contractual term of options to acquire common stock is ten years after the initial date of the award. Vested RSUs do not expire. For RSUs, all unvested awards shall be forfeited immediately upon termination.

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

Income (Loss) Per Share

Income (loss) per share is calculated by dividing net income (loss) by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted income (loss) per share assumes the conversion, exercise or issuance of all potential dilutive common stock equivalents outstanding for the period. For the purposes of this calculation, options and restricted stock units are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive. Diluted income (loss) per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 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, with early adoption permitted. The Company is currently evaluating the effects of this pronouncement on its financial statements and expects the update to result in additional disclosures.

Note 3—Balance Sheet Components

Accounts and Other Receivables

Accounts and other receivables as of August 31, 2024 and August 31, 2023 consists of the following:

As of August 31,

(amounts in thousands)

Credit card and other receivables 2,872 1,075

Total accounts and other receivables $ 4,573 $ 5,048

Inventories

Inventories as of August 31, 2024 and August 31, 2023 consists of the following:

As of August 31,

(amounts in thousands)

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of August 31, 2024 and August 31, 2023 consists of the following:

As of August 31,

(amounts in thousands)

Total prepaid expenses and other current assets $ 3,391 $ 4,233

Property and Equipment - net

Property and equipment - net as of August 31, 2024 and August 31, 2023 consists of the following:

As of August 31,

(amounts in thousands)

Less: accumulated depreciation and amortization (38,869 ) (27,902 )

Depreciation and amortization expense for property and equipment was $11.8 million, $7.8 million and $5.6 million for the fiscal years ended August 31, 2024, August 31, 2023, and August 31, 2022, respectively.

Deposits and Other Assets

Deposits and other assets, as of August 31, 2024 and August 31, 2023 consists of the following:

As of August 31,

(amounts in thousands)

Total deposits and other assets $ 4,916 $ 4,977

Note 4—Leases

The Company has operating and finance leases for its corporate office, restaurant locations, kitchen equipment and automobiles. The Company’s finance leases are immaterial. The Company’s leases have remaining lease terms of less than 1 year to 20 years, some of which include options to extend the leases.

Lease related costs recognized in the statements of operations and comprehensive income (loss) for fiscal years 2024, 2023 and 2022 are as follows:

Fiscal Years Ended August 31,

(amounts in thousands)

Operating lease cost Classification

Supplemental balance sheet information related to leases is as follows:

Operating Leases

As of August 31,

(amounts in thousands)

As of August 31,

Weighted Average Remaining Lease Term (Years)

Weighted Average Discount Rate

Operating leases 7.1 % 7.0 %

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

Fiscal Years Ended August 31,

(amounts in thousands)

Operating cash flows paid for operating lease liabilities $ 10,723 $ 7,935

As of August 31, 2024, the Company had an additional $51.4 million of operating leases related to restaurants for which the Company had not yet taken possession. Subsequent to August 31, 2024, the Company entered into four additional operating leases related to restaurants for which the Company has not yet taken possession. The lease liabilities associated with the leases after August 31, 2024 are $17.8 million. The operating leases are expected to commence in fiscal year 2025, with lease terms of up to 20 years.

Maturities of lease liabilities are as follows as of August 31, 2024:

Operating Leases

(amounts in thousands)

Less: imputed interest (110,060 )

Present value of lease liabilities $ 141,351

Note 5—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 statement 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 use of certain of Kura Japan’s intellectual property rights, including, but not limited to, Kura Japan’s trademarks “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 statements of operations and comprehensive income (loss).

On April 10, 2020, the Company and Kura Japan entered into a Revolving Credit Agreement, which was subsequently amended on September 2, 2020 and April 9, 2021, to provide the Company a line of credit of $45.0 million. For additional information, see “Note 9 — Debt.”

Balances with Kura Japan as of August 31, 2024 and August 31, 2023 are as follows:

As of August 31,

(amounts in thousands)

Reimbursements and other payments by the Company to Kura Japan for fiscal years ended August 31, 2024, August 31, 2023, and August 31, 2022 are as follows:

Fiscal Years Ended August 31,

(amounts in thousands)

Related party transactions:

Travel and other administrative expenses 26 35 9

Reimbursements by Kura Japan to the Company were $0.3 million, $0.2 million and $0.2 million for fiscal years ended August 31, 2024, August 31, 2023, and August 31, 2022, respectively. The reimbursements were primarily for professional fees, travel and other administrative expenses.

Note 6—Stock-based Compensation

The Company has a 2018 Incentive Compensation Plan (the “Stock Incentive Plan”), as amended. Under the Stock Incentive Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and performance awards in the form of shares and cash. Stock options granted under the Stock Incentive Plan include both incentive stock options and non-qualified stock options. This plan authorizes 1,350,000 shares to be granted.

Stock option activity under the Stock Incentive Plan is as follows:

Options Outstanding

(amounts inthousands)

The total intrinsic value of stock options exercised during fiscal year 2024 was $6.3 million.

The total fair value of options vested was $3.7 million, $3.1 million, and $1.7 million for the fiscal years ended August 31, 2024, August 31, 2023, and August 31, 2022, respectively. As of August 31, 2024, unrecognized stock-based compensation of $7.2 million related to unvested stock options is expected to be recognized on a straight-line basis over a weighted average period of 2.6 years.

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

RSUs Outstanding

Number of SharesUnderlyingOutstanding RSU Weighted AverageGrant Date Fair Value

Outstanding — August 31, 2022 — —

The total fair value of RSUs vested was $0.9 million for the fiscal year ended August 31, 2024. No RSUs vested during the fiscal years ended August 31, 2023, and August 31, 2022. As of August 31, 2024, unrecognized stock-based compensation of $2.5 million related to unvested RSUs is expected to be recognized on a straight-line basis over a weighted average period of2.7 years.

Stock-based Compensation Expense

Stock-based compensation for restaurant-level employees is included in other costs and stock-based compensation for corporate-level employees is included in general and administrative expenses in the statements of operations and comprehensive income (loss). The total stock-based compensation recognized under the Stock Incentive Plan in the statements of operations and comprehensive income (loss) is as follows:

Fiscal Years Ended August 31,

(amounts in thousands)

Stock-based compensation, net of amounts capitalized $ 4,314 $ 3,550 $ 2,409

Amount capitalized to Property and equipment - net 218 — —

Determination of Fair Value

For the fiscal years ended August 31, 2024, August 31, 2023, and August 31, 2022, the fair value of stock options was estimated on the grant date using the Black-Scholes valuation model with the following assumptions:

Fiscal Years Ended August 31,

Dividend rate — — —

Weighted average grant date fair value $ 53.09 $ 45.79 $ 29.54

Expected Term - The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options.

Expected Volatility - Since the Company does not have a trading history of its common stock equivalent to the expected term of the stock option grants, the expected volatility is derived from the average historical stock volatilities of several unrelated public companies within the Company’s industry that the Company considers to be comparable to its business over a period equivalent to the expected term of the stock option grants.

Risk-Free Interest Rate - The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.

Dividend Rate - The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans to do so.

Fair Value of Common Stock - The fair value of common stock is based on the closing price of the Company’s common stock, as reported on The Nasdaq Stock Market LLC.

Note 7—Fair Value Measurements

The following table sets forth the Company’s assets measured at fair value on a recurring basis as of August 31, 2023. The Company did not have any assets and liabilities measured at fair value on a recurring basis as of August 31, 2024 or August 31, 2022.

Level 1 Level 2 Level 3 Total

(amounts in thousands)

Assets:

Certificates of deposits $ — $ 4,495 $ — $ 4,495

The Company’s cash and cash equivalents include cash on hand, deposits in banks, certificates of deposits and money market funds. Due to their short-term nature, the carrying amounts reported in the accompanying balance sheets approximate the fair value of cash and cash equivalents. The fair value of our certificates of deposits are 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. The Company determines realized gains or losses on the available-for-sale debt securities on a specific identification method.

Note 8—Kura Sushi USA, Inc. 401(k) Plan

The Company maintains the Kura Sushi USA, Inc. 401(k) Plan (the “Plan”). The Plan covers all employees, subject to certain eligibility requirements. Starting in fiscal year 2022, the Company makes safe harbor matching contributions which vest immediately, equal to 100% of each eligible participant’s salary deferrals that do not exceed 3% of compensation, plus 50% of each eligible participant’s salary deferrals between 3% and 5% of compensation. The Company made matching Plan contributions of $0.5 million, $0.4 million and $0.2 million during the fiscal years ended August 31, 2024, August 31, 2023 and August 31, 2022, respectively.

Note 9—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 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 August 31, 2024 and August 31, 2023, the Company had no outstanding balance on the revolving credit line and had $45.0 million of availability remaining under the Revolving Credit Agreement.

Note 10—Income (Loss) Per Share

The net income (loss) per share attributable to common stockholders is allocated based on the contractual participation rights of the Class A common stock and Class B common stock as if the income for the year has been distributed. As the liquidation and dividend rights for Class A and Class B common stock are identical, the net loss attributable to all common stockholders is allocated on a proportionate basis.

The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share:

Fiscal Years Ended August 31,

Class A Class B Class A Class B Class A Class B

(amounts in thousands, except per share data)

Dilutive effect of stock-based awards — — 335 — — —

The Company computes basic income (loss) per common share using net income (loss) and the weighted average number of common shares outstanding during the period, and computes diluted income (loss) per common share using net income (loss) and the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include dilutive outstanding employee stock options and restricted stock units.

For the fiscal years ended August 31, 2024, August 31, 2023 and August 31, 2022, there were 647 thousand, 685 thousand and 677 thousand shares of common stock, respectively, subject to outstanding employee stock options and RSUs that were excluded from the calculation of diluted income per share because their inclusion would have been anti-dilutive.

Note 11—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 alleged 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 has 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 statements of operations and comprehensive income (loss) during the fiscal year ended August 31, 2024. The Company has an accrued liability of $1.2 million related to these matters as of August 31, 2024, which was subsequently paid in October 2024.

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, excluding the putative class action matter referenced above, 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 12—Income Taxes

The components of loss before provision for income taxes are as follows:

Fiscal Years Ended August 31,

(amounts in thousands)

The components of the provision for income taxes are as follows:

Fiscal Years Ended August 31,

(amounts in thousands)

Current:

Federal $ — $ — $ —

Deferred:

Federal — — —

State — — —

Total deferred — — —

The Company had an effective tax rate of (1.9)%, 13.4%, and (10.7)% for the fiscal years ended August 31, 2024, August 31, 2023, and August 31, 2022, respectively. The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate was as follows:

Fiscal Years Ended August 31,

Tax at federal statutory rate 21.0 % 21.0 % 21.0 %

Stock-based compensation 4.3 2.6 29.7

Change in valuation allowance (42.4 ) 96.8 (186.1 )

State tax, net of federal benefit (1.0 ) 10.7 (4.8 )

Effective tax rate (1.9 )% 13.4 % (10.7 )%

The Company recorded an income tax provision for the years ended August 31, 2024, 2023 and 2022 of $167 thousand, $233 thousand, and $74 thousand, respectively. The primary difference between the effective rate and the federal statutory tax rate relates to recognition of valuation allowance against deferred tax assets, employer tip credits, and non-deductible stock compensation.

The deferred income taxes reflect the tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

As of August 31,

(amounts in thousands)

Deferred tax assets:

State tax deduction 41 —

Deferred tax liabilities:

Basis difference on fixed assets (8,711 ) (7,911 )

Net deferred tax $ — $ —

As of August 31, 2024, the Company has U.S. federal net operating loss (“NOL”) carryover of approximately $32.9 million, various state NOL carryover of approximately $18.4 million, and federal tax credit carryover of approximately $8.0 million. If not utilized, $30.8 million of the federal NOL can be carried forward indefinitely, and the remainder will begin to expire in the fiscal year ending August 31, 2036. The federal tax credit will begin to expire in the fiscal year ending August 31, 2032. Utilization of the Company’s NOL and federal tax credit carryover may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended.

The Company has not recorded any unrecognized tax benefits as of August 31, 2024. Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has no liability for uncertain positions. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as income tax expense.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized. The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended August 31, 2024, as well as significant deferred tax assets in excess of deferred tax liabilities. As a result, the Company determined that it is not more likely than not that it will generate sufficient future U.S. taxable income to realize its deferred tax assets and, therefore, recorded valuation allowances against the net deferred tax assets. The total amount of the valuation allowance was approximately $15.6 million. The net change for the valuation allowance was $4.1 million as of August 31, 2024.

On August 16, 2022, Congress passed, and the President signed into law, the Inflation Reduction Act (the “IRA”), which includes certain business tax provisions. The IRA did not have a material impact on the Company’s effective tax rate or income tax expense for the fiscal year ended August 31, 2022.

Item 9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure

None.

Item 9A.Controls and Procedures

Disclosure Controls and Procedures

Our management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report.

Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting using the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on this assessment, management has concluded that our internal control over financial reporting was effective as of the end of the period covered by this report. Our independent registered public accounting firm, KPMG LLP, has audited our internal control over financial reporting and its report is included herein.

Changes in Internal Control over Financial Reporting

In the current quarter, we performed an impairment assessment and determined the carrying amount of an asset group at one individual restaurant exceeded its estimated undiscounted cash flows. As a result, for that asset group, an impairment charge of $1.6 million was recorded for the amount by which the carrying amount of the assets exceeded the fair value of the assets. In connection with the determination of the fair values of the assets, we implemented additional controls. There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended August 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

During the quarter ended August 31, 2024, no director or officer of the Company, adopted or terminated a

Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

The information required by Items 10, 11, 12, 13 and 14 will be furnished (and are hereby incorporated by reference) by an amendment hereto or pursuant to the Company’s definitive proxy statement pursuant to Regulation 14A for the 2025 annual meeting of stockholders that will contain such information.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1). Financial Statements. See “Table of Contents” on page 52.

(a)(2). Financial Statement Schedules.

All schedules are omitted because they are not required or applicable, or the required information is included in the Company’s financial statements or related notes.

(a)(3). Exhibits. See “Index to Exhibits.”

INDEX TO EXHIBITS

ExhibitNumber Description

23.1# Consent of KPMG LLP

24.1# Power of Attorney (included on signature page of this report)

101.SCH# Inline XBRL Taxonomy Extension Schema Document

101.CAL# Inline XBRL Taxonomy Extension Calculation Linkbase Document

KRUS US Equity

KRUS · 10-K · period ended 2024-08-31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. Quantitative and Qualitative Disclosure of Market Risks

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure

Item 9A.Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 15. Exhibits and Financial Statement Schedules

KRUS US Equity☆

KRUS · 10-K · period ended 2024-08-31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. Quantitative and Qualitative Disclosure of Market Risks

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure

Item 9A.Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 15. Exhibits and Financial Statement Schedules

KRUS US Equity