þQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
☑ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
oMarch 27, 2022 or
☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
________.
Missouri | 45-3189287 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer | |
Identification No.) |
(Zip Code)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.01 par value | RAVE | Nasdaq Capital Market |
☐
☐
Large accelerated filero Accelerated filero Non-accelerated filero Smaller reporting companyþ
Emerging growth companyo
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☑ | Smaller reporting company ☑ |
Emerging growth company ☐ |
☑o ☐ NoþFebruary 6, 2018, 14,896,208May 4, 2022, 18,004,904 shares of the issuer’s common stock were outstanding.2
PART I. FINANCIAL INFORMATION | |||
Item 1. | Financial Statements | Page | |
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Item 2. | |||
Item 3. | |||
PART II. OTHER INFORMATION
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PART II. OTHER INFORMATION | |||
Item 1. | 26 | ||
Item 1A. | 26 | ||
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Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | 26 | ||
(Unaudited) Three Months Ended Six Months Ended December 24, December 25, December 24, December 25, 2017 2016 2017 2016 REVENUES: $ 4,197 $ 6,780 $ 9,629 $ 14,246 COSTS AND EXPENSES: Cost of sales 1,055 3,858 3,142 8,305 General and administrative expenses 2,017 2,967 4,111 5,525 Franchise expenses 743 685 1,344 1,263 Pre-opening expenses (1) 47 114 54 (Gain)/Loss on sale of assets (166) 656 (165) 699 Impairment of long-lived assets and other lease charges 533 5,057 681 5,226 Bad debt 89 298 213 351 Interest expense 63 2 131 2 Depreciation and amortization expense 288 740 600 1,517 Total costs and expenses 4,621 14,310 10,171 22,942 LOSS FROM CONTINUING OPERATIONS BEFORE TAXES (424) (7,530) (542) (8,696) Income tax expense / (benefit) (27) 5 (14) 10 LOSS FROM CONTINUING OPERATIONS (397) (7,535) (528) (8,706) Loss from discontinued operations (180) (390) (405) (715) NET LOSS $ (577) $ (7,925) $ (933) $ (9,421) LOSS PER SHARE OF COMMON STOCK - BASIC: Loss from continuing operations $ (0.03) $ (0.71) $ (0.04) $ (0.82) Loss from discontinued operations (0.01) (0.03) (0.03) (0.07) Net loss $ (0.04) $ (0.74) $ (0.07) $ (0.89) LOSS PER SHARE OF COMMON STOCK - DILUTED: Loss from continuing operations $ (0.03) $ (0.71) $ (0.04) $ (0.82) Loss from discontinued operations $ (0.01) $ (0.03) $ (0.03) $ (0.07) Net loss $ (0.04) $ (0.74) $ (0.07) $ (0.89) Weighted average common shares outstanding - basic 14,344 10,657 12,742 10,575 Weighted average common and potential dilutive common shares outstanding 14,344 10,657 12,742 10,575 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 4CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) December 24, June 25, 2017 (unaudited) 2017 ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 1,428 $ 451 Accounts receivable, less allowance for bad debts accounts of $332 and $249, respectively 1,494 2,761 Notes receivable 2,060 675 Inventories 19 79 Income tax receivable - 194 Property held for sale 608 671 Prepaid expenses and other 448 295 Total current assets 6,057 5,126 LONG-TERM ASSETS Property, plant and equipment, net 1,667 3,808 Intangible assets definite-lived, net 228 239 Long-term notes receivable - 127 Deposits and other 243 246 Total assets $ 8,195 $ 9,546 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 1,428 $ 4,165 Short-term debt - 1,000 Accrued expenses 854 1,265 Deferred rent 41 101 Deferred revenues 97 212 Total current liabilities 2,420 6,743 Convertible notes 1,459 2,749 Deferred rent, net of current portion 294 655 Deferred revenues, net of current portion 715 1,425 Other long-term liabilities 45 53 Total liabilities 4,933 11,625 SHAREHOLDERS' EQUITY Common stock, $.01 par value; authorized 26,000,000 shares; issued 22,015,608 and 17,786,049 shares, respectively; outstanding 14,896,208 and 10,666,649 shares, respectively 220 178 Additional paid-in capital 33,016 26,784 Accumulated deficit (5,338) (4,405) Treasury stock at cost Shares in treasury: 7,119,400 (24,636) (24,636) Total shareholders' equity (deficit) 3,262 (2,079) $ 8,195 $ 9,546 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
(Unaudited)5RAVE RESTAURANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended December 24, December 25, 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (933) $ (9,421) Adjustments to reconcile net loss to cash used in operating activties: Depreciation and amortization 581 1,513 Amortization of intangible assets definite-lived 19 26 Amortization of debt issue costs 23 - Impairment of long-lived assets 681 4,773 Stock compensation expense 19 90 (Gain)/loss on sale/disposal of assets (166) 699 Provision for bad debt 213 351 Changes in operating assets and liabilities: Notes and accounts receivable 1,376 100 Inventories 60 (2) Accounts payable - trade (3,667) 680 Accrued expenses (419) (132) Deferred rent (421) (253) Deferred revenue (690) (246) Prepaid expenses and other (150) 182 Cash used in operating activities (3,474) (1,640) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of assets 939 45 Purchase of intangible assets definite-lived (9) - Capital expenditures (421) (217) Cash provided by (used in) investing activities 509 (172) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of stock 4,942 - Proceeds from stock options - 806 Net change in other debt (1,000) 1,000 Cash provided by financing activities 3,942 1,806 Net increase (decrease) in cash and cash equivalents 977 (6) Cash and cash equivalents, beginning of period 451 873 Cash and cash equivalents, end of period $ 1,428 $ 867 <TABLE><CAPTION> SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest paid $ 115 $ - Taxes paid $ 48 $ 25 Non-cash activities: Capital expenditures included in accounts payable $ 125 $ - See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. Three Months Ended Nine Months Ended REVENUES: $ 2,620 $ 2,183 $ 7,869 $ 6,214 COSTS AND EXPENSES: Cost of sales 1 76 1 229 General and administrative expenses 1,357 1,250 3,940 3,524 Franchise expenses 705 629 2,475 1,782 Gain on sale of assets 0 (156 ) 0 (156 ) Impairment of long-lived assets and other lease charges 0 0 0 21 Bad debt expense (recovery) 1 (97 ) 9 18 Interest expense 14 23 61 69 Depreciation and amortization expense 46 41 138 128 Total costs and expenses 2,124 1,766 6,624 5,615 INCOME BEFORE TAXES 496 417 1,245 599 Income tax expense 3 1 10 5 NET INCOME 493 416 1,235 594 INCOME PER SHARE OF COMMON STOCK - BASIC: $ 0.03 $ 0.02 $ 0.07 $ 0.03 INCOME PER SHARE OF COMMON STOCK - DILUTED: $ 0.03 $ 0.02 $ 0.07 $ 0.03 Weighted average common shares outstanding - basic 18,005 17,991 18,005 17,061 Weighted average common and potential dilutive common shares outstanding 18,452 18,789 18,686 17,859 6
March 27, 2022 | June 27, 2021 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 7,237 | $ | 8,330 | ||||
Accounts receivable, less allowance for bad debts of $22 and $47, respectively | 1,175 | 911 | ||||||
Notes receivable, current | 443 | 901 | ||||||
Deferred contract charges, current | 36 | 35 | ||||||
Prepaid expenses and other | 131 | 196 | ||||||
Total current assets | 9,022 | 10,373 | ||||||
LONG-TERM ASSETS | ||||||||
Property, plant and equipment, net | 365 | 445 | ||||||
Operating lease right of use asset, net | 1,771 | 2,085 | ||||||
Intangible assets definite-lived, net | 196 | 183 | ||||||
Notes receivable, net of current portion | 242 | 52 | ||||||
Deferred contract charges, net of current portion | 223 | 207 | ||||||
Total assets | $ | 11,819 | $ | 13,345 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable - trade | $ | 615 | $ | 644 | ||||
Accrued expenses | 749 | 924 | ||||||
Other current liabilities | 46 | 46 | ||||||
Operating lease liability, current | 483 | 465 | ||||||
Short term loan, current | 60 | 250 | ||||||
Convertible notes short term, net of unamortized debt issuance costs and discounts | 0 | 1,576 | ||||||
Deferred revenues, current | 430 | 626 | ||||||
Total current liabilities | 2,383 | 4,531 | ||||||
LONG-TERM LIABILITIES | ||||||||
Operating lease liability, net of current portion | 1,546 | 1,911 | ||||||
Deferred revenues, net of current portion | 795 | 1,170 | ||||||
Total liabilities | 4,724 | 7,612 | ||||||
COMMITMENTS AND CONTINGENCIES (SEE NOTE D) | ||||||||
0 | 0 | |||||||
SHAREHOLDERS' EQUITY | ||||||||
Common stock, $0.01 par value; authorized 26,000,000 shares; issued 25,090,058 and 25,090,058 shares, respectively; outstanding 18,004,904 and 18,004,904 shares, respectively | 251 | 251 | ||||||
Additional paid-in capital | 37,342 | 37,215 | ||||||
Accumulated deficit | (5,961 | ) | (7,196 | ) | ||||
Treasury stock at cost | ||||||||
Shares in treasury: 7,085,154 and 7,085,154, respectively | (24,537 | ) | (24,537 | ) | ||||
Total shareholders' equity | 7,095 | 5,733 | ||||||
Total liabilities and shareholders' equity | $ | 11,819 | $ | 13,345 |
Common Stock | Treasury Stock | |||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Shares | Amount | Total | ||||||||||||||||||||||
Balance, June 28, 2020 | 22,550 | $ | 225 | $ | 33,531 | $ | (8,716 | ) | (7,085 | ) | $ | (24,537 | ) | $ | 503 | |||||||||||||
Equity issue costs - ATM offering | — | 0 | (3 | ) | 0 | — | 0 | (3 | ) | |||||||||||||||||||
Net income | — | 0 | 0 | 76 | — | 0 | 76 | |||||||||||||||||||||
Balance, September 27, 2020 | 22,550 | $ | 225 | $ | 33,528 | $ | (8,640 | ) | (7,085 | ) | $ | (24,537 | ) | $ | 576 | |||||||||||||
Issuance of Common Stock | 2,540 | 26 | 3,735 | 0 | — | 0 | 3,761 | |||||||||||||||||||||
Equity issue costs - ATM offering | — | 0 | (127 | ) | 0 | — | 0 | (127 | ) | |||||||||||||||||||
Net income | — | 0 | 0 | 102 | — | 0 | 102 | |||||||||||||||||||||
Balance, December 27, 2020 | 25,090 | 251 | $ | 37,136 | $ | (8,538 | ) | (7,085 | ) | $ | (24,537 | ) | $ | 4,312 | ||||||||||||||
Stock compensation expense | — | 0 | 39 | 0 | — | 0 | 39 | |||||||||||||||||||||
Equity issue costs - ATM offering | — | 0 | (1 | ) | 0 | — | 0 | (1 | ) | |||||||||||||||||||
Net income | — | 0 | 0 | 416 | — | 0 | 416 | |||||||||||||||||||||
Balance, March 28, 2021 | 25,090 | 251 | $ | 37,174 | $ | (8,122 | ) | (7,085 | ) | $ | (24,537 | ) | $ | 4,766 |
Common Stock | Treasury Stock | |||||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Shares | Amount | Total | ||||||||||||||||||||||
Balance, June 27, 2021 | 25,090 | $ | 251 | $ | 37,215 | $ | (7,196 | ) | (7,085 | ) | $ | (24,537 | ) | $ | 5,733 | |||||||||||||
Stock compensation expense | — | 0 | 42 | 0 | — | 0 | 42 | |||||||||||||||||||||
Net income | — | 0 | 0 | 285 | — | 0 | 285 | |||||||||||||||||||||
Balance, September 26, 2021 | 25,090 | $ | 251 | $ | 37,257 | $ | (6,911 | ) | (7,085 | ) | $ | (24,537 | ) | $ | 6,060 | |||||||||||||
Stock compensation expense | — | 0 | 43 | 0 | — | 0 | 43 | |||||||||||||||||||||
Net income | — | 0 | 0 | 457 | — | 0 | 457 | |||||||||||||||||||||
Balance, December 26, 2021 | 25,090 | $ | 251 | $ | 37,300 | $ | (6,454 | ) | (7,085 | ) | $ | (24,537 | ) | $ | 6,560 | |||||||||||||
Stock compensation expense | — | 0 | 42 | 0 | — | 0 | 42 | |||||||||||||||||||||
Net income | — | 0 | 0 | 493 | — | 0 | 493 | |||||||||||||||||||||
Balance, March 27, 2022 | 25,090 | $ | 251 | $ | 37,342 | $ | (5,961 | ) | (7,085 | ) | $ | (24,537 | ) | $ | 7,095 |
Nine Months Ended | ||||||||
March 27, 2022 | March 28, 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 1,235 | $ | 594 | ||||
Adjustments to reconcile net income to cash provided by/(used in) operating activities: | ||||||||
Impairment of long-lived assets and other lease charges | 0 | 21 | ||||||
Stock compensation expense | 127 | 39 | ||||||
Depreciation and amortization | 105 | 100 | ||||||
Amortization of operating right of use assets | 314 | 435 | ||||||
Amortization of intangible assets definite-lived | 33 | 28 | ||||||
Amortization of debt issue costs | 21 | 20 | ||||||
Gain on the sale of assets | 0 | (156 | ) | |||||
Provision for bad debt | 9 | 18 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (273 | ) | (245 | ) | ||||
Notes receivable | 28 | (144 | ) | |||||
Deferred contract charges | (17 | ) | 23 | |||||
Prepaid expenses and other | 65 | (57 | ) | |||||
Deposits and other | 0 | 5 | ||||||
Accounts payable - trade | (29 | ) | (1 | ) | ||||
Accounts payable - lease termination impairments | 0 | (428 | ) | |||||
Accrued expenses | (175 | ) | 201 | |||||
Operating lease liability | (347 | ) | (470 | ) | ||||
Deferred revenue | (571 | ) | (289 | ) | ||||
Other long-term liabilities | 0 | (51 | ) | |||||
Cash provided by/(used in) operating activities | 525 | (357 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Payments received on notes receivable | 240 | 40 | ||||||
Purchase of intangible assets definite-lived | (46 | ) | 0 | |||||
Purchase of property, plant and equipment | (25 | ) | (29 | ) | ||||
Cash provided by investing activities | 169 | 11 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from sale of stock | 0 | 3,761 | ||||||
Equity issuance costs - ATM offering | 0 | (131 | ) | |||||
Payment of Convertible Notes | (1,597 | ) | 0 | |||||
Short term loan, current | (190 | ) | 0 | |||||
Cash (used in)/provided by financing activities | (1,787 | ) | 3,630 | |||||
Net (decrease)/increase in cash and cash equivalents | (1,093 | ) | 3,284 | |||||
Cash and cash equivalents, beginning of period | 8,330 | 3,203 | ||||||
Cash and cash equivalents, end of period | $ | 7,237 | $ | 6,487 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
CASH PAID FOR: | ||||||||
Interest | $ | 64 | $ | 64 | ||||
Income taxes | $ | 8 | $ | 16 | ||||
Non-cash activities: | ||||||||
Conversion of notes to common shares | $ | 0 | $ | 0 | ||||
Operating lease right of use assets at adoption | $ | 0 | $ | 0 | ||||
Operating lease liability at adoption | $ | 0 | $ | 0 |
27, 2021.
Revenue Recognition
The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities.
Franchise revenues consist of income from license fees, royalties, and area development and foreign master license fees and supplier and distributor incentive revenues. License fees are recognized as income when there has been substantial performance under the agreement by the Company. Domestic license fees are generally recognized at the time the restaurant is opened. Foreign master license fees are generally recognized upon execution of the agreement as all material services relating to the sale have been substantially performed by the Company and the fee has been collected. Royalties are recognized as income when earned. Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfers.
Stock-Based Compensation
The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future. The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.
Restricted Stock Units
Compensation cost for restricted stock units (“RSU’s”) is measured as an amount equal to the fair value of the RSU’s on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.
Reclassification
Certain items have been reclassified
Discontinuationsubfranchise are amortized as revenue over the term of Norco Distribution Division
During the fiscal quarter ended December 24, 2017,contract.
Three Months Ended | ||||||||
March 27, 2022 | March 28, 2021 | |||||||
Franchise royalties | $ | 1,137 | $ | 933 | ||||
Supplier and distributor incentive revenues | 1,056 | 916 | ||||||
Franchise license fees | 36 | 79 | ||||||
Area development fees and foreign master license fees | 5 | 9 | ||||||
Advertising funds | 339 | 194 | ||||||
Rental income | 47 | 52 | ||||||
$ | 2,620 | $ | 2,183 |
Nine Months Ended | ||||||||
March 27, 2022 | March 28, 2021 | |||||||
Franchise royalties | $ | 3,315 | $ | 2,638 | ||||
Supplier and distributor incentive revenues | 3,051 | 2,491 | ||||||
Franchise license fees | 106 | 261 | ||||||
Area development fees and foreign master license fees | 14 | 17 | ||||||
Advertising funds | 1,083 | 469 | ||||||
Supplier convention funds | 143 | 177 | ||||||
Rental income | 140 | 152 | ||||||
Other | 17 | 9 | ||||||
$ | 7,869 | $ | 6,214 |
Nine Months Ended | ||||
March 27, 2022 | ||||
Operating lease cost | $ | 374 | ||
Rental income | (140 | ) | ||
Total lease expense, net of sublease income | $ | 234 |
Nine Months Ended | ||||
March 27, 2022 | ||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 413 |
March 27, 2022 | ||||
Weighted average remaining lease term | 3.3 Years | |||
Weighted average discount rate | 4.0 | % |
Operating Leases | ||||
Remainder of fiscal year 2022 | $ | 138 | ||
2023 | 558 | |||
2024 | 511 | |||
2025 | 433 | |||
2026 | 382 | |||
Thereafter | 191 | |||
Total operating lease payments | $ | 2,213 | ||
Less: imputed interest | (184 | ) | ||
Total operating lease liability | $ | 2,029 |
may repurchase by 1,000,000 shares to a total of 2,016,000 shares. On April 22, 2009, the Company’s board of directors amended the 2007 Stock Purchase Plan first adopted on May 23, 2007 and previously amended on June 2, 2008,again to increase the number of shares of common stock the Company may repurchase by 1,000,000 shares to a total of 3,016,000 shares. The 2007 Stock Purchase Plan does not have an expiration date. There were no0 stock repurchasespurchases in the second quarter of fiscal 2018. As of December 24, 2017, up to an additional 848,425 shares could be repurchased under the 2007 Stock Purchase Plan.
quarters ended March 27, 2022 or March 28, 2021.
(3)
options.
<BTB> | Six Months Ended | ||
<BTB> | December 24, 2017 | December 25, 2016 | |
Outstanding at beginning of year | 478,056 | 847,556 | |
Granted | - | 50,000 | |
Exercised | - | (315,000) | |
Forfeited/Canceled/Expired | - | (80,000) | |
Outstanding at end of period | 478,056 | 502,556 | |
Exercisable at end of period | 438,056 | 365,406 |
Nine Months Ended Shares Shares Outstanding at beginning of year 166,750 206,750 Granted 0 0 Exercised 0 0 Forfeited/Canceled/Expired 0 0 Outstanding at end of period 166,750 206,750 Exercisable at end of period 166,750 206,750
RSUs.
Unvested at June 27, 2021 | ||||
545,600 | ||||
Granted | 0 | |||
Issued | 0 | |||
Forfeited | (22,412 | ) | ||
Unvested at | | |||
| ||||
| ||||
Three Months Ended | Six Months Ended | ||||||
December 24, | December 25, | December 24, | December 25, | ||||
2017 | 2016 | 2017 | 2016 | ||||
Loss from continuing operations | $ (397) | $ (7,535) | $ (528) | $ (8,706) | |||
Loss from discontinued operations | (180) | (390) | (405) | (715) | |||
Net loss available to common stockholders | $ (577) | $ (7,925) | $ (933) | $ (9,421) | |||
BASIC: | |||||||
Weighted average common shares | 14,344 | 10,657 | 12,742 | 10,575 | |||
Loss from continuing operations per common share | $ (0.03) | $ (0.71) | $ (0.04) | $ (0.82) | |||
Loss from discontinued operations per common share | (0.01) | (0.03) | (0.03) | (0.07) | |||
Net loss per common share | $ (0.04) | $ (0.74) | $ (0.07) | $ (0.89) | |||
DILUTED: | |||||||
Weighted average common shares | 14,344 | 10,657 | 12,742 | 10,575 | |||
Stock options | - | - | - | - | |||
Weighted average common shares outstanding | 14,344 | 10,657 | 12,742 | 10,575 | |||
Loss from continuing operations per common share | $ (0.03) | $ (0.71) | $ (0.04) | $ (0.82) | |||
Loss from discontinued operations per common share | (0.01) | (0.03) | (0.03) | (0.07) | |||
Net loss per common share | $ (0.04) | $ (0.74) | $ (0.07) | $ (0.89) |
:
Three Months Ended | Nine Months Ended | |||||||||||||||
March 27, 2022 | March 28, 2021 | March 27, 2022 | March 28, 2021 | |||||||||||||
Net income available to common stockholders | $ | 493 | $ | 416 | $ | 1,235 | $ | 594 | ||||||||
BASIC: | ||||||||||||||||
Weighted average common shares | 18,005 | 17,991 | 18,005 | 17,061 | ||||||||||||
Net income per common share | $ | 0.03 | $ | 0.02 | $ | 0.07 | $ | 0.03 | ||||||||
DILUTED: | ||||||||||||||||
Weighted average common shares | 18,005 | 17,991 | 18,005 | 17,061 | ||||||||||||
Convertible notes | 447 | 798 | 681 | 798 | ||||||||||||
Dilutive stock options | 0 | 0 | 0 | 0 | ||||||||||||
Weighted average common shares outstanding | 18,452 | 18,789 | 18,686 | 17,859 | ||||||||||||
Net income per common share | $ | 0.03 | $ | 0.02 | $ | 0.07 | $ | 0.03 |
(5) Closed restaurants and discontinued operations
In April, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which modifies the definition of discontinued operations to include only disposals of an entity that represent strategic shifts that have or will have a major effect on an entity’s operation and requires entities to disclose information about disposals of individually significant components that do not meet the definition of discontinued operations. The standard was effective prospectively for annual and interim periods beginning after December 15, 2014, with early adoption permitted.
The authoritative guidance on “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that discontinued operations that meet certain criteria be reflected in the statement of operations after results of continuing operations as a net amount. This guidance also requires that the operations of closed restaurants, including any impairment charges, be reclassified to discontinued operations for all periods presented.
The authoritative guidance on “Accounting for Costs Associated with Exit or Disposal Activities,” requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This authoritative guidance also establishes that fair value is the objective for initial measurement of the liability.
Discontinued operations include losses attributable to the discontinued Norco distribution and supply division, leased buildings associated with Company-owned units closed in prior years, and closed Pizza Inn corporate-owned units.
(6) Income Taxes
which is attributable to current state taxes. The Company utilized net operating losses to offset federal income taxes.
In December 2017, President Donald Trump signed the Tax Cutsproducts and Jobs Act. The new law drops the income tax rate for corporationsservices sold. Corporate administration costs, which include, but are not limited to, 21% effective January 1, 2018. Duegeneral accounting, human resources, legal and credit and collections, are partially allocated to the tax rate change, the deferred tax assets as3 operating segments. Other revenue consists of December 24, 2017 were adjusted by $3.3 millionnon-recurring items.
(7) Related Party Transactions
On February 20, 2014, the Company entered into an Advisory Services Agreement (the “Agreement”) with NCM Services, Inc. (“NCMS”) pursuant to which NCMS would provide certain advisoryPie Five Franchising segments establish franchisees, licensees and consulting services to the Company. NCMSterritorial rights. Revenue for this segment is indirectly owned and controlled by Mark E. Schwarz, the Chairman of the Company. The term of the Agreement commenced December 30, 2013, and continued quarterly thereafter until terminated by either party. Pursuant to the Agreement, NCMS was paid an initial fee of $150,000 and earned quarterlyprimarily derived from franchise royalties, franchise license fees, of $50,000 and an additional fee of up to $50,000 per quarter (not to exceed an aggregate of $100,000 in additional fees). The quarterly and additional fees were waived if the Company was not in compliance with all financial covenants under its primary credit facility or to the extent that payment of those fees would result in non-compliance with such financial covenants. The Agreement was terminated at the end of fiscal 2017.
During the fiscal quarter ended December 24, 2017, the Company discontinued its Norco distribution division and revised its arrangements with third party suppliers and distributors of food, equipment and supplies. As a result, sale of food, equipmentarea development and supplies is no longer recognized as revenue and the cost of such items is no longer included in cost of sales. The Company now recognizesforeign master license rights, incentive revenues receivedpayments from third party suppliers and distributors, advertising funds, and supplier convention funds. Assets for these segments include equipment, furniture and fixtures.
In order to showwell as furniture and fixtures located at the impact of this changecorporate office and better reflecttrademarks and other intangible assets. All assets are located within the current operational structure, the Company has redefined its operating segments as Pizza Inn Franchising, Pie Five Franchising and Company-Owned Restaurants. United States.
Three Months Ended | Six Months Ended | ||||||||
<BTB> | December 24, | December 25, | December 24, | December 25, | |||||
2017 | 2016 | 2017 | 2016 | ||||||
Net sales and operating revenues: | |||||||||
Pizza Inn Franchising | $ 1,718 | $ 1,782 | $ 3,492 | $ 3,656 | |||||
Pie Five Franchising | 912 | 938 | 2,395 | 1,823 | |||||
Company-owned restaurants (Note 1) | 1,567 | 4,060 | 3,742 | 8,767 | |||||
Consolidated revenues | $ 4,197 | $ 6,780 | $ 9,629 | $ 14,246 | |||||
Depreciation and amortization: | |||||||||
Pizza Inn Franchising | $ - | $ - | $ - | $ - | |||||
Pie Five Franchising | - | - | - | - | |||||
Company-owned restaurants (Note 1) | 173 | 628 | 373 | 1,304 | |||||
Combined | 173 | 628 | 373 | 1,304 | |||||
Corporate administration and other | 115 | 112 | 227 | 213 | |||||
Depreciation and amortization | $ 288 | $ 740 | $ 600 | $ 1,517 | |||||
Gain/(Loss) from continuing operations before taxes: | |||||||||
Pizza Inn Franchising | $ 1,398 | $ 1,459 | $ 2,877 | $ 3,030 | |||||
Pie Five Franchising | 489 | 576 | 1,666 | 1,186 | |||||
Company-owned restaurants (Note 1) | (464) | (6,271) | (1,342) | (7,774) | |||||
Combined | 1,423 | (4,236) | 3,201 | (3,558) | |||||
Corporate administration and other | (1,847) | (3,294) | (3,743) | (5,138) | |||||
Loss from continuing operations before taxes | $ (424) | $ (7,530) | $ (542) | $ (8,696) | |||||
Geographic information (revenues): | |||||||||
United States | $ 3,983 | $ 6,733 | $ 9,336 | $ 14,103 | |||||
Foreign countries | 214 | 47 | 293 | 143 | |||||
Consolidated total | $ 4,197 | $ 6,780 | $ 9,629 | $ 14,246 | |||||
<FN> | |||||||||
Note 1: | |||||||||
Company stores that were closed are included in discontinued operations in the accompanying | |||||||||
Condensed Consolidated Statement of Operations. |
Three Months Ended | Nine Months Ended | |||||||||||||||
March 27, 2022 | March 28, 2021 | March 27, 2022 | March 28, 2021 | |||||||||||||
Net sales and operating revenues: | ||||||||||||||||
Pizza Inn Franchising | $ | 2,091 | $ | 1,714 | $ | 6,279 | $ | 4,718 | ||||||||
Pie Five Franchising | 482 | 418 | 1,450 | 1,350 | ||||||||||||
Company-Owned Restaurants | 0 | 0 | 0 | 0 | ||||||||||||
Corporate administration and other | 47 | 51 | 140 | 146 | ||||||||||||
Consolidated revenues | $ | 2,620 | $ | 2,183 | $ | 7,869 | $ | 6,214 | ||||||||
Depreciation and amortization expense: | ||||||||||||||||
Corporate administration and other | $ | 46 | $ | 41 | $ | 138 | $ | 128 | ||||||||
Depreciation and amortization | $ | 46 | $ | 41 | $ | 138 | $ | 128 | ||||||||
Income before taxes: | ||||||||||||||||
Pizza Inn Franchising | $ | 1,648 | $ | 1,339 | $ | 4,506 | $ | 3,723 | ||||||||
Pie Five Franchising | 220 | 164 | 748 | 563 | ||||||||||||
Company-Owned Restaurants | (1 | ) | (77 | ) | (3 | ) | (256 | ) | ||||||||
Combined | 1,867 | 1,426 | 5,251 | 4,030 | ||||||||||||
Corporate administration and other | (1,371 | ) | (1,009 | ) | (4,006 | ) | (3,431 | ) | ||||||||
Income before taxes | $ | 496 | $ | 417 | $ | 1,245 | $ | 599 | ||||||||
Geographic information (revenues): | ||||||||||||||||
United States | $ | 2,547 | $ | 2,114 | $ | 7,643 | $ | 6,047 | ||||||||
Foreign countries | 73 | 69 | 226 | 167 | ||||||||||||
Consolidated total | $ | 2,620 | $ | 2,183 | $ | 7,869 | $ | 6,214 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Pizza Inn and Pie Five franchise and license revenues. domestic royalties revenues. supplier incentives and domestic royalties revenues. comparable prior year periods. 2022. which is attributable to current state taxes. The Company utilized net operating losses to offset federal income taxes. allowance. income. nine months ended March 28, 2021. March 27, 2022.Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 25, 2017,27, 2021 and may contain certain forward-looking statements that are based on current management expectations. Generally, verbs in the future tense and the words “believe,” “expect,” “anticipate,” “estimate,” “intends,” “opinion,” “potential” and similar expressions identify forward-looking statements. Forward-looking statements in this report include, without limitation, statements relating to our business objectives, our customers and franchisees, our liquidity and capital resources, and the impact of our historical and potential business strategies on our business, financial condition, and operating results. Our actual results could differ materially from our expectations. Further information concerning our business, including additional factors that could cause actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q, are set forth in our Annual Report on Form 10-K for the year ended June 25, 2017.27, 2021. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as may be required by applicable law, we do not undertake, and specifically disclaim any obligation to, publicly update or revise such statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. operates and franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco Units”) and express (“Express Units”) restaurants domestically and internationally under the trademark “Pizza Inn” and operates domesticfranchises fast casual pizza restaurants (“Pie Five Units”) under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses Pizza Inn Express, or PIE, kiosks (“PIE Units”) under the trademark “Pizza Inn”. We facilitate food, equipment and supply distribution to our domestic and international system of restaurants through agreements with third party suppliersdistributors. At March 27, 2022, franchised and distributors. The following chart presents information concerning Company-owned and franchised restaurants aslicensed units consisted of and for the three and six month periods ended December 24, 2017: Three Months Ended December 24, 2017 (in thousands, except unit data) Pizza Inn Pie Five All Concepts Ending Retail Ending Retail Ending Retail Units Sales Units Sales Units Sales Company-Owned - $ - 3 $ 1,567 3 $ 1,567 Domestic Franchised 156 20,906 77 9,986 233 30,892 Total Domestic Units 156 $ 20,906 80 $ 11,553 236 $ 32,459 International Franchised 62 - 62 Six Months Ended December 24, 2017 (in thousands, except unit data) Pizza Inn Pie Five All Concepts Ending Retail Ending Retail Ending Retail Units Sales Units Sales Units Sales Company-Owned - $ - 3 $ 3,742 3 $ 3,742 Domestic Franchised 156 42,800 77 20,252 233 63,052 Total Domestic Units 156 $ 42,800 80 $ 23,994 236 $ 66,794 International Franchised 62 - 62
following:12 Pizza Inn Pie Five All Concepts Domestic Franchised/Licensed 128 $ 22,228 33 $ 4,870 161 $ 27,098 International Franchised 31 — 31 Pizza Inn Pie Five All Concepts Domestic Franchised/Licensed 128 $ 63,590 33 $ 14,907 161 $ 78,497 International Franchised 31 — 31 2318 states predominantly situated in the southern half of the United States. International units are located in six foreign countries.and diluted lossnet income per common share improved $0.70increased $0.01 per share to a loss of $0.04$0.03 per share for the three month periodmonths ended December 24, 2017,March 27, 2022, compared to a loss of $0.74 per share in the comparable period in the prior fiscal year. The Company had a net lossincome of $0.6$0.5 million for the three month periodmonths ended December 24, 2017, andMarch 27, 2022 compared to net lossincome of $7.9$0.4 million in the comparable period in the prior fiscal year, on revenues of $4.2$2.6 million for the three month periodmonths ended December 24, 2017March 27, 2022 compared to $6.8$2.2 million in the comparable period in the prior fiscal year. The decreaseincrease in revenue was primarily due to increases in franchise royalties, supplier and distributer incentives, and advertising fund contributions. The $0.1 million increase in net loss fromincome for the three months ended March 27, 2022, compared to the comparable period of the prior year was primarily due to the closingresult of poorly preforming stores, lower closed store expenses, increased gains from sale of assets, lower impairment expenses , lower lease termination costs and reduced general and administrativethe $0.4 million increase in revenues partially offset by a $0.3 million increase in expenses.and diluted loss per common share improved $0.82net income per share increased $0.04 per share to a loss of $0.07 per share for the six month periodnine months ended December 24, 2017,March 27, 2022, compared to a lossthe comparable period in the prior fiscal year. The Company had net income of $0.89 per share$1.2 million for the nine months ended March 27, 2022 compared to net income of $0.6 million in the comparable period in the prior fiscal year, on revenues of $7.9 million for the nine months ended March 27, 2022 compared to $6.2 million in the comparable period in the prior fiscal year. Net loss decreased by $8.5 million from $9.4 million to $0.9 millionThe increase in the six month period ended December 24, 2017 as compared to the same period in the prior year. The decrease in net loss from prior yearrevenue was primarily due to the closing of poorly preforming stores, lower closed store expenses, increased gains from sale of assets, lower impairment expenses ,lower lease termination costsincreases in franchise royalties, supplier and reduced generaldistribution incentives, and administrative expenses.Adjusted EBITDAadvertising fund contributions. The $0.6 million increase in net income for the fiscal quarternine months ended December 24, 2017, improved by $0.9 millionMarch 27, 2022 compared to the prior fiscal year. Year-to-date adjusted EBITDA increased to $0.5 million compared to a loss of $0.9 million the prior fiscal year. The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown (in thousands): Three Months Ended Six Months Ended December 24, December 25, December 24, December 25, 2017 2016 2017 2016 Net loss $ (577) $ (7,925) $ (933) $ (9,421) Interest expense 63 2 131 2 Income taxes (27) 5 (14) 10 Depreciation and amortization 288 740 600 1,517 EBITDA $ (253) $ (7,178) $ (216) $ (7,892) Stock compensation expense 10 45 19 90 Pre-opening costs (1) 47 114 54 (Gain)/Loss on sale/disposal of assets (166) 656 (165) 699 Impairment of long-lived assets and other lease charges 533 5,057 681 5,226 Discontinued operations and closed and non-operating store costs (291) 347 72 884 Adjusted EBITDA $ (168) $ (1,026) $ 505 $ (939) Pie Five Brand SummaryThe following tables summarize certain key indicators for the Pie Five franchised and Company-owned restaurants that management believes are useful in evaluating performance. Three Months Ended Six Months Ended December 24, December 25, December 24, December 25, 2017 2016 2017 2016 (in thousands, except unit data) (in thousands, except unit data) Pie Five Retail Sales - Total Units Domestic - Franchised $ 9,986 $ 10,161 $ 20,252 $ 20,501 Domestic - Company-owned 1,567 4,060 3,742 8,767 Total domestic retail sales $ 11,553 $ 14,221 $ 23,994 $ 29,268 Pie Five Comparable Store Retail Sales - Total $ 7,840 $ 9,087 $ 15,184 $ 17,961 Pie Five Average Units Open in Period Domestic - Franchised 72 67 71 63 Domestic - Company-owned 10 30 12 30 Total domestic Units 82 97 83 93 Pie Five system-wide retail sales decreased $2.7 million, or 18.8%, for the three month period ended December 24, 2017 when compared to the samecomparable period of the prior year. Compared to the same fiscal quarter of the prior year average units open in the period decreased from 97 to 82. Comparable store retail sales decreased by $1.2 million, or 13.7%, during the second quarter of fiscal 2018 compared to the same period of the prior year.13Pie Five system-wide retail sales decreased $5.3 million, or 18.0%, for the six month period ended December 24, 2017 when compared to the same period of the prior year. Year-to-date fiscal 2018 compared to the year-to-date of the prior year, average units open in the period decreased from 93 to 83. Comparable store retail sales decreased by $2.8 million, or 15.5%, during the first six month period ended December 24, 2018 compared to the same period of the prior fiscal year.The following chart summarizes Pie Five Unit activity for the three and six month periods ended December 24, 2017: Three Months Ended December 24, 2017 Beginning Ending Units Opened Transfer Closed Units Domestic - Franchised 69 2 11 5 77 Domestic - Company-owned 14 - (11) - 3 Total domestic Units 83 2 - 5 80 Six Months Ended December 24, 2017 Beginning Ending Units Opened Transfer Closed Units Domestic - Franchised 71 5 11 10 77 Domestic - Company-owned 13 1 (11) - 3 Total domestic Units 84 6 - 10 80 The net decrease of three Pie Five Units during the three month period ended December 24, 2017 was primarily the result of the closure$1.7 million increase in revenues partially offset by a $1.1 million increase in expenses.poor-performing stores,novel coronavirus (COVID-19) as a pandemic, and the disease has spread rapidly throughout the United States and the world. Federal, state and local responses to the COVID-19 pandemic, as well as our internal efforts to protect customers, franchisees and employees, have severely disrupted our business operations. Most of the domestic Pizza Inn buffet restaurants and Pie Five restaurants are in areas that were for varying periods subject to "shelter-in-place" and social distancing restrictions prohibiting in-store sales and, therefore, were limited to carry-out and/or delivery orders. In some areas, these restrictions limited non-essential movement outside the home, which discouraged or even precluded carry-out orders. In most cases, in-store dining has now resumed subject to seating capacity limitations, social distancing protocols, and enhanced cleaning and disinfecting practices. Further, the COVID-19 pandemic precipitated significant job losses and a national economic downturn that impacted the demand for restaurant food service. Although most of the Company's domestic restaurants continued to operate under these conditions, the Company experienced temporary closures from time to time during the pandemic.believeparticipated in a government-sponsored loan program. (See, "Liquidity and Capital Resources--PPP Loan," below.) The Company also temporarily furloughed certain employees and reduced base salary by 20% for all remaining employees for the fourth quarter of fiscal 2020, as well as reducing other expenses. While the Company will provide a stronger foundation forremain focused on controlling expenses, future brand growth. We believeresults of operations are likely to be materially adversely impacted by the pandemic and its aftermath.the net increase of eight franchisedBuffet Units and Pie Five Units in many areas will continue to be subject to capacity restrictions for some time as social distancing protocols remain in place. Additionally, an outbreak or perceived outbreak of COVID-19 connected to restaurant dining could cause negative publicity directed at any of our brands and cause customers to avoid our restaurants. We cannot predict how long the three month period ended December 24, 2017 is a demonstration of brand strengthpandemic will last or whether it will reoccur, what additional restrictions may be enacted, to what extent off-premises dining will continue, or if individuals will be comfortable returning to our Buffet Units and strategic commitment to franchise operations.The net decrease of four Pie Five Units duringfollowing social distancing protocols. Any of these changes could materially adversely affect the first six month period ended December 24, 2018 was primarilyCompany’s future financial performance. However, the resultultimate impact of COVID-19 on the closureCompany's future results of poor-performing stores, which we believe will provide a stronger foundation for future brand growth. We believe that the net increase of six franchised Pie Five Units in the first six month period ended December 24, 2017 is a demonstration of brand strengthoperations and strategic commitment to franchise operations. We do not anticipate the opening of additional Company-owned Pie Five Units in the near future.Pie Five - Company-Owned Restaurants Three Months Ended Six Months Ended (in thousands, except store weeks and average data) December 24, December 25, December 24, December 25, 2017 2016 2017 2016 Store weeks 130 386 307 786 Average weekly sales 11,594 10,517 11,979 11,151 Average number of units 10 30 12 30 Restaurant sales (excluding partial weeks) 1,507 4,060 3,677 8,765 Restaurant sales 1,567 4,060 3,742 8,767 Loss from continuing operations before taxes (464) (6,269) (1,342) (7,774) Allocated marketing and advertising expenses 78 204 187 438 Depreciation/amortization expense 173 628 373 1,304 Pre-opening costs (1) 47 114 54 Operations management and extraordinary expenses 28 213 83 440 Impairment, other lease charges and non-operating store costs 61 5,121 345 5,506 Loss from continuing operations before taxes (135) (56) (240) (32)
liquidity cannot presently be predicted.14Average weekly sales for Company-owned Pie Five Units increased $1,077, or 10.2%, to $11,594 for the three month period ended December 24, 2017 compared to $10,517 for the same period of the prior fiscal year. Company-owned Pie Five restaurant operating cash flow decreased $0.1 million during the second quarter of fiscal 2018 compared to the same period of prior year. Loss from continuing operations before taxes for Company-owned Pie Five stores improved $5.8 million for the three month period ended December 24, 2017 compared to the same period of the prior year. For the Pie Five Company-owned restaurants, the decrease in sales was due to decreased store count, and the increase in average weekly sales was due to closing underperforming stores.Average weekly sales for Company-owned Pie Five Units increased $828, or 7.4%, to $11,979 for the six month period ended December 24, 2017 compared to $11,151 for the same period of prior year. Company-owned Pie Five restaurant operating cash flow decreased $0.2 million during the six month period ended December 24, 2017 compared to the same period of prior year. Loss from continuing operations before taxes for Company-owned Pie Five stores improved $6.4 million for the six month period ended December 24, 2017 compared to the same period of the prior year. For the Pie Five Company-owned restaurants, the decrease in sales was due to decreased store count, and the increase in average weekly sales was due to closing underperforming stores. Pizza Inn Brand SummaryThe following tables summarize certain key indicators for the Pizza Inn franchised and Company-owned domestic units that management believes are useful in evaluating performance. Three Months Ended Six Months Ended December 24, December 25, December 24, December 25, 2017 2016 2017 2016 Pizza Inn Retail Sales - Total Domestic Units (in thousands, except unit data) (in thousands, except unit data) Domestic Units Buffet - Franchised $ 19,267 $ 19,802 $ 39,406 $ 40,009 Delco/Express - Franchised 1,639 1,658 3,394 3,362 Buffet - Company-owned - 167 - 359 Total domestic retail sales $ 20,906 $ 21,627 $ 42,800 $ 43,730 Pizza Inn Comparable Store Retail Sales - Total Domestic $ 19,784 $ 19,257 $ 40,244 $ 39,375 Pizza Inn Average Units Open in Period Domestic Units Buffet - Franchised 91 95 91 95 Delco/Express - Franchised 67 64 67 63 Buffet - Company-owned - 1 - 1 Total domestic Units 158 160 158 159 Total Pizza Inn domestic retail sales decreased $0.7 million, or 3.3%, for the three month period ended December 24, 2017 when compared to the same period of the prior year. Pizza Inn domestic comparable store retail sales increased 2.7%, for the three month period ended December 24, 2017 when compared to the same period of the prior year.Total Pizza Inn domestic retail sales decreased $0.9 million, or 2.1%, for the six month period ended December 24, 2017 when compared to the same period of the prior year. Pizza Inn domestic comparable store retail sales increased 2.2%, for the six month period ended December 24, 2017 when compared to the same period of the prior year.15The following chart summarizes Pizza Inn unit activity for the three month and six month periods ended December 24, 2017: Three Months Ended December 24, 2017 Beginning Concept Ending Units Opened Change Closed Units Domestic Units Buffet - Franchised 91 - - 1 90 Delco/Express - Franchised 68 1 - 3 66 Total domestic Units 159 1 4 156 International Units (all types) 60 2 - - 62 Total Units 219 3 - 4 218 Six Months Ended December 24, 2017 Beginning Concept Ending Units Opened Change Closed Units Domestic Units Buffet - Franchised 93 - - 3 90 Delco/Express - Franchised 68 2 - 4 66 Total domestic Units 161 2 7 156 International Units (all types) 60 2 - - 62 Total Units 221 4 - 7 218 There was a net decrease of three units in the total domestic Pizza Inn store count during the three month period ended December 24, 2017. There was a net decrease of five units in the total domestic Pizza Inn store count during the six month period ended December 24, 2017. We believe this represents a stabilizing of domestic store count. The number of international Pizza Inn units increased by two units in the three month period ended December 24, 2017
1516We considerourthe Company's industry. We believeThe Company believes that EBITDA is helpful to investors in evaluating ourthe Company's results of operations without the impact of expenses affected by financing methods, accounting methods and the tax environment. We believeThe Company believes that Adjusted EBITDA provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period. We believeThe Company believes that restaurant operating cash flow is a useful metric to investors in evaluating the ongoing operating performance of Company-owned restaurants and comparing such store operating performance from period to period. Management also uses these non-GAAP financial measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting and other planning purposes.·●“EBITDA” represents earnings before interest, taxes, depreciation and amortization. ·●“Adjusted EBITDA” represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, pre-opening expense,severance, gain/loss on sale of assets, costs related to impairment and other lease charges, franchisee default and closed store revenue/expense, and closed and non-operating store costs and discontinued operations.costs.·●“Retail sales” represents the restaurant sales reported by our franchisees and Company-owned restaurants, which may be segmented by brand or domestic/international locations. ·●“System-wide retail sales” represents combined retail sales for franchisee and Company-owned restaurants for a specified brand. ·●“Comparable store retail sales” includes the retail sales for restaurants that have been open for at least 18 months as of the end of the reporting period. The sales results for a restaurant that was closed temporarily for remodeling or relocation within the same trade area are included in the calculation only for the days that the restaurant was open in both periods being compared. ·●“Store weeks” represent the total number of full weeks that specified restaurants were open during the period. ·●“Average units open” reflects the number of restaurants open during a reporting period weighted by the percentage of the weeks in a reporting period that each restaurant was open. ·●“Average weekly sales” for a specified period is calculated as total retail sales (excluding partial weeks) divided by store weeks in the period. ·●“Restaurant operating cash flow” represents the pre-tax income earned by Company-owned restaurants before (1) allocated marketing and advertising expenses, (2) depreciation and amortization, (3) pre-opening expenses, (4) operations management and extraordinary expenses, (5) impairment and other lease charges, and (6)(3) non-operating store costs.·●“Non-operating store costs” represent gain or loss on asset disposal, store closure expenses, lease termination expenses and expenses related to abandoned store sites. ·●“ Pre-opening expenses” consist primarilyFranchisee default and closed store revenue/expense” represents the net of certainaccelerated revenues and costs incurred priorattributable to the opening of a restaurant, including: (1) marketingdefaulted area development agreements and promotional expenses, (2) accrued rent, and (3) manager salaries, employee payroll and related training costs.closed franchised stores.17Financial ResultsDuringDecember 24, 2017,March 27, 2022 increased $0.2 million compared to the Company discontinued its Norco distribution divisionsame period of the prior fiscal year. Year-to-date Adjusted EBITDA increased $0.8 million compared to the same period of the prior fiscal year. The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown (in thousands):revised its arrangements with third party suppliersADJUSTED EBITDA Three Months Ended Nine Months Ended Net income $ 493 $ 416 $ 1,235 $ 594 Interest expense 14 23 61 69 Income tax expense 3 1 10 5 Depreciation and amortization 46 41 138 128 EBITDA $ 556 $ 481 $ 1,444 $ 796 Stock compensation expense 42 39 127 39 Severance — — 33 — Gain on sale of assets — (156 ) — (156 ) Impairment of long-lived assets and other lease charges — — — 21 Franchisee default and closed store revenue (9 ) (43 ) (21 ) (154 ) Closed and non-operating store costs 1 77 3 235 Adjusted EBITDA $ 590 $ 398 $ 1,586 $ 781 distributorslicensed domestic units that management believes are useful in evaluating performance: Three Months Ended Nine Months Ended Pizza Inn Retail Sales - Total Domestic Units (in thousands, except unit data) (in thousands, except unit data) Domestic Units Buffet Units - Franchised $ 20,676 $ 16,042 $ 58,754 $ 45,057 Delco/Express Units - Franchised 1,494 1,393 4,660 4,339 PIE Units - Licensed 58 68 176 183 Total Domestic Retail Sales $ 22,228 $ 17,503 $ 63,590 $ 49,579 Pizza Inn Comparable Store Retail Sales - Total Domestic $ 20,845 $ 16,976 $ 60,877 $ 47,045 Pizza Inn Average Units Open in Period Domestic Units Buffet Units - Franchised 70 75 71 78 Delco/Express Units - Franchised 49 54 51 55 PIE Units - Licensed 9 11 10 12 Total Domestic Units 128 140 132 145 food, equipmentthe prior year. Pizza Inn domestic comparable store retail sales increased by $3.9 million, or 22.8%, for the three months ended March 27, 2022 when compared to the same period of the prior year. Total Pizza Inn domestic retail sales increased $14.0 million, or 28.3%, for the nine months ended March 27, 2022 when compared to the same period of the prior year. Pizza Inn domestic comparable store retail sales increased by $13.8 million, or 29.4%, for the nine months ended March 27, 2022 when compared to the same period of the prior year. For both the three and supplies. Asnine months ended March 27, 2022, the improvements in domestic retail sales and comparable store retail sales were primarily the result of a result, sale of food, equipment and supplies is no longer recognized as revenue and the cost of such items is no longer includedmoderation in cost of sales. The Company now recognizes incentive revenues received from third party suppliers and distributors as revenue.In order to show the impact of this changeCOVID-19.better reflectnine months ended March 27, 2022: Three Months Ended March 27, 2022 Opened Closed Domestic Units Buffet Units - Franchised 70 1 1 1 71 Delco/Express Units - Franchised 49 1 (1 ) 1 48 PIE Units - Licensed 9 — — — 9 Total Domestic Units 128 2 — 2 128 International Units (all types) 33 1 — 3 31 Total Units 161 3 — 5 159 Nine Months Ended March 27, 2022 Opened Closed Domestic Units Buffet Units - Franchised 70 3 1 3 71 Delco/Express Units - Franchised 54 1 (1 ) 6 48 PIE Units - Licensed 11 — — 2 9 Total Domestic Units 135 4 — 11 128 International Units (all types) 32 2 — 3 31 Total Units 167 6 — 14 159 current operational structure,three months ended March 27, 2022. There was a net decrease of seven units in the total domestic Pizza Inn unit count during the nine months ended March 27, 2022. For the three and nine months ended March 27, 2022, the number of international Pizza Inn units decreased by two units and one unit, respectively. The Company has redefinedbelieves the number of domestic Pizza Inn units will stabilize in the near term and increase modestly in future periods. The Company expects international units to increase moderately in future periods. Three Months Ended Nine Months Ended (in thousands, except unit data) (in thousands, except unit data) Pie Five Retail Sales - Total Units Domestic Units - Franchised $ 4,870 $ 4,074 $ 14,907 $ 12,913 Domestic Units - Company-owned — — — — Total Domestic Retail Sales $ 4,870 $ 4,074 $ 14,907 $ 12,913 Pie Five Comparable Store Retail Sales - Total $ 4,519 $ 3,722 $ 13,884 $ 11,848 Pie Five Average Units Open in Period Domestic Units - Franchised 34 36 33 39 Domestic Units - Company-owned — — — — Total Domestic Units 34 36 33 39 Three Months Ended March 27, 2022 Opened Transfer Closed Domestic - Franchised 34 1 — 2 33 Domestic - Company-owned — — — — — Total Domestic Units 34 1 — 2 33 Nine Months Ended March 27, 2022 Opened Transfer Closed Domestic - Franchised 33 2 — 2 33 Domestic - Company-owned — — — — — Total Domestic Units 33 2 — 2 33 six month periodsnine months ended December 24, 2017March 27, 2022 and December 25, 2016March 28, 2021 (in thousands): Pizza Inn Pie Five Company-Owned Franchising Franchising Stores Corporate Total Fiscal Quarter Ended Fiscal Quarter Ended Fiscal Quarter Ended Fiscal Quarter Ended Fiscal Quarter Ended Dec 24, Dec 25, Dec 24, Dec 25, Dec 24, Dec 25, Dec 24, Dec 25, Dec 24, Dec 25, 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 REVENUES: Franchise revenues 1,718 1,782 912 938 - - - - 2,630 2,720 Restaurant sales - - - - 1,567 4,060 - - 1,567 4,060 Total revenues 1,718 1,782 912 938 1,567 4,060 - - 4,197 6,780 COSTS AND EXPENSES: Cost of sales - - - - 1,055 3,858 - - 1,055 3,858 General and administrative expenses - - - - 271 739 1,746 2,228 2,017 2,967 Franchise expenses 320 323 423 362 - - - - 743 685 Pre-opening expenses - - - - (1) 47 - - (1) 47 (Gain)/Loss on sale of assets - - - - - - (166) 656 (166) 656 Impairment of long-lived assets and other lease charges - - - - 533 5,057 - - 533 5,057 Bad debt - - - - - - 89 298 89 298 Interest expense - - - - - - 63 2 63 2 Amortization and depreciation expense - - - - 173 628 115 112 288 740 Total costs and expenses 320 323 423 362 2,031 10,329 1,847 3,296 4,621 14,310 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES 1,398 1,459 489 576 (464) (6,269) (1,847) (3,296) (424) (7,530) Pizza Inn Pie Five Company-Owned Franchising Franchising Stores Corporate Total Fiscal Year-to-Date Fiscal Year-to-Date Fiscal Year-to-Date Fiscal Year-to-Date Fiscal Year-to-Date Dec 24, Dec 25, Dec 24, Dec 25, Dec 24, Dec 25, Dec 24, Dec 25, Dec 24, Dec 25, 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 REVENUES: Franchise revenues 3,492 3,656 2,395 1,823 - - - - 5,887 5,479 Restaurant sales - - - - 3,742 8,767 - - 3,742 8,767 Total revenues 3,492 3,656 2,395 1,823 3,742 8,767 - - 9,629 14,246 COSTS AND EXPENSES: Cost of sales - - - - 3,142 8,305 - - 3,142 8,305 General and administrative expenses - - - - 650 1,652 3,461 3,873 4,111 5,525 Franchise expenses 615 626 729 637 - - - - 1,344 1,263 Pre-opening expenses - - - - 114 54 - - 114 54 (Gain)/Loss on sale of assets - - - - - - (165) 699 (165) 699 Impairment of long-lived assets and other lease charges - - - - 681 5,226 - - 681 5,226 Bad debt - - - - 124 - 89 351 213 351 Interest expense - - - - - - 131 2 131 2 Amortization and depreciation expense - - - - 373 1,304 227 213 600 1,517 Total costs and expenses 615 626 729 637 5,084 16,541 3,743 5,138 10,171 22,942 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES 2,877 3,030 1,666 1,186 (1,342) (7,774) (3,743) (5,138) (542) (8,696) 18 Corporate Total Fiscal Quarter Ended Fiscal Quarter Ended Fiscal Quarter Ended Fiscal Quarter Ended Fiscal Quarter Ended REVENUES: Franchise and license revenues $ 2,091 $ 1,714 $ 482 $ 418 $ — $ — $ — $ — $ 2,573 $ 2,132 Restaurant sales — — — — — — — — — — Rental income — — — — — — 47 51 47 51 Interest income and other — — — — — — — — — — Total revenues 2,091 1,714 482 418 — — 47 51 2,620 2,183 COSTS AND EXPENSES: Cost of sales — — — — 1 76 — — 1 76 General and administrative expenses — — — — — 1 1,357 1,249 1,357 1,250 Franchise expenses 443 375 262 254 — — — — 705 629 Gain on sale of assets — — — — — — — (156 ) — (156 ) Impairment of long-lived assets and other lease charges — — — — — — — — — — Bad debt expense (recovery) — — — — — — 1 (97 ) 1 (97 ) Interest expense — — — — — — 14 23 14 23 Depreciation and amortization expense — — — — — — 46 41 46 41 Total costs and expenses 443 375 262 254 1 77 1,418 1,060 2,124 1,766 INCOME/(LOSS) BEFORE TAXES $ 1,648 $ 1,339 $ 220 $ 164 $ (1 ) $ (77 ) $ (1,371 ) $ (1,009 ) $ 496 $ 417 Corporate Total Fiscal Year-to-Date Fiscal Year-to-Date Fiscal Year-to-Date Fiscal Year-to-Date Fiscal Year-to-Date REVENUES: Franchise and license revenues $ 6,279 $ 4,718 $ 1,433 $ 1,336 $ — $ — $ — $ — $ 7,712 $ 6,054 Restaurant sales — — — — — — — — — — Rental Income — — — — — — 140 151 140 151 Interest income and other — — 17 14 — — — (5 ) 17 9 Total revenues 6,279 4,718 1,450 1,350 — — 140 146 7,869 6,214 COSTS AND EXPENSES: Cost of sales — — — — 1 229 — — 1 229 General and administrative expenses — — — — 2 6 3,938 3,518 3,940 3,524 Franchise expenses 1,773 995 702 787 — — — — 2,475 1,782 Gain on sale of assets — — — — — — — (156 ) — (156 ) Impairment of long-lived assets and other lease charges — — — — — 21 — — — 21 Bad debt expense (recovery) — — — — — — 9 18 9 18 Interest expense — — — — — — 61 69 61 69 Depreciation and amortization expense — — — — — — 138 128 138 128 Total costs and expenses 1,773 995 702 787 3 256 4,146 3,577 6,624 5,615 INCOME/(LOSS) BEFORE TAXES $ 4,506 $ 3,723 $ 748 $ 563 $ (3 ) $ (256 ) $ (4,006 ) $ (3,431 ) $ 1,245 $ 599 (1) franchise royalties, franchise license fees, supplier and distributor incentives, advertising funds, area development exclusivity fees and foreign master license fees, supplier incentives,convention funds, and (2)sales by Company-owned restaurant operations.restaurants. The volume of supplier incentive revenues is dependent on the level of chain-wide retail sales, which are impacted by changes in comparable store sales and restaurant count, andas well as the products sold to franchisees through third-party food distributors.December 24, 2017March 27, 2022 and for the same period in the prior fiscal year were $4.2$2.6 million and $6.8$2.2 million, respectively. The increase in total revenues was driven by increases in Pizza Inn and Pie Five franchise and license revenues.sixnine month period ended December 24, 2017 was $9.6 million compared to $14.2 million inMarch 27, 2022 and for the same period in the prior fiscal year.year were $7.9 million and $6.2 million, respectively. The decreaseincrease in total revenues in both the three and six month periods was primarily driven by the reductionincreases in the number of Company-owned stores.decreasedincreased by $0.1$0.4 million to $1.7 million from $1.8$2.1 million for the three month period ended December 24, 2017March 27, 2022 compared to the same period inof the prior fiscal year. Pizza Inn franchise and license revenues decreasedincreased to $3.5$6.3 million for the sixnine month period ended December 24, 2017March 27, 2022 from $3.7$4.7 million for the same period of the prior fiscal year. The decreaseincreases were primarily driven by increases in both the threesupplier incentives and six month periods was primarily the result of reduced retail sales, largely attributable to closure of under-performing stores.were flat year over year at $0.9increased by $0.1 million to $0.5 million for the three month period ended December 24, 2017March 27, 2022 compared to the same period of the prior fiscal year.Pie Five franchise and license revenues increased to $1.4 million for the nine month period ended March 27, 2022 compared to $1.3 million for the same period in the prior fiscal year. Pie Five franchise revenues increased to $2.4 million for the six month period ended December 24, 2017 from $1.8 million for the same period of the prior fiscal period,The increases were primarily driven by the recognition of a set up fee for the first international franchisee.Restaurant SalesRestaurant sales, which consist of revenue generated by Company-owned restaurants, decreased 61.4%, or $2.5 million, to $1.6 million for the three month period ended December 24, 2017, compared to $4.1 million for the comparable periodincreases in the prior year. In the six month period ended December 24, 2017, restaurant sales decreased 57.3%, or $5.0 million, to $3.8 million compared to $8.8 million for the comparable period in the prior year. In both cases, the decrease in restaurant sales was primarily a result of decreased store count. $1.1$1 thousand for the three and nine month period ended March 27, 2022 as a result of the closure of all of the remaining Company-owned restaurants during the third quarter of fiscal 2020.December 24, 2017March 27, 2022 compared to $1.3 million for the same period of the prior fiscal year. Total general and administrative expenses increased to $3.9 million infor the threenine month period ended December 25, 2016. ForMarch 27, 2022 compared to $3.5 million for the sixnine month period ended December 24, 2017, total cost of sales decreased to $3.1 million from $8.3 million.March 28, 2021. The decreasesincreases in costs ingeneral and administrative expenses during both the three and sixnine month periods were primarily the result decreased Company-owned store count.General and Administrative Expenses - TotalTotal general and administrative expenses decreased to $2.0 million for the three month period ended December 24, 2017 compared to $3.0 million for the three month period ended December 25, 2016 primarily due to decreased expenses resulting from the lower number of Company-owned restaurants and decreased costs inincreased corporate overhead. For the six month period ended December 24, 2017, general and administrative expenses decreased to $4.1 million from $5.5 million in the same period in the prior fiscal year primarily due to decreased expenses resulting from the lower number of Company-owned restaurants and decreased costs in corporate overhead.
expenses.19General and Administrative Expenses - Company-Owned RestaurantsGeneral and administrative expenses for Company-owned restaurants decreased to $0.3 million for the three month period ended December 24, 2017 compared to $0.7 million in the three month period ended December 25, 2016 primarily as a result of lower store count. General and administrative expenses for Company-owned restaurants decreased to $0.7 million for the six month period ended December 24, 2017 compared to $1.6 million in the six month period ended December 25, 2016 primarily as a result of lower store count. General and Administrative Expenses - CorporateGeneral and administrative expenses for corporate decreased to $1.7 million for the three month period ended December 24, 2017 compared to $2.2 million for the three month period ended December 25, 2016. General and administrative expenses for corporate decreased to $3.5 million for the six month period ended December 24, 2017 compared to $3.9 million for the six month period ended December 25, 2016. - Total expenses include selling, general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. Franchise expenses remained stable at $0.7 million for the three month periods and $1.3 million for the six month periods ended December 24, 2017 and December 25, 2016 respectively.Franchise Expenses – Pizza InnPizza Inn franchise expenses include general and administrative expenses directly related to the continuing service of the Pizza Inn domestic and international franchises. Franchise expenses remained stable at $0.3 million for the three month periods and $0.6 million for the six month periods ended December 24, 2017 and December 25, 2016 respectively.Franchise Expenses – Pie FivePie Five franchise expenses include general and administrative expenses directly related to the continuing service of domestic and international franchises. Pie Five franchiseFranchise expenses remained stable at $0.4increased to $0.7 million for the three month period ended December 24, 2017 asMarch 27, 2022 compared to $0.6 million for the same period inof the prior fiscal year. Pie Five franchiseFranchise expenses increased slightly to $0.7 million from $0.6$2.5 million for the sixnine month period ended December 24, 2017 asMarch 27, 2022 compared to the same period in the prior fiscal year.Pre-Opening ExpensesPre-opening expenses decreased to a credit of $1 thousand$1.8 million for the second quarter of fiscal 2018 compared to $47 thousand expense for the same quarter of fiscal 2017. For the sixnine month period ended December 24, 2017, pre-opening expensesMarch 28, 2021. In both cases, the increases were $114 thousandprimarily due to an increase in advertising expenses.$54a gain of $156 thousand in six month period ended December 25, 2016. Pre-opening expenses are directly related toduring the number of new store openings, which declined in fiscal 2018.were $0.5 millionwas zero for both the three month period ended December 24, 2017 compared to $5.1 million forMarch 27, 2022 and the samecomparable period in the prior fiscal year. Impairment of long-lived assets and other lease charges were $0.7 millionwas zero for the sixnine month period ended December 24, 2017March 27, 2022 compared to $5.2 million$21 thousand for the same period inof the prior fiscal year. For the sixthree and nine month periodperiods ended December 24, 2017, theseMarch 27, 2022, there were no charges related to continuing lease termination expenses for nine Pie Five restaurant sites no longer deemed desirable for future restaurant development and lease termination expense for one additional Pie Five restaurant site.
expenses.20Bad debt expense decreased $0.2 million forFor the three month period ended December 24, 2017 asMarch 27, 2022, bad debt expense was $1 thousand compared to the bad debt recovery of $97 thousand for the same period in the prior fiscal year. Bad debt expense for the nine month period ended March 27, 2022, decreased $9 thousand to $9 thousand compared to the comparable period in the prior fiscal year. Bad debt$0.2 million$14 thousand for the six month period ended December 24, 2017 as compared to $0.4 million in the comparable period in the prior fiscal year. In the six month period ended December 24, 2017, the Company recognized $0.2 million bad debt expense related to the collectability of a promissory note taken in connection with the prior sale of two Company-owned Pie Five Units to a franchisee.Interest ExpenseInterest expense increased to $63 thousand in the three month period ended December 24, 2017March 27, 2022 compared to $2 thousand during the same fiscal quarterperiod of the prior year. Interest expense was $131decreased $8 thousand to $61 thousand for the sixnine month period ended December 24, 2017 as compared to $2 thousand in the comparable period in the prior fiscal year. The increase in interest expense during both the three and six month periodsMarch 27, 2022 compared to the same fiscal period of the prior fiscal yearyear. In both cases, the decrease was primarily related to the interest expense on seniorresult of the payment of all outstanding convertible notes issued induring the third quarter of fiscal 2017.sixthree and nine months ended December 24, 2017,March 27, 2022, the Company had an income tax benefit of $260 thousand calculated at a 27.5% weighted-average rate consistent with a statutory U.S. federal blended rate offset byrecorded an income tax expense of $246 thousand related to recording a valuation allowance for deferred tax assets of $260 thousand foreign taxes of $6 thousand, state taxes of $13$3 thousand and an additional IRS refund$10 thousand, respectively, all of $33 thousand.The Company continues to record a full valuation allowance against its net deferred tax assets. The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not” standard. In assessing the need for a valuation allowance, the Company consideredconsiders both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Future sources of taxable income wereare also considered in determining the amount of the recorded valuation allowance. Based onAs of March 27, 2022, the Company’s review of this evidence at December 24, 2017, management determined thatCompany had established a full valuation allowance of $6.1 million against all of the Company’sits deferred tax assets at December 24, 2017 was appropriate.In December 2017, President Donald Trump signedassets. The Company will continue to review the Tax Cuts and Jobs Act. The new law drops the income tax rateneed for corporations to 21% effective January 1, 2018. Duean adjustment to the tax rate change, the deferred tax assets as of December 24, 2017 were adjusted by $3.3 million and the valuation allowance was adjusted by the same amount. There were approximately 6.0 million of deferred tax assets at December 24, 2017.Discontinued OperationsNet losses from the Norco food and supply distribution division are included within discontinued operations. The discontinuation of the Norco food and supply distribution entity was a strategic shift for the Company during the second quarter of fiscal 2018, releasing the Company from added credit risk, overhead expense, and direct supply and delivery responsibilities. Discontinued operations also includes losses from leased buildings and operating losses associated with Company-owned Pizza Inn restaurants closed in prior years.sixnine month period ended December 24, 2017, ourMarch 27, 2022, the Company's primary sourcessource of liquidity were cash flows from investing activities andwas proceeds from the sale of common stock.
operating activities.21usedprovided by operating activities increased $1.8 million to cash used of $3.5 millionwas $525 thousand for the sixnine month period ended December 24, 2017 March 27, 2022compared to cash used of $1.6 million$357 thousand for the sixnine month period ended December 25, 2016.March 28, 2021. The primary driversdriver of additionalincreased operating cash consumptionflow during the sixnine month period ended December 24, 2017 were lease termination payments for restaurant sites no longer deemed desirable for future development, timing ofMarch 27, 2022 was increased net working capital related to the discontinued Norco food and supply distribution division, and an overall reduction in accounts payable.sixnine month period ended December 24, 2017March 27, 2022 was $169 thousand, attributable to payments received on notes receivable from fixed asset sales of $0.5 million was primarily attributed to the sale of assets of closed Company-owned Pie Five Units$240 thousand being partially offset by capital expenditures for a new Company-owned Pie Five Unit. This compares to cash usedthe purchase of definite-lived intangible assets of $46 thousand and the purchase of property, plant, and equipment of $25 thousand. Cash flows provided by investing activities of $0.2 million duringwere $11 thousand for the same period in the prior fiscal year attributable to Company-owned Pie Five Units that were under development during the period.increased to $3.9of $3.6 million for the sixnine month period ended December 24, 2017 compared to $1.8 millionMarch 28, 2021. Net cash used by financing activities for the six month periodnine months ended December 25, 2016March 27, 2022 was primarily asattributable to the payment of all outstanding convertible notes during the third quarter of fiscal 2022.sale of stock in connection with a shareholder rights offering that closed in September 2017 partially offset by the repayment of a $1.0 million promissory note. On October 27, 2017,COVID-19 pandemic, the Company filed withhas taken aggressive measures to control expenses and expects modest cash flow from operations during the Securities and Exchange Commission (“SEC”) a shelf registration statement on Form S-3 for the offer and salefourth quarter of up to $5.0 million of its common stock at such time and in such manner as may subsequently be determined appropriate. The registration statement was declared effective by the SEC on November 8, 2017. On December 5, 2017, the Company filed a prospectus supplement pertaining to at-the-market sales of its common stock under the effective registration statement.Managementfiscal 2022. However, management believes the cash on hand combined with net cash fromprovided by operations and proceeds from at-the-market sales of common stock under its shelf registration will be sufficient to fund operations for the next 12 months.ourthe Company's reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and various other assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates.concessions.incentives. The Company records a provision for doubtful receivables to allow for any amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. Actual realization of accounts receivable could differ materially from the Company’s estimates.Inventory consists primarily of food, paper products and supplies stored in and used by Company-owned restaurants and is stated at lower of first-in, first-out (“FIFO”) or market. The valuation of such restaurant inventory requires us to estimate the amount of obsolete and excess inventory based on estimates of future retail sales by Company-owned restaurants. Overestimating retail sales by Company-owned restaurants could result in the write-down of inventory which would have a negative impact on the gross margin of such Company-owned restaurants.22andadvertising fund revenues, supplier incentive and convention contribution revenues. LicenseFranchise fees, area development and foreign master license agreement fees are amortized into revenue on a straight-line basis over the term of the related contract agreement. Royalties and advertising fund revenues, which are based on a percentage of franchise retail sales, are recognized as income when there has been substantial performance of the agreement by both the franchisee and the Company, generally at the time the restaurant is opened. Royalties are recognized as income when earned.retail sales occur. Supplier incentive revenues are recognized as earned, typically as the underlying commodities are shipped.continues to record a full valuation allowance against its net deferred tax assets. The Company assessedassesses whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not” standard. In assessing the need for a valuation allowance, the Company consideredconsiders both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight wasis given to evidence that couldcan be objectively verified, including recent cumulative losses. Future sources of taxable income wereare also considered in determining the amount of the recorded valuation allowance. BasedCompany’s review of this evidence at December 24, 2017, management determined that a full valuation allowance against alltechnical merits of the Company’s deferredposition. The tax assets at December 24, 2017 was appropriate.In December 2017, President Donald Trump signedbenefits recognized in the Tax Cutsfinancial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of March 27, 2022 and Jobs Act. March 28, 2021, the Company had no uncertain tax positions.new law dropsCompany assesses its exposures to loss contingencies from legal matters based upon factors such as the income tax ratecurrent status of the cases and consultations with external counsel and provides for corporationsthe exposure by accruing an amount if it is judged to 21% effective January 1, 2018. Due tobe probable and can be reasonably estimated. If the tax rate change, the deferred tax assets as of December 24, 2017 were adjusted by $3.3 million and the valuation allowance was adjusted by the same amount. There were approximately 6.0 million of deferred tax assets at December 24, 2017.actual loss from a contingency differs from management’s estimate, operating results could be adversely impacted.23December 24, 2017.December 24, 2017,March 27, 2022, the Company has not repurchased any outstanding shares but may make further repurchases under the 2007 Stock Purchase Plan. The Company may also repurchase shares of ourthe Company's common stock other than pursuant to the 2007 Stock Purchase Plan or other publicly announced plans or programs.Not applicable.24Amended and Restated By-lawsBylaws of Rave Restaurant Group, Inc. (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed January 8, 2015).4.1Indenture for 4% Convertible Senior Notes due 2022 (filed as Exhibit 4.1 to Form S-3/A filed January 6, 2017 and incorporated herein by reference).4.2Pledge Agreement (filed as Exhibit 4.2 to Form S-3/A filed January 6, 2017 and incorporated herein by reference).31.1Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. Section 1350 Certification of Principal Executive Officer. Section 1350 Certification of Principal Financial Officer. 101 Interactive data files pursuant to Rule 405 of Regulation S-TS-T.25 RAVE RESTAURANT GROUP, INC. (Registrant) (Registrant) By: /s/ Scott Crane Scott CranePresident and Chief Executive Officer(Principal Executive Officer) By: /s/ Timothy E. Mullany Brandon L. Solano Timothy E. MullanyBrandon L. SolanoChief Executive Officer (principal executive officer) By: /s/ Clinton D. Fendley Clinton D. Fendley Chief Financial Officer ( Principal Financial Officer)principal financial officer)Dated: February 6, 2018 26Dated: May 6, 2022