Core Insights - The article discusses the expansion of Asian food chains in the United States, focusing on Jollibee, Luckin Coffee, Kura Sushi, and Haidi Lao Hot Pot, and their potential as investment opportunities [1][22]. Jollibee - Jollibee is a Philippine-based fast food chain known for its fried chicken and unique spaghetti, with over 1,300 locations in the Philippines and nearly 500 internationally, including over 100 in North America [1][19]. - The company aims to expand its North American presence from about 100 to 250 locations through franchising, with average unit volumes of $4.2 million per year for company-owned locations [1][19]. - Jollibee's brand is as popular in the Philippines as McDonald's and Coca-Cola, and 60% of its U.S. customers are non-Filipinos, indicating a growing appeal beyond its traditional customer base [1][19]. - The company currently spends less than 2.5% of its total costs on marketing in the U.S., which may hinder brand recognition and average unit volumes as it expands [4][19]. - The management's focus appears to be on acquiring smaller beverage chains rather than solely promoting the Jollibee brand, raising concerns about the company's strategic focus [4][19]. Luckin Coffee - Luckin Coffee, a Chinese coffee chain, has made a significant comeback after a fraud scandal, now boasting over 26,000 locations globally and a revenue growth of 47% last quarter [7][10]. - The company operates on a low-cost, quick-service model, appealing to consumers seeking speed and efficiency rather than a premium experience [9][10]. - Despite its past issues, Luckin Coffee's current growth strategy and profitability metrics are seen as promising, with a lower price-to-sales multiple compared to Starbucks [7][10]. - The company has been expanding aggressively, opening around 2,000 new locations quarterly, and has seen double-digit growth in same-store sales [7][10]. Kura Sushi - Kura Sushi is a conveyor belt sushi restaurant expanding in the U.S. through company-owned locations rather than franchising, which may provide more lucrative returns for investors [11][12]. - The chain has about 75-80 U.S. locations, reporting restaurant-level operating margins of 17-18% and average unit volumes of $4.2 million [12][13]. - Despite its fun dining experience, Kura Sushi is not yet profitable due to high expenses associated with aggressive unit growth [13][16]. - The concept may face challenges in becoming a regular dining choice for consumers, as it is perceived more as a special occasion experience [13][16]. Haidi Lao Hot Pot - Haidi Lao Hot Pot is a high-end hot pot chain with over 1,400 locations globally and more than a dozen in the U.S., known for its unique dining experience [17][19]. - The company operates with low margins, reporting only 3% operating margins in the first half of the year, highlighting the importance of disciplined growth and operational efficiency [17][19]. - The niche market appeal of hot pot dining may limit its mass market success, requiring careful market selection for expansion [17][19].

Kura Sushi USA FY Conference Summary Company Overview - **Company**: Kura Sushi USA (NasdaqGM: KRUS) - **Fiscal Year**: 2025 - **Conference Date**: September 11, 2025 Key Points Reservation System Implementation - The introduction of a reservation system aims to reduce multi-hour wait times, especially on weekends, enhancing customer experience by seating guests within two minutes of arrival [2][3] - The system is expected to drive positive same-store sales in fiscal 2026, with plans to advertise it outside the rewards program [2][3] IP Collaborations - Fiscal 2025 saw a lack of IP collaborations for a couple of months, leading to questions about their impact; however, the company confirmed that these collaborations are significant revenue drivers [9][10] - An IP committee was established to manage and increase the number of collaborations, with plans for seven to eight campaigns in fiscal 2026 compared to the typical four to five [11][15] - The success of the Hollow Light campaign demonstrated that smaller, passionate audiences can effectively support campaigns without traditional giveaways [12][13] Cost Management and Supply Chain - 65% of purchases are sourced overseas, with 45% from Japan, Vietnam, and South Korea; tariffs currently stand at 25% for Japan [17][18] - The company expects to mitigate tariff impacts through vendor negotiations, aiming for a 50-50 split on tariff costs [17][18] - Effective pricing strategies are in place, with a 2% price drop scheduled for November 1, leading to expectations of significant pricing power thereafter [18] Store-Level Margins and Labor Costs - The company aims to achieve a restaurant-level margin of 20% or better in fiscal 2026 [16] - Labor costs have normalized from high single-digit inflation to low single-digit inflation, with expectations for continued improvement in fiscal 2026 [37][38] Development Strategy - The company plans a 70% focus on existing markets and 30% on new markets for fiscal 2026, anticipating a 400 basis point headwind to same-store sales [30][31] - The pipeline for fiscal 2026 looks promising, with expectations for improved unit economics and reduced cannibalization effects [31][32] Cash Position and Future Outlook - Kura Sushi holds approximately $90 million in cash and investments, with expectations to become cash flow positive in the next four to five years [40] - The company sees significant growth potential in the sushi market, particularly due to industry fragmentation and post-pandemic shifts in consumer behavior [42] Loyalty Program Enhancements - The company is working on a tier-based loyalty system and frequency-based giveaways to enhance customer engagement and drive repeat visits [25][26] Dishwashing Robot Initiative - The certification process for a proprietary dishwashing robot is nearing completion, with potential retrofitting in up to 50 existing restaurants, expected to reduce labor costs by about 50 basis points [27][28] Additional Insights - The company is optimistic about the total addressable market, especially following positive developments in previously unexplored markets like Bakersfield [42] - The focus on asset-light IP campaigns and innovative marketing strategies is expected to drive future growth and customer engagement [12][15]

Company Overview - Kura Sushi USA, Inc. is a technology-enabled Japanese restaurant concept with 79 locations across 22 states and Washington DC [1] - The company offers a distinctive dining experience based on authentic Japanese cuisine and a revolving sushi service model [1] - Established in 2008 as a subsidiary of Kura Sushi, Inc., which has over 650 restaurants and 45 years of brand history in Japan [1] Investor Engagement - On September 10, 2025, the company will meet with institutional investors at the 2025 Benchmark Consumer 1x1 Investor Conference in New York, NY [2] - On September 11, 2025, the company will host a fireside chat at the Piper Sandler Growth Frontiers Conference in Nashville, TN, starting at 1:00 p.m. CT, which will be webcast live [2]

Core Viewpoint - Kura Sushi (KRUS) has received an upgrade to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in a company's earnings picture, which is crucial for predicting near-term stock price movements [2][3]. - A strong correlation exists between earnings estimate revisions and stock price movements, with institutional investors using these estimates to determine fair value [3]. Kura Sushi's Earnings Outlook - The recent upgrade for Kura Sushi indicates an improvement in the company's underlying business, which is expected to positively influence its stock price [4]. - Over the past three months, the Zacks Consensus Estimate for Kura Sushi has increased by 3950%, indicating a significant positive revision in earnings expectations [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [6]. - Kura Sushi's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [9].

Group 1 - The article suggests that the current market conditions present a favorable opportunity for investment, particularly near the support zone [1] - The author references a previous article from April, indicating a consistent analysis approach [1] Group 2 - There are no specific company names or financial data provided in the content, limiting the ability to summarize further details related to companies or industries [2]

Financial Performance - Kura Sushi USA reported quarterly earnings of 5 cents per share, exceeding the analyst consensus estimate of a loss of 1 cent per share [1] - The company achieved quarterly sales of $73.965 million, surpassing the analyst consensus estimate of $71.832 million [1] - Kura Sushi raised its FY2025 sales guidance from a range of $275 million to $279 million, now set at $281 million [1] Management Commentary - Hajime Uba, President and CEO, expressed satisfaction with the third quarter's performance, highlighting the rollout of a new reservation system, exploration of new market opportunities, and development of the IP pipeline [2] - Uba emphasized the team's efforts to capitalize on the summer season and prepare for a strong fiscal 2026 [2] Stock Performance and Analyst Ratings - Following the earnings announcement, Kura Sushi shares fell by 13.2%, trading at $75.00 [2] - Roth Capital analyst George Kelly reiterated a Buy rating and raised the price target from $89 to $106 [8] - Lake Street analyst Mark Smith maintained a Buy rating and increased the price target from $62 to $98 [8] - Barclays analyst Jeffrey Bernstein kept an Equal-Weight rating and raised the price target from $71 to $75 [8]

Core Viewpoint - Kura Sushi reported quarterly earnings of $0.05 per share, exceeding the Zacks Consensus Estimate of a loss of $0.02 per share, marking a significant earnings surprise of +350.00% compared to break-even earnings per share a year ago [1] Financial Performance - The company achieved revenues of $73.97 million for the quarter ended May 2025, surpassing the Zacks Consensus Estimate by 2.22% and showing an increase from $63.08 million in the same quarter last year [2] - Over the last four quarters, Kura Sushi has exceeded consensus EPS estimates three times and has also topped consensus revenue estimates three times [2] Stock Performance and Outlook - Kura Sushi shares have declined approximately 5.2% since the beginning of the year, while the S&P 500 has gained 5.9% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $0.18 on revenues of $77.7 million, with a breakeven estimate on revenues of $280.01 million for the current fiscal year [7] - The estimate revisions trend for Kura Sushi was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Retail - Restaurants industry, to which Kura Sushi belongs, is currently ranked in the top 37% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - Total sales for the fiscal third quarter were $74 million, compared to $63.1 million in the prior year period, representing a growth of approximately 17.5% [15][20] - Comparable sales growth was negative 2.1%, with traffic down 2.9% and price/mix up 0.8% [8][15] - Cost of goods sold as a percentage of sales improved to 28.3% from 29.2% in the prior year quarter [9][17] - Labor costs as a percentage of sales increased to 33.1% from 32.6% in the prior year quarter due to wage inflation [17][19] - Restaurant level operating profit margin was 18.2%, down from 20% in the prior year quarter [9][19] - Adjusted EBITDA increased to $5.4 million from $4.5 million in the prior year quarter, a 20% increase [20] Business Line Data and Key Metrics Changes - The company opened three new restaurants during the third quarter and two more subsequent to the quarter end, achieving its unit development guidance of 14 new restaurants for the fiscal year [9][10] - The class of 2025 restaurants has performed well, with many exceeding expectations shortly after opening [10] Market Data and Key Metrics Changes - Comparable sales in the West Coast market were flat, while the Southwest market saw a decline of 2.5% [15][17] - The company is focusing on smaller DMAs, with successful openings in Bakersfield, California, and plans for further expansion into markets like Des Moines, Richmond, and Tulsa [11] Company Strategy and Development Direction - The company is implementing a new reservation system, which has been rolled out across all restaurants ahead of schedule, and is expected to drive operational efficiencies and improve customer experience [7][13] - There is a renewed focus on intellectual property collaborations, with seven to eight lined up for fiscal 2026, which is a record for the company [11][12] - The company aims to achieve a 50-50 split between new and existing markets by fiscal 2027, with ongoing development in previously unexplored DMAs [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sequential improvement in comparable sales performance each month of the quarter [8][15] - The company is confident in achieving a 20% plus operating margin in fiscal 2026, supported by a strong pipeline of IP collaborations and the reservation system [46][47] - Management noted that labor inflation is expected to moderate in the upcoming quarter, which should help with labor cost leverage [32] Other Important Information - The company has $93 million in cash and no debt at the end of the fiscal third quarter [20] - General and administrative expenses as a percentage of sales were reduced to 11.8% from 14% in the prior year quarter, attributed to lower public company costs and operational efficiencies [18][19] Q&A Session Summary Question: Can you elaborate on the new reservation system and its impact on same-store sales? - Management noted that the reservation system rollout began in late February and showed sequential improvement in sales performance, particularly in May when the first IP campaign was introduced [25][26][29] Question: What are the expectations regarding labor costs and inflation? - The company expects mid to low single-digit labor inflation in Q4, which should improve labor cost leverage if sales are positive [31][32] Question: Can you provide insights on tariff implications and their impact on costs? - Management indicated that they do not foresee a significant impact from tariffs on food and beverage costs, and they are negotiating with suppliers to share any potential cost increases [40][41][42] Question: What is the outlook for restaurant margins moving forward? - Management acknowledged that achieving a 20% margin in fiscal 2025 is challenging but remains confident in reaching that target in fiscal 2026 due to improved sales and operational efficiencies [44][46] Question: How is the company managing general and administrative expenses? - The company is focused on maintaining tight control over hiring and operational efficiencies, which has led to a reduction in G&A expenses as a percentage of sales [79][81] Question: Can you discuss the performance of new store openings? - The class of 2025 openings has been strong, particularly in the Pacific Northwest, and management is optimistic about future openings in new markets [56][57] Question: What are the expectations for the light rice initiative? - The light rice option has been well-received in test markets, and management is confident it will drive increased sales and customer satisfaction [122][124]

Financial Data and Key Metrics Changes - Total sales for the fiscal third quarter were $74 million, compared to $63.1 million in the prior year period, representing a year-over-year increase [14] - Comparable restaurant sales performance was negative 2.1%, with traffic down 2.9% and price and mix positive 0.8% [14] - Cost of goods sold as a percentage of sales improved to 28.3% from 29.2% in the prior year quarter [15] - Labor costs as a percentage of sales increased to 33.1% from 32.6% in the prior year quarter due to wage inflation [15] - Net income was $565,000 or $0.05 per share, compared to a net loss of $558,000 or negative $0.05 per share in the prior year quarter [18] - Adjusted EBITDA increased to $5.4 million from $4.5 million in the prior year quarter, marking a 20% increase [19] Business Line Data and Key Metrics Changes - The company opened three new restaurants during the third quarter and two additional units after the quarter ended, achieving its unit development guidance of 14 new restaurants for the fiscal year [7][8] - Restaurant level operating profit margin was 18.2%, down from 20% in the prior year due to increased labor and occupancy costs [18] Market Data and Key Metrics Changes - Comparable sales in the West Coast market were flat, while the Southwest market experienced a decline of 2.5% [15] - The company is focusing on smaller DMAs, with successful openings in Bakersfield, California, and plans for further expansion into markets like Des Moines, Richmond, and Tulsa [10] Company Strategy and Development Direction - The company aims to achieve a 50-50 split between new and existing markets by fiscal 2027, with ongoing development in previously unexplored DMAs [10] - A new light rice option was introduced to enhance customer experience and potentially drive sales [12] - The company is revamping its marketing strategy with a record number of collaborations planned for fiscal 2026 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sequential improvement in comparable sales performance each month of the quarter [6] - The implementation of the reservation system is expected to drive operational efficiencies and improve customer experience [12] - Management remains cautious about raising guidance too early, reflecting on past experiences [29] Other Important Information - The company has $93 million in cash and no debt at the end of the fiscal third quarter [19] - General and administrative expenses as a percentage of sales are expected to be below 13% for the fiscal year [20] Q&A Session Summary Question: Inquiry about the new reservation system and its impact on same-store sales - Management noted sequential improvement in sales throughout the quarter, with the reservation system rollout contributing positively [25][28] Question: Clarification on tariff implications and cost structure - Management indicated that they are currently assessing the impact of tariffs, with 45% of their basket sourced from Japan, Korea, and Vietnam [40][42] Question: Discussion on restaurant margins and future outlook - Management acknowledged the difficulty in achieving a 20% margin for fiscal 2025 but remains confident in returning to that level in fiscal 2026 [46][48] Question: Insights on new store productivity and market expansion - The company reported that the Class of 2025 openings are performing strongly, particularly in the Pacific Northwest [57] Question: Update on technology initiatives and operational efficiencies - Management highlighted the potential of the robotic dishwasher and ongoing improvements to the reservation system to enhance operational efficiency [109][110]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed financial statements for the period ended May 31, 2025, detailing asset growth to **$419.4 million**, a **17.3%** quarterly sales increase yielding **$0.6 million** net income, and significant financing inflows despite a **$4.2 million** nine-month net loss [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Balance Sheet Highlights (as of May 31, 2025) | Metric | May 31, 2025 (in thousands) | August 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $47,132 | $50,986 | | Total current assets | $72,026 | $61,335 | | Property and equipment – net | $164,909 | $138,589 | | Total assets | $419,373 | $328,522 | | **Liabilities & Equity** | | | | Total current liabilities | $38,548 | $34,499 | | Total liabilities | $192,369 | $165,984 | | Total stockholders' equity | $227,004 | $162,538 | - Total assets increased by **27.7%** to **$419.4 million**, primarily due to growth in property and equipment and the addition of **$45.9 million** in short-term and long-term investments[9](index=9&type=chunk) - Total stockholders' equity grew by **39.7%** to **$227.0 million**, mainly as a result of a follow-on public offering which increased additional paid-in capital[9](index=9&type=chunk)[14](index=14&type=chunk) [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Statement of Operations Summary | Metric | Three Months Ended May 31, 2025 (in thousands) | Three Months Ended May 31, 2024 (in thousands) | Nine Months Ended May 31, 2025 (in thousands) | Nine Months Ended May 31, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Sales | $73,965 | $63,082 | $203,315 | $171,848 | | Operating Loss | $(162) | $(1,169) | $(6,225) | $(5,700) | | Net Income (Loss) | $565 | $(558) | $(4,177) | $(3,603) | | Diluted EPS | $0.05 | $(0.05) | $(0.35) | $(0.32) | - For the third quarter of fiscal 2025, sales grew **17.3%** year-over-year, and the company shifted from a net loss to a net income of **$565 thousand**[11](index=11&type=chunk) - For the nine months ended May 31, 2025, sales increased by **18.3%** year-over-year, but the net loss widened to **$4.2 million** from **$3.6 million** in the prior year period[11](index=11&type=chunk) [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Cash Flow Summary (Nine Months Ended May 31) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $15,338 | $14,943 | | Net cash used in investing activities | $(84,183) | $(27,257) | | Net cash provided by financing activities | $64,991 | $2,022 | | **Decrease in cash and cash equivalents** | **$(3,854)** | **$(10,292)** | - Cash from financing activities surged to **$65.0 million** due to net proceeds of **$64.4 million** from a follow-on public offering[18](index=18&type=chunk)[21](index=21&type=chunk) - Cash used in investing activities increased significantly to **$84.2 million**, driven by **$70.2 million** in purchases of investments and **$36.7 million** for property and equipment[18](index=18&type=chunk) [Notes to Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) - In November 2024, the company completed a follow-on public offering, raising net proceeds of **$64.4 million** to be used for general corporate purposes, including capital expenditures[21](index=21&type=chunk) - The company pays its parent, Kura Japan, a royalty fee of **0.5%** of net sales. For the nine months ended May 31, 2025, total payments to Kura Japan for royalties, equipment, and other services amounted to **$5.2 million**[40](index=40&type=chunk)[41](index=41&type=chunk) - The company has settled several employee wage claims for a total of approximately **$7.2 million** since August 2024 and is currently facing a new putative class action lawsuit filed in December 2024[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - The revolving credit agreement with Kura Japan was extended in April 2025, pushing the availability period to April 10, 2028. As of May 31, 2025, the full **$45.0 million** credit line remains available with no outstanding balance[45](index=45&type=chunk)[46](index=46&type=chunk) [Management's Discussion and Analysis (MD&A)](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports an **18.3%** increase in nine-month sales to **$203.3 million** driven by new restaurants, despite a **1.7%** decline in comparable sales, with liquidity bolstered by a **$64.4 million** offering to support expansion [Overview and Business Trends](index=22&type=section&id=Overview%20and%20Business%20Trends) - The company expanded its footprint by opening **13** new restaurants in the first nine months of fiscal 2025, bringing the total to **76** restaurants across 20 states and Washington, D.C[64](index=64&type=chunk) - The company plans to open a total of **15** new restaurants in fiscal year 2025 and anticipates that revenue, operating costs, and G&A expenses will increase accordingly to support this growth[64](index=64&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q3 FY2025 vs. Q3 FY2024 Performance | Metric | Q3 2025 (in millions) | Q3 2024 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $74.0 | $63.1 | +$10.9 | +17.3% | | Operating Loss | $(0.2) | $(1.2) | +$1.0 | -86.1% | | Net Income (Loss) | $0.6 | $(0.6) | +$1.2 | +201.3% | Nine Months FY2025 vs. Nine Months FY2024 Performance | Metric | YTD 2025 (in millions) | YTD 2024 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $203.3 | $171.8 | +$31.5 | +18.3% | | Operating Loss | $(6.2) | $(5.7) | -$0.5 | -9.2% | | Net Loss | $(4.2) | $(3.6) | -$0.6 | +15.9% | - For the nine months ended May 31, 2025, food and beverage costs as a percentage of sales decreased to **28.6%** from **29.5%** YoY, due to menu price increases and supply chain initiatives[77](index=77&type=chunk)[89](index=89&type=chunk) - Labor costs as a percentage of sales for the nine-month period increased to **33.6%** from **32.5%** YoY, primarily due to higher wage rates[77](index=77&type=chunk)[90](index=90&type=chunk) [Key Performance Indicators (KPIs)](index=29&type=section&id=Key%20Performance%20Indicators) Non-GAAP Performance Metrics (Nine Months Ended May 31) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Adjusted EBITDA | $11.7 | $9.1 | | Adjusted EBITDA Margin | 5.7% | 5.3% | | Restaurant-level Operating Profit | $36.4 | $33.9 | | Restaurant-level Operating Profit Margin | 17.9% | 19.7% | Comparable Restaurant Sales Performance | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended May 31 | (2.1)% | 0.6% | | Nine Months Ended May 31 | (1.7)% | 2.4% | - For the nine months ended May 31, 2025, the comparable restaurant sales decrease of **1.7%** was composed of a **4.2%** decline in traffic offset by a **2.5%** positive price/mix[88](index=88&type=chunk) - The company opened **12** restaurants in the first nine months of fiscal 2025, compared to **13** in the same period of fiscal 2024, ending the period with **76** total restaurants[114](index=114&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) - The company believes its cash on hand, cash from operations, and investments are sufficient to fund needs for at least the next 12 months[116](index=116&type=chunk) - In November 2024, a public offering of common stock generated net proceeds of **$64.4 million**, strengthening the company's capital resources[119](index=119&type=chunk) - As of May 31, 2025, the company had no outstanding balance on its **$45.0 million** revolving credit line with Kura Japan, which was recently extended to 2028[116](index=116&type=chunk)[118](index=118&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk exposure, including commodity price fluctuations and interest rate changes, since its last Annual Report on Form 10-K - No material changes to market risk were reported for the nine months ended May 31, 2025[132](index=132&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of May 31, 2025, with no material changes to internal control over financial reporting identified during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[134](index=134&type=chunk) - No changes occurred in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[135](index=135&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to Note 8 for legal matters, detailing **$7.2 million** in employee wage claim settlements and an ongoing putative class action lawsuit with an unestimable potential loss - Details on legal proceedings are incorporated by reference from Note 8 of the financial statements[137](index=137&type=chunk) - The company has settled multiple employee claims related to wage laws for approximately **$7.2 million** and is defending a new putative class action complaint in California[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) The company highlights no material changes to overall risk factors but emphasizes vulnerability to food and supply costs, particularly due to sole reliance on Kura Japan for proprietary rice vinegar and potential supply chain disruptions - The company's profitability is vulnerable to changes in food and supply costs and the availability of key products[139](index=139&type=chunk) - A specific dependency risk is noted, as Kura Japan is the sole supplier of the company's proprietary rice vinegar[139](index=139&type=chunk) - Supply chain disruptions could force menu changes, cause shortages, and lead to significant reductions in sales[140](index=140&type=chunk) [Other Items (Items 2, 3, 4, 5)](index=38&type=section&id=Other%20Items) This section reports no unregistered equity sales or senior security defaults, and discloses that the CEO and CDO adopted Rule 10b5-1 trading plans for potential stock sales beginning January 2026 - No unregistered sales of equity securities or defaults on senior securities were reported during the period[141](index=141&type=chunk)[142](index=142&type=chunk) - In May 2025, CEO Hajime Uba and CDO Robert Kluger adopted Rule 10b5-1 trading plans for potential future sales of company stock, scheduled to commence no earlier than January 16, 2026[144](index=144&type=chunk)[146](index=146&type=chunk)