KURA SUSHI USA, INC.

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.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

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 2026”, “fiscal year 2025” and “fiscal year 2024” refer to the Company’s fiscal years ended August 31, 2026, August 31, 2025 and August 31, 2024, 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, 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 and debt securities. 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 fulfill 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, accounted for 53%,58%, and 55% of total food and beverage costs for fiscal years 2026, 2025 and 2024, respectively. The Company’s purchases from Mutual Trading Co., Inc. were 40%,32% and 34% of our total food and beverage costs for fiscal years 2026, 2025 and 2024, respectively.

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. Additionally, the Company operates in one geographic area: 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. 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. Due to the short-term maturities and their relatively low interest rates, the carrying value of the money market funds approximates their fair value.

Investments

The Company invests in securities, including certificates of deposit, Treasury notes, and U.S. Government Agency debt securities. Investment classification is determined based on the accounting guidance available for sale or held to maturity. Certificates of deposit and Treasury notes are classified as available-for-sale debt securities and measured at fair value, with unrealized gains or losses recorded in other comprehensive income (loss). U.S. Government Agency debt securities are classified as held-to-maturity and measured at amortized cost. Realized gains or losses are determined on a specific identification basis. The classification of these investments as either short-term or long-term is based on their original maturity dates, with short-term investments having maturities greater than three months but less than one year, and long-term investments having maturities greater than one year.

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, andno allowance for doubtful accounts is recorded as of August 31, 2026 and August 31, 2025.

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 and leasehold improvements. Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization on property and equipment is calculated using thestraight-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.

Property and equipment that are retired, abandoned or otherwise disposed of are removed from the accounts, and any resulting gain or loss is recognized within operating expenses in the statements of operations and comprehensive loss.

The following table represents the various types of property and equipment and their respective useful lives:

Liquor Licenses

The costs of purchasing non-transferable liquor licenses through local government agencies or secondary-markets in jurisdictions that do not limit the number of authorized liquor licenses are capitalized as definite-lived intangible assets and amortized over the applicable restaurants’ remaining lease term. Amortization of definite-lived liquor licenses are recorded to depreciation and amortization expenses in the accompanying statements of operations and comprehensive loss. The future amortization expense for each of the remaining years are not material to the Company’s financial statements. The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are deemed to have indefinite useful lives and are subject to annual impairment testing. The Company’s assessment resulted inno impairment of liquor licenses as of fiscal years ended August 31, 2026, 2025 and 2024. Definite-lived and indefinite-lived liquor licenses are included in deposits and other assets in the accompanying balance sheets. Liquor license renewal fees are expensed over the renewal term.

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. The Company’s ARO liability is $1.5 million and $1.1 million as of August 31, 2026 and August 31, 2025, respectively and is included in other liabilities in the accompanying balance sheets. Periodic accretion of the discount of the estimated liability is recorded as interest expense in the accompanying statements of operations and comprehensive 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.

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. An impairment assessment is performed at the individual restaurant level to determine if events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Assets are grouped at the individual restaurant level because a restaurant represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The primary indicator considered by the Company in the assessment is significant historical cash flow underperformance at the individual restaurant level. Other indicators that are considered by the Company include but are not limited to: significant negative industry, economic or customer trends and expectations that the asset group will be sold or otherwise disposed of before the end of its previously estimated useful life. If there are indicators that the carrying value of an asset group may not be recoverable, recoverability 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. The estimated undiscounted forecasted cash flows include assumptions made by the Company 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.

As of August 31, 2026, the Company performed an impairment test and recorded impairment charges of $0.9 million related to property and equipment of one restaurant location as a result of its performance. No impairment losswas recognized during the fiscal year ended August 31, 2025. As of August 31, 2024, the Company performed an impairment test and recorded impairment charges of $1.6 million related to property and equipment of one underperforming restaurant location.

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. The Company’s loyalty program provides customers with rewards that may be redeemed for future purchases. The Company accounts for the rewards as a separate performance obligation and defers a portion of the transaction price attributable to the rewards based on their estimated standalone selling price at a historical redemption rate. Revenue associated with the rewards is recognized when the rewards are redeemed or expire.

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 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 offices, restaurant locations, office equipment, kitchen equipment and automobiles. The leases have remaining lease terms ofless 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 lease term based on whether the renewal of any options is reasonably certain to be exercised at the inception of the lease.

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

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 hasno outstanding debt, it estimates this rate based on prevailing financial market conditions, a synthetic credit rating and credit analysis. 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 unamortized initial direct costs, prepaid or accrued lease payments, and unamortized lease incentives. Depreciation expense 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 thanone month andtwelve months or less, and expense is recognized on a straight-line basis over the lease term.

The Company’s office leases provide for fixed minimum rent payments. Most of the Company’s 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. The Company recognizes 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 the Company obtains 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. 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. 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.

Other Costs

Other costs in restaurant operating costs in the accompanying statements of operations and comprehensive loss include credit card processing fees, repairs and maintenance, restaurant-level advertising and promotions, restaurant supplies, royalty payments to Kura Japan, utilities and other restaurant-level expenses.

Advertising Costs

Advertising costs are expensed as incurred and are included in other costs in the accompanying statements of operations and comprehensive loss. The Company incurred $2.6 million, $2.6 million and $3.0 million in advertising expenses for the fiscal years ended August 31, 2026, August 31, 2025 and August 31, 2024, respect ively.

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 Treasury notes is classified within Level 1 when valued using unadjusted quoted market prices in active markets, or within Level 2 when valued using observable market inputs such as benchmark yield curves and dealer quotes. The fair value of our Certificate of Deposit and U.S. Government Agency debt securities are valued using Level 2 inputs of the fair value hierarchy. Level 2 inputs are based on market data that include factors such as interest rates, market and pricing activity and other market-based valuation techniques. The fair value of payments due to or from Kura Japan is not determinable due to its related-party nature. These related-party balances are not based on observable market inputs and may not reflect arm’s-length terms, making a reliable fair value measurement impracticable.

Stock-based Compensation

Stock-based compensation consists of stock options, restricted stock units (“RSUs”) and performance restricted stock units (“PSUs”) 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 RSUs and PSUs are 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, RSUs and PSUs 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, RSUs and PSUs granted in fiscal years 2026, 2025 and 2024 have a vesting period of 48 months. RSUs granted in fiscal years 2026, 2025 and 2024 have a vesting period of 12 months or 48 months. PSUs granted in fiscal years 2026 and 2025 have a vesting and performance period of 36 months. For PSUs, the number of shares ultimately earned is contingent upon the achievement of specified performance metrics and is subject to the recipient’s continued employment or service through the vesting date. Depending on the level of performance achieved, participants may earn between 50% and 150% of the target number of shares, with no payout for performance below threshold levels.

Each stock option 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 shares of RSUs and PSUs are settled in company stock, net of taxes. For RSUs and PSUs, all unvested awards shall be forfeited immediately upon termination except for terminations due to death or Disability or termination by the Company without Cause (as such terms are defined in the Stock Incentive Plan, as amended).

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 investments consist of Treasury notes that are classified as available-for-sale debt securities which are measured at fair value with unrealized gains or losses recordedin 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 per share assumes the conversion, exercise or issuance of potential dilutive common stock equivalents outstanding for the period. For periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share because potential common stock equivalents are anti-dilutive. For the purposes of this calculation, options, RSUs and PSUs 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 Adopted Accounting Pronouncement

In December 2023, the 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 adopted ASU 2023-09 on a prospective basis in this Annual Report on Form 10-K for the fiscal year ending August 31, 2026. The enhanced disclosures for fiscal year ending August 31, 2026 are included in Note 14, Income Taxes, to our financial statements. The adoption of this standard enhanced the disclosure of income tax information.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses”, which requires public companies to disaggregate key expense categories such as inventory purchases, employee compensation and depreciation in their financial statements. In January 2025, the FASB issued ASU 2025-01 “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures — Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company expects to adopt the guidance in its annual report on Form 10-K for the fiscal year ending August 31, 2028. The Company is currently evaluating the effects of this pronouncement on its financial statements and expects the update to result in additional disclosures.

In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software”, which modernizes guidance for internal-use software costs. The amendments in this update improve the operability of the guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. This update is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years, though early adoption is permitted. The Company expects to adopt the guidance in its annual report on Form 10-K for the fiscal year ending August 31, 2029. The Company is currently evaluating the effects of this pronouncement on its financial statements and does not expect the update to have a material effect on its financial statements.

In December 2025, the FASB issued ASU 2025-11, Narrow-Scope Improvements (Topic 270): Interim Reporting. This update makes targeted, narrow-scope improvements to the interim reporting guidance in Topic 270 to clarify application and improve consistency in practice. The amendments do not change the underlying principles ofinterim reporting. The amendments in this ASU are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company expects to adopt the guidance in its Form 10-Q for the interim period ending November 30, 2028. The Company is currently evaluating the effects of this pronouncement on its financial statements and does not expect the adoption of this ASU to have a material effect on its financial statements.

Note 3—Balance Sheet Components

Accounts and Other Receivables

Accounts and other receivables as of August 31, 2026 and August 31, 2025 consists of the following:

Inventories

Inventories as of August 31, 2026 and August 31, 2025 consists of the following:

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of August 31, 2026 and August 31, 2025 consists of the following:

Property and Equipment - net

Property and equipment - net as of August 31, 2026 and August 31, 2025 consists of the following:

Depreciation and amortization expense for property and equipment was $17.7 million, $14.0 million and $11.8 million for the fiscal years ended August 31, 2026, August 31, 2025, and August 31, 2024, respectively. Disposals of long-lived assets were $0.3 million, $0.1 million and $22 thousand for the fiscal years ended August 31, 2026, August 31, 2025, and August 31, 2024, respectively.

Deposits and Other Assets

Deposits and other assets, as of August 31, 2026 and August 31, 2025 consists of the following:

Note 4—Leases

The Company has operating and finance leases for its corporate offices, restaurant locations, kitchen and office equipment and automobiles. The Company’s finance leases are immaterial. The Company’s leases have remaining lease terms ofless 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 loss for fiscal years 2026, 2025 and 2024 are as follows:

Supplemental balance sheet information related to leases is as follows:

Operating Leases

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

As of August 31, 2026, the Company recorded a non-cash reduction of operating lease right-of use assets of $444 thousand and operating lease liabilities of $506 thousand resulting in a net balance of $62 thousand recorded in occupancy and related expenses in the accompanying statements of operations and comprehensive loss from a lease remeasurement related to one restaurant location.

As of August 31, 2026, the Company had an additional$71.5 million of operating leases related to restaurants for which the Company had not yet taken possession. Subsequent to August 31, 2026, the Company entered intotwo 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, 2026 are $9.9 million. The operating leases are expected to commence in fiscal years 2027 with lease terms of up to 20 years.

Maturities of lease liabilities are as follows as of August 31, 2026:

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 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 loss.

Balances arising from transactions with Kura Japan are presented in the accompanying balance sheets under the line items “Due from affiliate” and “Due to affiliate.”

On April 10, 2020, the Company and Kura Japan entered into a Revolving Credit Agreement, as amended, to provide the Company a line of credit of $45.0 million(as amended, the “Revolving Credit Agreement”). For additional information, see “Note 8 — Debt.”

Reimbursements and other payments by the Company to Kura Japan for fiscal years ended August 31, 2026, August 31, 2025, and August 31, 2024 are as follows:

Reimbursements by Kura Japan to the Company were$0.4 million,$0.4 million and$0.3 million for fiscal years ended August 31, 2026, August 31, 2025, and August 31, 2024, respectively. The reimbursements were primarily for travel, professional fees and other administrative expenses.

Note 6—Investments

As of August 31, 2026 and August 31, 2025, the Company’s investments are summarized below. The Company has one certificate of deposit of $0.5 million, which is restricted to funding a collateral account relating to a standby letter of credit. Based on the evaluation of credit risk factors guaranteed by the U.S. government, the Company has concluded that an allowance for credit losses is unnecessary for its investments.

The following table sets forth the maturities of the Company’s assets as of August 31,2026 and August 31, 2025.

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, 2026 and August 31, 2025.

Note 8—Debt

On April 10, 2020, the Company and Kura Japan entered into a Revolving Credit Agreement, as amended on September 2, 2020, April 9, 2021 and April 4, 2025, 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, 2028. The Revolving Credit Note, as amended, 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, 2026 and August 31, 2025, the Company hadno outstanding balance and had$45.0 million of availability remaining under the Revolving Credit Agreement.

Note 9—Commitments and Contingencies

Purchase Obligations

We enter into various purchase obligations in the ordinary course of business, generally of a short-term nature. As of August 31, 2026, we had an aggregate of approximately$21.7 million in contractual obligations, which consisted of $14.6 million in purchase commitments for food related to restaurant operations and $7.1 million related to the construction of new restaurants. All contractual obligations are expected to be paid during the next 12 months utilizing cash and cash equivalents on hand and provided by operations.

Legal Matters

On December 9, 2024, a former employee filed a putative class action complaint in the Superior Court of California in Los Angeles, individually and on behalf of others similarly situated, against the Company alleging certain violations of California labor laws. The complaint alleges various wage and hour violations under the California Labor Code and related statutes. Plaintiff has also served a Private Attorneys General Act (“PAGA”) notice for the same alleged wage and hour violations. In February 2026, the Company reached an agreement to settle the claims for $0.9 million, subject to court approval. The Company expensed $0.9 million related to this settlement within general and administrative expenses in the statements of operations and comprehensive loss during the three months ended February 28, 2026, and has an accrued liability of $0.9 million related to this settlement as of August 31, 2026.

The Company is involved from time to time in various legal proceedings that arise in the ordinary course of business, including but not limited to commercial disputes, environmental matters, employee related claims, intellectual property disputes and litigation in connection with transactions, including acquisitions and divestitures.

In the opinion of management, the Company does not believe that such litigation, claims, and administrative proceedings will have a material adverse effect on its business, financial position, results of operations or cash flows. However, a significant increase in the number of these claims or an increase in amounts owing under successful claims, including the putative class action referenced above, could materially and adversely affect its business, financial condition, results of operations or cash flows. The Company records a liability when a loss is considered probable, and the amount can be reasonably estimated.

Note 10—Segment Information

The Company operates asone reportable segment: company-owned restaurants and inone geographic area: the United States of America. The Company does not have intra-entity sales or transfers. Sales represent sales of food and beverages in restaurants. The Chief Executive Officer, whoserves as the Chief Operating Decision Maker (“CODM”), evaluates performance and allocates resources based on sales and operating income (loss). The CODM does not review segment assets at a level different than what is reported in the Company’s balance sheet.

Reported segment sales and expenses are presented below (in thousands):

Note 11—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, performance 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. The Stock Incentive Plan authorizes 1,350,000 shares to be granted.

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

The total intrinsic value of stock options exercised during fiscal year 2026 was$1.0 million.

The total fair value of options vested was$2.7 million,$3.2 million, and$3.7 million for the fiscal years ended August 31, 2026, August 31, 2025, and August 31, 2024, respectively. As of August 31, 2026, unrecognized stock-based compensation of$4.8 million related to unvested stock options is expected to be recognized on a straight-line basis over a weighted average period of 1.3 years.

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

The total fair value of RSUs vested was$1.4 million,$1.1 million and$0.9 million for the fiscal years ended August 31, 2026, August 31, 2025 and August 31, 2024, respectively. As of August 31, 2026, unrecognized stock-based compensation of$4.4 million related to unvested RSUs is expected to be recognized on a straight-line basis over a weighted average period of 1.5 years.

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

As of August 31, 2026, unrecognized stock-based compensation of$0.9 million related to unvested PSUs is expected to be recognized on a straight-line basis over a weighted average period of 1.1 years.

Stock-based Compensation Expense

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

Determination of Fair Value

For the fiscal years ended August 31, 2026, August 31, 2025, and August 31, 2024, the fair value of stock options was estimated on the grant date using the Black-Scholes valuation model with the following assumptions:

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 - The expected volatility is derived from the average historical stock volatilities of several publicly traded companies within the Company’s industry that the Company considers to be comparable to its business, measured 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 bezero 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 12—Loss Per Share

The net loss per share attributable to common stockholders is allocated based on the contractual participation rights of the Class A common stock and Class B common stock as if the loss for the year 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 loss per share:

The Company computes basic loss per common share using net loss and the weighted average number of common shares outstanding during the period, and computes diluted loss per common share using net loss and the weighted average number of common shares, which excludes potentially dilutive common shares outstanding during the period. Potentially dilutive common shares include dilutive outstanding employee stock options, RSUs and PSUs.

For the fiscal years ended August 31, 2026, August 31, 2025 and August 31, 2024, there were 670 thousand,651 thousand and 647 thousand shares of common stock, respectively, subject to outstanding employee stock options, RSUs and PSUs that were excluded from the calculation of diluted net loss per common share because their inclusion would have been anti-dilutive.

Note 13—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. 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$0.7 million,$0.6 million and$0.5 million during the fiscal years ended August 31, 2026, August 31, 2025 and August 31, 2024, respectively.

Note 14—Income Taxes

The components of loss before income taxes are as follows:

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which updated income tax disclosure requirements related to the income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The Company has applied ASU 2023-09 beginning in fiscal year ended August 31, 2026. As such, our effective tax rate reconciliation for fiscal year ended August 31, 2026 is reflected in a new table following the requirements set forth in ASU 2023-09, while the 2025 and 2024 effective tax rate reconciliations are presented in the historical format as required by U.S. GAAP.

The Company had an effective tax rate of(5.0)%,(10.1)% and(1.9)% for the fiscal years ended August 31, 2026, August 31, 2025, and August 31, 2024, respectively.

The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate after adoption of ASU 2023-09 was as follows:

(a)

During the year ended August 31, 2026, state taxes in Texas comprised the greater than 50% of the tax effect in this category.

The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate, prior to the adoption of ASU 2023-09 was as follows:

The details of fiscal year ended August 31, 2026 cash paid for income taxes, net of refunds, consisted of the following:

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, 2026, the Company has U.S. federal net operating loss (“NOL”) carryover of approximately $41.7 million, various state NOL carryover of approximately $24.6 million, and federal tax credit carryover of approximately $12.9 million. If not utilized, $39.1 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 completed the Section 382 and 383 assessments of an ownership change as of August 31, 2026.

The Company hasnot recorded any unrecognized tax benefits as of August 31, 2026. 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, 2026, 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$20.1 million. The net change for the valuation allowance was$2.6 million for the fiscal year ended August 31, 2026.

On July 4, 2025, the President signed into law, the reconciliation tax bill, commonly known as the “One Big Beautiful Bill Act” (OBBA). Notable corporate provisions include the restoration of 100% bonus depreciation; the creation of Section 174A, which reinstates expensing for domestic research and experimental expenditures; modifications to Section 163(j) interest limitations; updates to the rules for global intangible low-taxed income and foreign-derived intangible income; amendments to the rules for energy credits; and the expansion of Section 162(m) aggregation requirements. OBBA did not have a material impact on the Company’s effective tax rate or income tax expense for thefiscal year ended August 31, 2026.