Rave Restaurant Group, Inc 10-Q for FY2022 Q3
Rave Restaurant Group, Inc. (RAVE)
10-Q
2022-05-06
For: 2022-03-27
View Original
Added on
April 06, 2026
About this 10-Q
Rave Restaurant Group, Inc filed this 10-Q on May 6, 2022, covering the quarter ended March 27, 2022 (FY2022 Q3).
Headline figures
Quarter ended March 27, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.62M
- up 20.0% from $2.18M a year earlier
- Net income
- $493K
- up 18.5% from net income of $416K a year earlier
- Diluted EPS
- $0.03
- up 50.0% from $0.02 a year earlier
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended March 27, 2022 or
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from ________ to ________.
Commission File Number: 0-12919
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
(Zip Code)
(Zip Code)
(469 ) 384-5000
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of May 4, 2022, 18,004,904
shares of the issuer’s common stock were outstanding.
RAVE RESTAURANT GROUP, INC.
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PART I. FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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Page
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3
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4
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5
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6
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7
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Item 2.
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14
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Item 3.
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25 | ||
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Item 4.
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25 | ||
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PART II. OTHER INFORMATION
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Item 1.
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26 | ||
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Item 1A.
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26 | ||
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Item 2.
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26 | ||
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Item 3.
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26 | ||
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Item 4.
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26
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Item 5.
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26
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Item 6.
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26 | ||
| 27 | |||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RAVE RESTAURANT GROUP, INC.
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended
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Nine Months Ended
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|||||||||||||||
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March 27,
2022
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March 28,
2021
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March 27,
2022
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March 28,
2021
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|||||||||||||
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REVENUES:
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$
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$
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$
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$
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||||||||
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COSTS AND EXPENSES:
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||||||||||||||||
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Cost of sales
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||||||||||||
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General and administrative expenses
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Franchise expenses
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||||||||||||
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Gain on sale of assets
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( |
) | ( |
) | ||||||||||||
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Impairment of long-lived assets and other lease charges
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||||||||||||
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Bad debt expense (recovery)
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(
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)
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|||||||||||
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Interest expense
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Depreciation and amortization expense
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||||||||||||
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Total costs and expenses
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||||||||||||
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INCOME BEFORE TAXES
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||||||||||||
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Income tax expense
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||||||||||||
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NET INCOME
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||||||||||||
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INCOME PER SHARE OF COMMON STOCK - BASIC:
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$
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$
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$
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$
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||||||||
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INCOME PER SHARE OF COMMON STOCK - DILUTED:
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$
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$
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$
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$
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||||||||
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Weighted average common shares outstanding - basic
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|
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||||||||||||
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Weighted average common and potential dilutive common shares outstanding
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||||||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
RAVE RESTAURANT GROUP, INC.
(In thousands, except share amounts)
(Unaudited)
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March 27,
2022
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June 27,
2021
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|||||||
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ASSETS
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||||||||
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CURRENT ASSETS
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||||||||
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Cash and cash equivalents
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$
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$
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||||
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Accounts receivable, less allowance for bad debts of $
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||||||
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Notes receivable, current
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Deferred contract charges, current
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Prepaid expenses and other
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Total current assets
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||||||
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LONG-TERM ASSETS
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||||||||
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Property, plant and equipment, net
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||||||
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Operating lease right of use asset, net
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||||||
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Intangible assets definite-lived, net
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||||||
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Notes receivable, net of current portion
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||||||
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Deferred contract charges, net of current portion
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||||||
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Total assets
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$
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$
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||||
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LIABILITIES AND SHAREHOLDERS' EQUITY
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||||||||
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CURRENT LIABILITIES
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||||||||
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Accounts payable - trade
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$
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$
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|
||||
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Accrued expenses
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||||||||
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Other current liabilities
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||||||||
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Operating lease liability, current
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||||||
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Short term loan, current
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||||||
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Convertible notes short term, net of unamortized debt issuance costs and discounts
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Deferred revenues, current
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||||||
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Total current liabilities
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||||||
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LONG-TERM LIABILITIES
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Operating lease liability, net of current portion
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Deferred revenues, net of current portion
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Total liabilities
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||||||
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COMMITMENTS AND CONTINGENCIES (SEE NOTE D)
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SHAREHOLDERS' EQUITY
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||||||||
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Common stock, $
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||||||
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Additional paid-in capital
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||||||
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Accumulated deficit
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(
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)
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(
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)
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||||
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Treasury stock at cost
|
||||||||
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Shares in treasury:
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(
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)
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(
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)
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||||
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Total shareholders' equity
|
|
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||||||
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Total liabilities and shareholders' equity
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$
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$
|
|
||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
RAVE RESTAURANT GROUP, INC.
(In thousands)
(Unaudited)
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Common Stock
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Treasury Stock
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|||||||||||||||||||||||||||
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Shares
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Amount
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Additional
Paid-in
Capital
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Accumulated
Deficit
|
Shares
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Amount
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Total
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||||||||||||||||||||||
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Balance, June 28, 2020
|
|
$
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$
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$
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(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
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|
|||||||||||||
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Equity issue costs - ATM offering
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—
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(
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)
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—
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(
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)
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|||||||||||||||||||
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Net income
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—
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|
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—
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|||||||||||||||||||||
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Balance, September 27, 2020
|
|
$
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|
$
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$
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(
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)
|
(
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)
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$
|
(
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)
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$
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|
|||||||||||||
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Issuance of Common Stock
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|
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—
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|||||||||||||||||||||
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Equity issue costs - ATM offering
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—
|
|
(
|
)
|
|
—
|
|
(
|
)
|
|||||||||||||||||||
|
Net income
|
—
|
|
|
|
—
|
|
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|||||||||||||||||||||
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Balance, December 27, 2020
|
|
|
$
|
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
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Stock compensation expense
|
— |
— |
||||||||||||||||||||||||||
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Equity issue costs - ATM offering
|
— |
( |
) | — | ( |
) | ||||||||||||||||||||||
|
Net income
|
— |
— | ||||||||||||||||||||||||||
|
Balance, March 28, 2021
|
$ | $ | ( |
) | ( |
) | $ | ( |
) | $ | ||||||||||||||||||
|
Common Stock
|
Treasury Stock
|
|||||||||||||||||||||||||||
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
|
Balance, June 27, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||
| Stock compensation expense |
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
|
Net income
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
|
Balance, September 26, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||
|
Stock compensation expense
|
—
|
|
|
—
|
|
|||||||||||||||||||||||
|
Net income
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
|
Balance, December 26, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||
|
Stock compensation expense
|
— |
— |
||||||||||||||||||||||||||
|
Net income
|
— |
— |
||||||||||||||||||||||||||
|
Balance, March 27, 2022
|
$ | $ | $ | ( |
) | ( |
) | $ | ( |
) | $ | |||||||||||||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
RAVE RESTAURANT GROUP, INC.
(In thousands)
(Unaudited)
|
Nine Months Ended
|
||||||||
|
March 27,
2022
|
March 28,
2021
|
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net income
|
$
|
|
$
|
|
||||
|
Adjustments to reconcile net income to cash provided by/(used in) operating activities:
|
||||||||
|
Impairment of long-lived assets and other lease charges
|
|
|
||||||
|
Stock compensation expense
|
|
|
||||||
|
Depreciation and amortization
|
|
|
||||||
|
Amortization of operating right of use assets
|
|
|
||||||
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Amortization of intangible assets definite-lived
|
||||||||
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Amortization of debt issue costs
|
|
|
||||||
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Gain on the sale of assets
|
( |
) | ||||||
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Provision for bad debt
|
|
|
||||||
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Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
(
|
)
|
(
|
)
|
||||
|
Notes receivable
|
|
(
|
)
|
|||||
|
Deferred contract charges
|
(
|
)
|
|
|||||
|
Prepaid expenses and other
|
|
(
|
)
|
|||||
|
Deposits and other
|
|
|
||||||
|
Accounts payable - trade
|
(
|
)
|
(
|
)
|
||||
|
Accounts payable - lease termination impairments
|
|
(
|
)
|
|||||
|
Accrued expenses
|
(
|
)
|
|
|||||
|
Operating lease liability
|
(
|
)
|
(
|
)
|
||||
|
Deferred revenue
|
( |
) | ( |
) | ||||
|
Other long-term liabilities
|
( |
) | ||||||
|
Cash provided by/(used in) operating activities
|
(
|
)
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Payments received on notes receivable
|
|
|
||||||
|
Purchase of intangible assets definite-lived
|
( |
) | ||||||
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Purchase of property, plant and equipment
|
(
|
)
|
(
|
)
|
||||
|
Cash provided by investing activities
|
|
|
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Proceeds from sale of stock
|
||||||||
|
Equity issuance costs - ATM offering
|
|
(
|
)
|
|||||
|
Payment of Convertible Notes
|
( |
) | ||||||
|
Short term loan, current
|
(
|
)
|
|
|||||
|
Cash (used in)/provided by financing activities
|
(
|
)
|
|
|||||
|
Net (decrease)/increase in cash and cash equivalents
|
(
|
)
|
|
|||||
|
Cash and cash equivalents, beginning of period
|
|
|
||||||
|
Cash and cash equivalents, end of period
|
$
|
|
$
|
|
||||
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||
|
CASH PAID FOR:
|
||||||||
|
Interest
|
$
|
|
$
|
|
||||
|
Income taxes
|
$
|
|
$
|
|
||||
|
Non-cash activities:
|
||||||||
|
Conversion of notes to common shares
|
$
|
|
$
|
|
||||
|
Operating lease right of use assets at adoption
|
$
|
|
$
|
|
||||
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Operating lease liability at adoption
|
$
|
|
$
|
|
||||
RAVE RESTAURANT GROUP, INC.
Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”) franchises pizza buffet (“Buffet
Units”), delivery/carry-out (“Delco Units”) and express (“Express Units”) restaurants under the trademark “Pizza Inn” and franchises 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”. The accompanying condensed consolidated financial statements of Rave Restaurant Group, Inc. have been prepared without audit pursuant to
the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements have been omitted pursuant to such rules and regulations. The unaudited
condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27,
2021.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the
Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments are of a normal recurring nature. Results of operations for the fiscal periods presented are not necessarily indicative
of fiscal year-end results.
Note A - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All appropriate intercompany
balances and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Fiscal Quarters
The three and nine month periods ended March 27, 2022 and March 28, 2021 each contained 13 weeks and 39 weeks, respectively.
Use of Management Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s
management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other
various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically, and actual results could differ materially from estimates.
Revenue Recognition
Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected on behalf of third parties,
primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent
with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
The following describes principal activities, separated by major product or service, from which the Company generates its revenues:
Franchise Revenues
Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license fees, 4) area
development exclusivity fees and foreign master license fees, 5) advertising funds, and 6) supplier convention funds.
Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur.
Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer.
Franchise license fees are typically billed upon execution of the franchise agreement and amortized over the term of the franchise agreement
which can range from to 20
years. Fees received for renewal periods are amortized over the life of the renewal period.
Area development exclusivity fees and foreign master license fees are typically billed upon execution of the area development and foreign
master license agreements. Area development exclusivity fees are included in deferred revenue in the Condensed Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development agreement. Area
development exclusivity fees that include rights to subfranchise are amortized as revenue over the term of the contract.
Advertising fund contributions for Pie Five units represent contributions collected where we have control over the activities of the fund.
Contributions are based on a percentage of net retail sales. The adoption of Topic 606 revised the determination of whether these arrangements are considered principal versus agent. For Pie Five, we have determined that we are the principal in
these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross basis in the Condensed Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to
be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes. Our obligation related to these funds is to develop and conduct advertising activities. Pie Five marketing fund contributions
are billed and collected weekly.
Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place.
Rental Income
The Company subleases some of its restaurant space to third parties. The Company’s two subleases have terms that end in 2023 and 2025. The sublease agreements are noncancelable through the end of the term and both parties have substantive rights to terminate the lease
when the term is complete. Sublease agreements are not capitalized and the amounts the Company receives are recorded as rental income in the period that rent is received.
Total revenues consist of the following (in thousands):
|
Three Months Ended
|
||||||||
|
March 27,
2022
|
March 28,
2021
|
|||||||
|
Franchise royalties
|
$
|
|
$
|
|
||||
|
Supplier and distributor incentive revenues
|
|
|
||||||
|
Franchise license fees
|
|
|
||||||
|
Area development fees and foreign master license fees
|
|
|
||||||
|
Advertising funds
|
|
|
||||||
|
Rental income
|
|
|
||||||
|
$
|
|
$
|
|
|||||
|
Nine Months Ended
|
||||||||
|
March 27,
2022
|
March 28,
2021
|
|||||||
|
Franchise royalties
|
$ |
|
$ |
|
||||
|
Supplier and distributor incentive revenues
|
|
|
||||||
|
Franchise license fees
|
|
|
||||||
|
Area development fees and foreign master license fees
|
|
|
||||||
|
Advertising funds
|
|
|
||||||
|
Supplier convention funds
|
|
|
||||||
|
Rental income
|
|
|
||||||
|
Other
|
|
|
||||||
|
$
|
|
$
|
|
|||||
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.
Compensation cost for restricted stock units (“RSUs”) 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.
Note B - Leases
The Company determines if an arrangement is a lease at inception of the arrangement. To the extent that it can be determined that an
arrangement represents a lease, it is classified as either an operating lease or a finance lease. The Company does not currently have any finance leases. The Company capitalizes operating leases on the Condensed Consolidated Balance Sheets
through a right of use asset and a corresponding operating lease liability. Right of use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to
make lease payments arising from the lease. Short-term leases that have an initial term of one year or less are not capitalized but are disclosed below.
Operating lease right of use assets and liabilities are recognized at the commencement date of an arrangement based on the present value of
lease payments over the lease term. In addition to the present value of lease payments, the operating lease right of use asset also includes any lease payments made to the lessor prior to lease commencement less any lease incentives and
initial direct costs incurred. Lease expense is recognized on a straight-line basis over the lease term.
Nature of Leases
The Company leases certain office space, restaurant space, and information technology equipment under non-cancelable leases to support its
operations. A more detailed description of significant lease types is included below.
Office Agreements
The Company rents office space from third parties for its corporate location. Office agreements are typically structured with non-cancelable
terms of to ten years .
The Company has concluded that its office agreement represents an operating lease with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate
the lease. As a result, enforceable rights and obligations do not exist under the rental agreement subsequent to the primary term.
Restaurant Space Agreements
As of March 27, 2022, the Company had no
Company-owned restaurants. Historically, the Company has rented restaurant space from third parties for its Company-owned restaurants. Restaurant space agreements are typically structured with non-cancelable terms of to ten years . The Company has
concluded that its restaurant space agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate the
lease. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term.
The Company also subleases some of its restaurant space to third parties. The Company’s two subleases have terms that end in 2023 and 2025. The sublease agreements are noncancelable through the end of the term and both parties have substantive rights to
terminate the lease when the term is complete. Sublease agreements are not capitalized and the amounts the Company receives are recorded as rental income in the period that rent is received.
Information Technology Equipment
The Company rents information technology equipment, primarily printers and copiers, from a third party for its corporate office location.
Information technology equipment agreements are typically structured with non-cancelable terms of to five years . The Company has concluded that its information technology equipment commitments are operating leases.
Discount Rate
Leases typically do not provide an implicit rate. Accordingly, the Company is required to use its incremental borrowing rate in determining
the present value of lease payments based on the information available at commencement date. The Company’s incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar
term an amount equal to the lease payments in a similar economic environment. The Company uses the implicit rate in the limited circumstances in which that rate is readily determinable.
Lease Guarantees
The Company has guaranteed the financial responsibilities of certain franchised store leases. These guaranteed leases are not considered
operating leases because the Company does not have the right to control the underlying asset. If the franchisee abandons the lease and fails to meet the lease’s financial obligations, the lessor may assign the lease to the Company for the
remainder of the term. If the Company does not expect to assign the abandoned lease to a new franchisee within 12 months, the lease will then be considered an operating lease and a right-of-use asset and liability will be recognized.
Practical Expedients and Accounting Policy Elections
Certain lease agreements include lease and non-lease components. For all existing asset classes with multiple component types, the Company
has utilized the practical expedient that exempts it from separating lease components from non-lease components. Accordingly, the Company accounts for the lease and non-lease components in an arrangement as a single lease component.
In addition, for all existing asset classes, the Company has made an accounting policy election not to apply the lease recognition requirements
to short-term leases (that is, a lease that, at commencement, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise). Accordingly, the
Company recognizes lease payments related to short-term leases in the condensed consolidated statement of income on a straight-line basis over the lease term which has not changed from prior recognition. To the extent that there are
variable lease payments, the Company recognizes those payments in the accompanying condensed consolidated statement of income in the period in which the obligation for those payments is incurred.
The components of total lease expense for the nine months ended March 27, 2022, the
majority of which is included in general and administrative expense, are as follows (in thousands):
|
Nine Months Ended
|
||||
|
March 27, 2022
|
||||
|
Operating lease cost
|
$
|
|
||
|
Rental income
|
(
|
)
|
||
|
Total lease expense, net of sublease income
|
$
|
|
||
Supplemental cash flow information related to operating leases is included in the table below (in thousands):
|
Nine Months Ended
|
||||
|
March 27, 2022
|
||||
|
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
|
||
Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:
|
March 27, 2022
|
||||
|
Weighted average remaining lease term
|
|
|||
|
Weighted average discount rate
|
|
%
|
||
Operating lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):
|
Operating Leases
|
||||
|
Remainder of fiscal year 2022
|
$
|
|
||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
| 2026 |
||||
|
Thereafter
|
|
|||
|
Total operating lease payments
|
$
|
|
||
|
Less: imputed interest
|
(
|
)
|
||
|
Total operating lease liability
|
$
|
|
||
Note C - Stock Purchase Plan
On May 23, 2007, the Company’s board of directors approved a stock purchase plan (the “2007 Stock Purchase Plan”) authorizing the purchase
of up to 1,016,000 shares of its common stock in the open market or in privately negotiated transactions. On June 2, 2008, the
Company’s board of directors amended the 2007 Stock Purchase Plan to increase the number of shares of common stock the Company 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
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 no
Note D - Commitments and Contingencies
The Company is subject to various claims and contingencies related to employment agreements, franchise disputes, lawsuits, taxes, food
product purchase contracts and other matters arising out of the normal course of business. Management believes that any such claims and actions currently pending are either covered by insurance or would not have a material adverse effect on
the Company’s annual results of operations or financial condition if decided in a manner that is unfavorable to the Company.
Note E - Stock-Based Compensation
Stock Options:
For the fiscal quarters ended March 27, 2022 and March 28, 2021, the Company did no no unamortized stock-based compensation expense related to stock options.
The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options:
|
Nine Months Ended
|
||||||||
|
March 27,
2022
|
March 28,
2021
|
|||||||
|
Shares
|
Shares
|
|||||||
|
Outstanding at beginning of year
|
|
|
||||||
|
Granted
|
|
|
||||||
|
Exercised
|
|
|
||||||
|
Forfeited/Canceled/Expired
|
|
|
||||||
|
Outstanding at end of period
|
|
|
||||||
|
Exercisable at end of period
|
|
|
||||||
Restricted Stock Units:
For the three months ended March 27, 2022 and March 28, 2021, the Company had stock-based compensation expense of $42 thousand and $39 thousand,
respectively, related to RSUs. As of March 27, 2022, there was no unamortized stock-based compensation expense related to RSUs.
A summary of the status of restricted stock units as of March 27, 2022, and changes during the nine months then ended is presented below:
|
Unvested at June 27, 2021
|
|
|||
|
Granted
|
|
|||
|
Issued
|
|
|||
|
Forfeited
|
(
|
)
|
||
|
Unvested at March 27, 2022
|
|
Note F - Earnings per Share (EPS)
The following table shows the reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the
diluted EPS calculation (in thousands, except per share amounts):
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
|||||||||||||
|
Net income available to common stockholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
BASIC:
|
||||||||||||||||
|
Weighted average common shares
|
|
|
|
|
||||||||||||
|
Net income per common share
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
DILUTED:
|
||||||||||||||||
|
Weighted average common shares
|
|
|
|
|
||||||||||||
|
Convertible notes
|
|
|
|
|
||||||||||||
|
Dilutive stock options
|
|
|
|
|
||||||||||||
|
Weighted average common shares outstanding
|
|
|
|
|
||||||||||||
|
Net income per common share
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
For the three and nine months ended March 27, 2022, options to purchase 166,750 3.11
to $13.11 were excluded from the computation of diluted EPS because their inclusion would have been anti-dilutive.
For the three and nine months ended March 28, 2021, options to purchase 206,750 2.71 to $13.11 were excluded from the computation of diluted EPS because their inclusion would have been anti-dilutive.
Note G - Income Taxes
For the three and nine months ended March 27, 2022, the Company recorded an income tax expense of $3 thousand and $10 thousand,
respectively, all of which is attributable to current state taxes. The Company utilized net operating losses to offset federal income taxes.
The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable
income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of
deferred tax assets. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance. As of March 27, 2022, the Company had established a full valuation allowance of $6.1 million against its deferred tax assets. The Company will continue to review the need for an adjustment to the valuation allowance.
Note H - Segment Reporting
The Company has three
reportable operating segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise and Related Information: (1) Pizza Inn Franchising, (2) Pie
Five Franchising and (3) Company-Owned Restaurants. These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general accounting,
human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue
consists of non-recurring items.
The Pizza Inn and Pie Five Franchising segments establish franchisees, licensees and territorial rights. Revenue for this segment is
primarily derived from franchise royalties, franchise license fees, sale of area development and foreign master license rights, incentive payments from third party suppliers and distributors, advertising funds, and supplier convention
funds. Assets for these segments include equipment, furniture and fixtures.
The Company-Owned Restaurant segment includes sales and operating results for all Company-owned restaurants. Assets for this segment
include equipment, furniture and fixtures for the Company-owned restaurants.
Revenue for corporate administration and other consists of rental income and interest income. Assets primarily include cash and
short-term investments, as well as furniture and fixtures located at the corporate office and trademarks and other intangible assets. All assets are located within the United States.
Summarized in the following table are net sales and operating revenues, depreciation and amortization expense, and income before taxes,
for the Company’s reportable segments as of the three months and nine months ended March 27, 2022 and March 28, 2021 (in thousands):
|
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
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Pie Five Franchising
|
|
|
|
|
||||||||||||
|
Company-Owned Restaurants
|
||||||||||||||||
|
Corporate administration and other
|
|
|
|
|
||||||||||||
|
Consolidated revenues
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Depreciation and amortization expense:
|
||||||||||||||||
|
Corporate administration and other
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Depreciation and amortization
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Income before taxes:
|
||||||||||||||||
| Pizza Inn Franchising | $ | $ | $ | $ | ||||||||||||
|
Pie Five Franchising
|
|
|
|
|
||||||||||||
|
Company-Owned Restaurants
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Combined
|
|
|
|
|
||||||||||||
|
Corporate administration and other
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Income before taxes
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Geographic information (revenues):
|
||||||||||||||||
|
United States
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Foreign countries
|
|
|
|
|
||||||||||||
|
Consolidated total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this
Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended June 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 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.
Results of Operations
Overview
Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”) franchises pizza buffet (“Buffet Units”), delivery/carry-out
(“Delco Units”) and express (“Express Units”) restaurants under the trademark “Pizza Inn” and franchises 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 distributors. At March
27, 2022, franchised and licensed units consisted of the following:
Three Months Ended March 27, 2022
(in thousands, except unit data)
|
Pizza Inn
|
Pie Five
|
All Concepts
|
||||||||||||||||||||||
|
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
|||||||||||||||||||
|
Domestic Franchised/Licensed
|
128
|
$
|
22,228
|
33
|
$
|
4,870
|
161
|
$
|
27,098
|
|||||||||||||||
|
International Franchised
|
31
|
—
|
31
|
|||||||||||||||||||||
Nine Months Ended March 27, 2022
(in thousands, except unit data)
|
Pizza Inn
|
Pie Five
|
All Concepts
|
||||||||||||||||||||||
|
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
|||||||||||||||||||
|
Domestic Franchised/Licensed
|
128
|
$
|
63,590
|
33
|
$
|
14,907
|
161
|
$
|
78,497
|
|||||||||||||||
|
International Franchised
|
31
|
—
|
31
|
|||||||||||||||||||||
Domestic units are located in 18 states predominantly situated in the southern half of the United States. International units are located in six foreign countries.
Basic net income per share increased $0.01 per share to $0.03 per share for the three months ended March 27, 2022, compared to the comparable period in the prior fiscal year.
The Company had net income of $0.5 million for the three months ended March 27, 2022 compared to net income of $0.4 million in the comparable period in the prior fiscal year, on revenues of $2.6 million for the three months ended March 27, 2022
compared to $2.2 million in the comparable period in the prior fiscal year. The increase 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 income for the three months ended March 27, 2022, compared to the comparable period of the prior year was primarily the result of the $0.4 million increase in revenues partially offset by a $0.3 million increase in expenses.
Basic net income per share increased $0.04 per share to $0.07 per share for the nine months ended March 27, 2022, compared to the comparable period in the prior fiscal year.
The Company had net income of $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. The increase in revenue was primarily due to increases in franchise royalties, supplier and distribution incentives, and advertising fund contributions. The $0.6 million
increase in net income for the nine months ended March 27, 2022 compared to the comparable period of the prior year was primarily the result of the $1.7 million increase in revenues partially offset by a $1.1 million increase in expenses.
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared the outbreak of 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.
The COVID-19 pandemic has resulted in dramatically reduced aggregate in-store retail sales at Buffet Units and Pie Five Units, modestly offset by increased aggregate
carry-out and delivery sales. The decreased aggregate retail sales have correspondingly decreased supplier rebates and franchise royalties payable to the Company. During the fourth quarter of fiscal 2020, we participated 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 remain focused on controlling expenses, future results of operations are likely to be materially adversely impacted by the pandemic and its aftermath.
Although the impact of COVID-19 has moderated during fiscal 2022, the Company expects that Buffet 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 pandemic 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 Pie Five Units following social distancing protocols. Any of these changes could materially adversely affect the Company’s future financial performance. However, the ultimate impact of COVID-19 on the Company's
future results of operations and liquidity cannot presently be predicted.
Non-GAAP Financial Measures and Other Terms
The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). However, the Company also presents and
discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for
planning and budgeting purposes. However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company’s GAAP financial statements.
The Company considers EBITDA and Adjusted EBITDA to be important supplemental measures of operating performance that are commonly used by securities analysts, investors and
other parties interested in the Company's industry. The Company believes that EBITDA is helpful to investors in evaluating the Company's results of operations without the impact of expenses affected by financing methods, accounting methods and
the tax environment. The 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. The 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.
The following key performance indicators presented herein, some of which represent non-GAAP financial measures, have the meaning and are calculated as follows:
| ● |
“EBITDA” represents earnings before interest, taxes, depreciation and amortization.
|
| ● |
“Adjusted EBITDA” represents earnings before interest, taxes, depreciation and amortization, stock compensation 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.
|
| ● |
“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) impairment and other lease charges, and (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.
|
| ● |
“Franchisee default and closed store revenue/expense” represents the net of accelerated revenues and costs attributable to defaulted area development agreements and closed franchised stores.
|
EBITDA and Adjusted EBITDA
Adjusted EBITDA for the fiscal quarter ended March 27, 2022 increased $0.2 million compared to the same 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):
RAVE RESTAURANT GROUP, INC.
EBITDA and ADJUSTED EBITDA
(In thousands)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
|||||||||||||
|
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
|
||||||||
Pizza Inn Brand Summary
The following tables summarize certain key indicators for the Pizza Inn franchised and licensed domestic units that management believes are useful in evaluating performance:
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
|||||||||||||
|
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
|
||||||||||||
Total Pizza Inn domestic retail sales increased $4.7 million, or 27.0%, for the three months ended March 27, 2022 when compared to the same period of the 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 nine months ended March 27, 2022, the improvements in domestic retail sales and comparable store retail sales were primarily the result of a moderation in the impact of COVID-19.
The following chart summarizes Pizza Inn unit activity for the three and nine months ended March 27, 2022:
|
Three Months Ended March 27, 2022
|
||||||||||||||||||||
|
Beginning
Units
|
Opened
|
Concept
Change
|
Closed
|
Ending
Units
|
||||||||||||||||
|
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
|
||||||||||||||||||||
|
Beginning
Units
|
Opened
|
Concept
Change
|
Closed
|
Ending
Units
|
||||||||||||||||
|
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
|
|||||||||||||||
The domestic Pizza Inn units remained stable during the 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 believes 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.
Pie Five Brand Summary
The 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
|
Nine Months Ended
|
|||||||||||||||
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
|||||||||||||
|
(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
|
||||||||||||
Pie Five system-wide retail sales increased $0.8 million, or 19.5%, for the three months ended March 27, 2022 when compared to the same period of the prior year. Compared to
the same fiscal quarter of the prior year, average units open in the period decreased from 36 to 34. Comparable store retail sales increased $0.8 million, or 21.4%, during the third quarter of fiscal 2022 compared to the same period of the prior
year. Pie Five system-wide retail sales increased $2.0 million, or 15.4%, for the nine month period ended March 27, 2022 when compared to the same period of the prior year. Year-to-date fiscal 2022 compared to year-to-date of the prior year,
average units open in the period decreased from 39 to 33. Comparable store retail sales increased $2.0 million, or 17.2%, during the nine month period ended March 27, 2022 compared to the same period of the prior fiscal year. For both the three
and nine months ended March 27, 2022, the improvements in domestic retail sales and comparable store retail sales were primarily the result of a moderation in the impact of COVID-19.
The following chart summarizes Pie Five Unit activity for the three and nine months ended March 27, 2022:
|
Three Months Ended March 27, 2022
|
||||||||||||||||||||
|
Beginning
Units
|
Opened
|
Transfer
|
Closed
|
Ending
Units
|
||||||||||||||||
|
Domestic - Franchised
|
34
|
1
|
—
|
2
|
33
|
|||||||||||||||
|
Domestic - Company-owned
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Total Domestic Units
|
34
|
1
|
—
|
2
|
33
|
|||||||||||||||
|
Nine Months Ended March 27, 2022
|
||||||||||||||||||||
|
Beginning
Units
|
Opened
|
Transfer
|
Closed
|
Ending
Units
|
||||||||||||||||
|
Domestic - Franchised
|
33
|
2
|
—
|
2
|
33
|
|||||||||||||||
|
Domestic - Company-owned
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Total Domestic Units
|
33
|
2
|
—
|
2
|
33
|
|||||||||||||||
There was a net decrease of one Pie Five unit during the three months ended March 27, 2022. The Pie Five units remained stable during the nine months ended March 27, 2022.
The Company believes the number of Pie Five units will stabilize in the near term and increase modestly in future periods.
Company-Owned Restaurants
The Company closed its single remaining Company-owned Pie Five restaurant during the third quarter of fiscal 2020. Loss from continuing operations before taxes for the
Company-owned Pie Five stores decreased $76 thousand for the three months ended March 27, 2022 to $1 thousand compared to $77 thousand during the same period of the prior year. Loss from continuing operations before taxes for the Company-owned
Pie Five stores decreased $253 thousand for the nine months ended March 27, 2022 to $3 thousand compared to $256 thousand during the same period of the prior year. The decreased loss was the result of the closure of all remaining Company-owned
restaurants. Our long-term strategy is expected to include Company-owned stores.
Financial Results
The Company defines its operating segments as Pizza Inn Franchising, Pie Five Franchising and Company-Owned Restaurants. The following is additional business segment
information for the three and nine months ended March 27, 2022 and March 28, 2021 (in thousands):
Three Months Ended March 27, 2022 and March 28, 2021
|
Pizza Inn
Franchising
|
Pie Five
Franchising
|
Company-Owned
Restaurants
|
Corporate
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Fiscal Quarter Ended
|
Fiscal Quarter Ended
|
Fiscal Quarter Ended
|
Fiscal Quarter Ended
|
Fiscal Quarter Ended
|
||||||||||||||||||||||||||||||||||||
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
|||||||||||||||||||||||||||||||
|
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
|
||||||||||||||||
Nine Months Ended March 27, 2022 and March 28, 2021
|
Pizza Inn
Franchising
|
Pie Five
Franchising
|
Company-Owned
Stores
|
Corporate
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Fiscal Year-to-Date
|
Fiscal Year-to-Date
|
Fiscal Year-to-Date
|
Fiscal Year-to-Date
|
Fiscal Year-to-Date
|
||||||||||||||||||||||||||||||||||||
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
March 27,
2022
|
March 28,
2021
|
|||||||||||||||||||||||||||||||
|
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
|
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Revenues:
Revenues are derived from franchise royalties, franchise license fees, supplier and distributor incentives, advertising funds, area development exclusivity fees and foreign
master license fees, supplier convention funds, and sales by Company-owned 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, as well as the products sold to franchisees through third-party food distributors.
Total revenues for the three month period ended March 27, 2022 and for the same period in the prior fiscal year were $2.6 million and $2.2 million, respectively. The increase
in total revenues was driven by increases in Pizza Inn and Pie Five franchise and license revenues.
Total revenues for the nine month period ended March 27, 2022 and for the same period in the prior fiscal year were $7.9 million and $6.2 million, respectively. The increase
in total revenues was driven by increases in Pizza Inn and Pie Five franchise and license revenues.
Pizza Inn Franchise Revenues
Pizza Inn franchise and license revenues increased by $0.4 million to $2.1 million for the three month period ended March 27, 2022 compared to the same period of the prior
year. Pizza Inn franchise and license revenues increased to $6.3 million for the nine month period ended March 27, 2022 from $4.7 million for the same period of the prior fiscal year. The increases were primarily driven by increases in supplier
incentives and domestic royalties revenues.
Pie Five Franchise Revenues
Pie Five franchise and license revenues increased by $0.1 million to $0.5 million for the three month period ended March 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. The increases were primarily driven by increases in supplier incentives and domestic royalties revenues.
Costs and Expenses:
Cost of Sales - Total
Total cost of sales, which primarily includes food and supply costs, labor, and general and administrative expenses directly related to Company-owned restaurant sales,
decreased to $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.
General and Administrative Expenses
Total general and administrative expenses increased $0.1 million to $1.4 million for the three month period ended March 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 for the nine month period ended March 27, 2022 compared to $3.5 million for the nine month period ended March 28, 2021. The increases in general and
administrative expenses during both the three and nine month periods were primarily the result of increased corporate expenses.
Franchise Expenses
Franchise expenses include general and administrative expenses directly related to the continuing service of domestic and international franchises. Franchise expenses
increased to $0.7 million for the three month period ended March 27, 2022 compared to $0.6 million for the same period of the prior fiscal year. Franchise expenses increased to $2.5 million for the nine month period ended March 27, 2022 compared
to $1.8 million for the nine month period ended March 28, 2021. In both cases, the increases were primarily due to an increase in advertising expenses.
Gain on Sale of Assets
Gain on sale of assets declined to zero for the three and nine months ended March 27, 2022 compared to a gain of $156 thousand during the comparable prior year periods.
Impairment of Long-lived Assets and Other Lease Charges
Impairment of long-lived assets and other lease charges was zero for both the three month period ended March 27, 2022 and the comparable period in the prior fiscal year.
Impairment of long-lived assets and other lease charges was zero for the nine month period ended March 27, 2022 compared to $21 thousand for the same period of the prior fiscal year. For the three and nine month periods ended March 27, 2022,
there were no charges related to lease termination expenses.
Bad Debt Expense
The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high risk accounts receivable. For the three
month period ended March 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.
Interest Expense
Interest expense decreased $9 thousand to $14 thousand for the three month period ended March 27, 2022 compared to the same fiscal period of the prior year. Interest expense
decreased $8 thousand to $61 thousand for the nine month period ended March 27, 2022 compared to the same fiscal period of the prior year. In both cases, the decrease was primarily the result of the payment of all outstanding convertible notes
during the third quarter of fiscal 2022.
Depreciation and Amortization Expense
Depreciation and amortization expense increased slightly for the three and nine months ended March 27, 2022, compared to the same periods of the prior year. In both cases,
the increase was primarily the result of increases in corporate equipment depreciation.
Provision for Income Tax
For the three and nine months ended March 27, 2022, the Company recorded an income tax expense of $3 thousand and $10 thousand, respectively, all of which is attributable to current state
taxes. The Company utilized net operating losses to offset federal income taxes.
The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences,
and tax planning strategies. In assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. Future sources of taxable income are also
considered in determining the amount of the recorded valuation allowance. As of March 27, 2022, the Company had established a full valuation allowance of $6.1 million against its deferred tax assets. The Company will continue to review the need
for an adjustment to the valuation allowance.
Liquidity and Capital Resources
During the nine month period ended March 27, 2022, the Company's primary source of liquidity was proceeds from operating activities.
Cash flows from operating activities generally reflect net income or losses adjusted for certain non-cash items including depreciation and amortization, changes in deferred
tax assets, share based compensation, and changes in working capital. Cash provided by operating activities was $525 thousand for the nine month period ended March 27, 2022 compared to cash used of $357
thousand for the nine month period ended March 28, 2021. The primary driver of increased operating cash flow during the nine month period ended March 27, 2022 was increased net income.
Cash flows from investing activities reflect net proceeds from the sale of assets and capital expenditures for the purchase of Company assets. Cash provided by investing
activities during the nine month period ended March 27, 2022 was $169 thousand, attributable to payments received on notes receivable from fixed asset sales of $240 thousand being partially offset by the 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 were $11 thousand for the nine months ended March 28, 2021.
Cash flows from financing activities generally reflect changes in the Company's stock and debt activity during the period. Net cash used by financing activities was $1.8
million for the nine month period ended March 27, 2022 compared to net cash provided by financing activities of $3.6 million for the nine month period ended March 28, 2021. Net cash used by financing activities for the nine months ended March 27,
2022 was primarily attributable to the payment of all outstanding convertible notes during the third quarter of fiscal 2022.
As a result of the COVID-19 pandemic, the Company has taken aggressive measures to control expenses and expects modest cash flow from operations during the fourth quarter of
fiscal 2022. However, management believes the cash on hand combined with net cash provided by operations will be sufficient to fund operations for the next 12 months.
2017 ATM Offering
On December 5, 2017, the Company entered into an At Market Issuance Sales Agreement with B. Riley FBR, Inc. (“B. Riley FBR”) pursuant to which the Company could
offer and sell shares of its common stock having an aggregate offering price of up to $5,000,000 from time to time through B. Riley FBR acting as agent (the “2017 ATM Offering”). The 2017 ATM Offering was undertaken pursuant to Rule 415 and a
shelf Registration Statement on Form S-3 which was declared effective by the SEC on November 6, 2017. Through November 6, 2020, the Company had sold an aggregate of 3,064,342 shares in the 2017 ATM Offering, realizing aggregate gross proceeds
of $4.5 million. The 2017 ATM Offering expired on November 6, 2020.
Convertible Notes
On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes due 2022 (“Notes”). Shareholders exercised subscription
rights to purchase all 30,000 of the Notes at the par value of $100 per Note, resulting in gross offering proceeds to the Company of $3.0 million.
The Notes bore interest at the rate of 4% per annum on the principal or par value of $100 per note, payable annually in arrears on February 15 of each year, commencing
February 15, 2018. Interest was payable in cash or, at the Company’s discretion, in shares of Company common stock. The Notes were secured by a pledge of all outstanding equity securities of our two primary direct operating subsidiaries. During
the nine month period ended March 27, 2022, no Notes were converted to common shares. The Notes matured on February 15, 2022, at which time all principal and unpaid interest was paid in cash. As of March 27, 2022, there were no Notes outstanding.
PPP Loan
On April 13, 2020, the Company received the proceeds from a loan in the amount of $0.7 million (the “PPP Loan”) from JPMorgan Chase Bank, N.A. pursuant to the Paycheck Protection Program of the
Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The PPP Loan was unsecured by the Company and was guaranteed by the SBA. We applied for and received a
forgiveness decision in the fourth quarter of fiscal 2021, such that all of the PPP Loan was forgiven at that time.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the 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.
The Company believes the following critical accounting policies require estimates about the effect of matters that are inherently uncertain, are susceptible to change, and
therefore require subjective judgments. Changes in the estimates and judgments could significantly impact the Company’s results of operations and financial condition in future periods.
Accounts receivable consist primarily of receivables generated from franchise royalties and supplier 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.
The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is
evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the assets compared to their carrying value. If impairment is recognized, the carrying value of an impaired asset is reduced to its fair value,
based on discounted estimated future cash flows.
Franchise revenue consists of income from license fees, royalties, area development and foreign master license agreements, advertising fund revenues, supplier incentive and
convention contribution revenues. Franchise 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 as retail sales occur. Supplier incentive revenues are recognized as earned, typically as the underlying commodities are shipped.
The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable
temporary differences, and tax planning strategies. The Company assesses 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 considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight is given to evidence that
can be objectively verified, including recent losses. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance.
The Company accounts for uncertain tax positions in accordance with ASC 740-10, which prescribes a comprehensive model for how a company should recognize, measure, present,
and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. ASC 740-10 requires that a company recognize in its financial statements the impact of tax positions that meet a “more likely
than not” threshold, based on the technical merits of the position. The tax benefits recognized in the financial 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 March 28, 2021, the Company had no uncertain tax positions.
The Company assesses its exposures to loss contingencies from legal matters based upon factors such as the current status of the cases and consultations with external counsel
and provides for the exposure by accruing an amount if it is judged to be probable and can be reasonably estimated. If the actual loss from a contingency differs from management’s estimate, operating results could be adversely impacted.
Not required for a smaller reporting company.
The Company maintains disclosure controls and procedures designed to ensure that information it is required to disclose in the reports filed or submitted under the Securities
Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal
financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
The Company’s management, including the Company’s principal executive officer and principal financial officer, or persons performing similar functions, have evaluated the
Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Company’s principal executive officer and principal financial officer, or persons performing similar functions, have
concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. During the most recent fiscal quarter, there have been no changes in the Company’s internal controls over financial
reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
On January 6, 2020, the Company’s former Chief Executive Officer, Scott Crane, filed suit in the U.S. District Court for the Eastern District of Texas alleging various claims in connection with the Company’s
termination of his employment in July 2019. In general, the suit asserted that the Company terminated Mr. Crane for the purpose of depriving him of certain equity compensation that would otherwise have become due to him on October 15, 2019. The
case proceeded to a jury trial, which resulted in a verdict in favor of Crane on his breach of contract claim. On February 9, 2022, the Court entered judgment against the Company in the amount of $1,887,760.10 inclusive of attorney fees, court
costs and pre-judgment interest. The Company has filed an appeal of the judgment to the Fifth Circuit Court of Appeals.
The Company is subject to other claims and legal actions in the ordinary course of its business. The Company believes that all such claims and actions currently pending against it are either adequately covered by
insurance or would not have a material adverse effect on the Company’s annual results of operations, cash flows or financial condition if decided in a manner that is unfavorable to the Company.
Not required for a smaller reporting company.
On May 23, 2007, the Company’s board of directors approved a stock purchase plan (the “2007 Stock Purchase Plan”) authorizing the purchase on our behalf of up to 1,016,000
shares of our common stock in the open market or in privately negotiated transactions. On June 2, 2008, the Company’s board of directors amended the 2007 Stock Purchase Plan to increase the number of shares of common stock the Company 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 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 no stock repurchases in the fiscal quarter ended March 27, 2022.
The Company’s ability to repurchase shares of our common stock is subject to various laws, regulations and policies as well as the rules and regulations of the SEC.
Subsequent to 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 the Company's common stock other than pursuant to
the 2007 Stock Purchase Plan or other publicly announced plans or programs.
Not applicable.
Not applicable.
None.
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Amended and Restated Articles of Incorporation of Rave Restaurant Group, Inc. (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed January 8,
2015).
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Amended and Restated Bylaws 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).
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Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
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Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
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Section 1350 Certification of Principal Executive Officer.
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Section 1350 Certification of Principal Financial Officer.
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101
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Interactive data files pursuant to Rule 405 of Regulation S-T.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
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RAVE RESTAURANT GROUP, INC.
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(Registrant)
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By:
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/s/ Brandon L. Solano
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Brandon L. Solano
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Chief Executive Officer
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(principal executive officer)
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By:
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/s/ Clinton D. Fendley
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Clinton D. Fendley
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Chief Financial Officer
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(principal financial officer)
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Dated: May 6, 2022
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