What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-06 compared with 2021-02-04 · 180 added, 192 removed, 281 unchanged (57% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

COSTS AND EXPENSES:

2 unchanged sentences

Franchise expenses

Gain on sale of assets

(Gain) loss on sale of assets

Impairment of long-lived assets and other lease charges

Bad debt expense

Bad debt expense (recovery)

Interest expense

1 unchanged sentence

Total costs and expenses

INCOME BEFORE TAXES

Income tax expense (benefit)

INCOME PER SHARE OF COMMON STOCK - BASIC:

INCOME PER SHARE OF COMMON STOCK - DILUTED:

INCOME (LOSS) BEFORE TAXES

Income tax expense

NET INCOME (LOSS)

INCOME (LOSS) PER SHARE OF COMMON STOCK - BASIC:

INCOME (LOSS) PER SHARE OF COMMON STOCK - DILUTED:

Weighted average common shares outstanding - basic

8 unchanged sentences

Accounts receivable, less allowance for bad debts of $64 and $269, respectively

Notes receivable

Deferred contract charges

Notes receivable, current

Deferred contract charges, current

Prepaid expenses and other

5 unchanged sentences

Notes receivable, net of current portion

Long-term deferred contract charges

Deferred contract charges, net of current portion

Deposits and other

5 unchanged sentences

Operating lease liability, current

Deferred revenues

Deferred revenues, current

Total current liabilities

31 unchanged sentences

Balance, December 29, 2019

Stock compensation expense

Issuance of common stock

Equity issue costs - ATM offering

Balance, March 29, 2020

Treasury Stock

5 unchanged sentences

Balance, December 27, 2020

Stock compensation expense

Equity issue costs - ATM offering

Balance, March 28, 2021

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to cash (used in) provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to cash used in operating activities:

Impairment of long-lived assets and other lease charges

1 unchanged sentence

Depreciation and amortization

Amortization of right of use assets

Amortization of operating right of use assets

Amortization of debt issue costs

Gain on the sale of assets

(Gain) loss on the sale of assets

Provision for bad debt

1 unchanged sentence

Changes in operating assets and liabilities:

Restricted cash

Accounts receivable

8 unchanged sentences

Deferred revenue

Deferred rent and other

Other long-term liabilities

Cash used in operating activities

5 unchanged sentences

Proceeds from sale of stock

Equity issuance costs

Cash (used in) provided by financing activities

Net (decrease)/increase in cash, cash equivalents and restricted cash

Equity issuance costs - ATM offering

Cash provided by financing activities

Net increase/(decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

4 unchanged sentences

Conversion of notes to common shares

Operating lease right of use assets at adoption of ASC 842

Operating lease liability at adoption of ASC 842

Operating lease right of use assets at adoption

Operating lease liability at adoption

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3 unchanged sentences

Units”) and express (“Express Units”) restaurants under the trademark “Pizza Inn” and operates 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 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”).

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 28, 2020.

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.

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 28, 2020.

for the interim periods reflected.

Except as noted, all adjustments are of a normal recurring nature.

3 unchanged sentences

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

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.

Restricted cash of $0.2 million at December 27, 2020 and

June 28, 2020 is omitted from cash and cash equivalents and is included in current assets.

The restricted cash is held in an interest-bearing money market account and is restricted pursuant to a letter of credit for an insurance claim dating back

to the mid-1980’s.

Restricted cash as of June 28, 2020 consisted of an interest-bearing money

market account restricted pursuant to a letter of credit for an insurance claim dating back to the mid-1980’s.

The $0.2 million in restricted cash was released during the third quarter of 2021.

Fiscal Quarters

The three and six month periods ended December 27, 2020 and December 29, 2019 each contained 13 weeks and 26 weeks, respectively.

The three and nine month periods ended March 28, 2021 and March 29, 2020 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.

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.

1 unchanged sentence

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 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:

1 unchanged sentence

Revenue from restaurant sales is recognized when food and beverage products are sold in Company-owned restaurants.

The Company reports revenue net of sales taxes collected from customers and remitted

to governmental taxing authorities.

The Company reports revenue net of sales taxes collected from customers and remitted to

governmental taxing authorities.

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, 6) supplier convention funds, and 7) rental income.

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.

1 unchanged sentence

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 five to 20 years.

Fees received for

renewal periods are amortized over the life of the renewal period.

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.

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.

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 Operations.

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.

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.

4 unchanged sentences

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.

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 are recorded as rental income in the period that rent is received.

5 unchanged sentences

Franchise license fees

Area development exclusivity fees and foreign master license fees

Area development fees and foreign master license fees

Advertising funds

1 unchanged sentence

Rental income

Six Months Ended

Nine Months Ended

Restaurant sales

2 unchanged sentences

Franchise license fees

Area development exclusivity fees and foreign master license fees

Area development fees and foreign master license fees

Advertising funds

3 unchanged sentences

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 (“RSU’s”) is measured as an amount equal to the fair value of the RSU’s on the date of grant and is expensed over the vesting period if achievement of the

performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.

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 (“RSU’s”) is measured as an amount equal to the fair value of the RSU’s on the date of grant and is expensed over the vesting period if

achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.

Note B - Adoption of ASC 842, “Leases”

In February 2016, FASB issued Accounting Standards Codification 842, Leases (“ASC 842”) which requires an entity to recognize a right of use asset and lease liability for all leases.

Classification of

leases as either a finance or operating lease determines the recognition, measurement and presentation of expenses.

Classification of leases as either a finance or operating lease determines the recognition, measurement and presentation of expenses.

The new standard was effective for the Company in the first quarter of fiscal 2020 and was adopted using a modified retrospective approach with the date of initial application on July 1,

4 unchanged sentences

not reassess certain land easements in existence prior to July 1, 2019.

Through the implementation process, the Company evaluated each of its lease arrangements and enhanced its systems to track and calculate additional information required upon adoption of this standards

The adoption had an impact to the Condensed Consolidated Balance Sheet as of July 1, 2019 relating to the recognition of operating lease right of use assets and operating lease liabilities which represented approximately a 30% change to

total assets and a 64% change to total liabilities.

Through the implementation process, the Company evaluated each of its lease arrangements and enhanced its systems to track and calculate additional information required upon adoption of this

standards update.

change to total assets and a 64% change to total liabilities.

The impact of adoption of this new standards update was as follows (in thousands):

4 unchanged sentences

Operating lease liabilities - long-term

As of June 30, 2019, the Company had $132 thousand recorded within deferred rent for lease incentives incurred at the inception of the affected leases and $302 thousand in deferred rent tenant improvements.

As of June 30, 2019, the Company had $132 thousand recorded within deferred rent for lease incentives incurred at the inception of the affected leases and $302 thousand in deferred rent tenant

improvements.

Upon adoption of the new standards update, these lease incentives were included within the lease liability.

1 unchanged sentence

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.

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

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.

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.

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.

A more detailed description of

significant lease types is included below.

Office Agreements

1 unchanged sentence

Office agreements are typically structured with non-cancelable terms of one to 10 years.

The Company has concluded that

its office agreements represent operating leases with a lease term that equals the primary non-cancelable contract term.

The Company has

concluded that its office 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.

result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term.

Restaurant Space Agreements

1 unchanged sentence

Restaurant space agreements are typically structured with non-cancelable terms of one to 10 years.

has concluded that its restaurant 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.

result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term.

Company has concluded that its restaurant 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

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.

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 are recorded as rental income in the period that rent is received.

1 unchanged sentence

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 one to five years.

Information technology equipment agreements are

typically structured with non-cancelable terms of one to five years.

The Company has concluded that its information technology equipment commitments are operating leases.

1 unchanged sentence

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

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.

1 unchanged sentence

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.

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 be considered an operating lease and a right-of-use asset and liability will be recognized.

If the Company does not expect to

assign the abandoned lease to a new franchisee within 12 months, the lease will 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.

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.

1 unchanged sentence

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, we recognize lease payments related to our short-term leases in

our statement of operations on a straight-line basis over the lease term which has not changed from our prior recognition.

To the extent that there are variable lease payments, we recognize those payments in our statement of operations in the

period in which the obligation for those payments is incurred.

The components of total lease expense for the six months ended December 27, 2020, the majority of which is included in general and administrative expense, are as follows (in thousands):

Six Months Ended

December 27, 2020

Accordingly, we recognize lease payments related to our short-term leases

in our statement of operations on a straight-line basis over the lease term which has not changed from our prior recognition.

To the extent that there are variable lease payments, we recognize those payments in our statement of operations in

the period in which the obligation for those payments is incurred.

The components of total lease expense for the nine months ended March 28, 2021, t he majority of which is included in general and

administrative expense, are as follows (in thousands):

Nine Months Ended

March 28, 2021

Operating lease cost

2 unchanged sentences

Supplemental cash flow information related to operating leases is included in the table below (in thousands):

Six Months Ended

December 27, 2020

Nine Months Ended

March 28, 2021

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:

December 27, 2020

March 28, 2021

Weighted average remaining lease term

7 unchanged sentences

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.

2007 Stock Purchase Plan does not have an expiration date.

There were no stock purchases in the fiscal quarters ended December 27, 2020 or December 29, 2019.

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.

3,016,000 shares.

The 2007 Stock Purchase Plan does not have an expiration date.

There were no stock purchases in the fiscal quarters ended March 28, 2021 or March 29, 2020.

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.

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 costumers, 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.

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 has precipitated significant job losses and a national economic downturn that typically impacts the demand for restaurant food service.

Although most of our domestic

restaurants have continued to operate under these conditions, we have 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

We 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.

We expect that Buffet Units and Pie Five Units 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.

changes could materially adversely affect the Company’s future financial performance.

However, the ultimate impact of COVID-19 on our future results of operations and liquidity cannot presently be predicted.

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 December 27, 2020 and December 29, 2019, the Company did not recognize any stock-based compensation expense related to stock options.

As of December 27, 2020, there

was no unamortized stock-based compensation expense related to stock options.

For the fiscal quarters ended March 28, 2021 and March 29, 2020, the Company did not recognize any stock-based compensation expense related to stock options.

As of March 28, 2021, there was

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:

Six Months Ended

Nine Months Ended

Outstanding at beginning of year

3 unchanged sentences

Restricted Stock Units:

For the three months ended December 27, 2020 and December 29, 2019, the Company had no stock-based compensation expenses related to RSU’s.

As of December 27, 2020, there was no unamortized

For the three months ended March 28, 2021 and March 29, 2020, the Company had stock-based compensation expense of $39 thousand and a credit of $19 thousand, respectively, related to RSU’s.

For the nine months ended March 28, 2021 and March 29, 2020, the Company had stock-based compensation expense of $39 thousand and a credit of $104 thousand, respectively, related to RSU’s.

As of March 28, 2021, there was no unamortized

stock-based compensation expense related to RSU’s.

A summary of the status of restricted stock units as of December 27, 2020, and changes during the three months then ended is presented below:

A summary of the status of restricted stock units as of March 28, 2021, and changes during the three months then ended is presented below:

Unvested at June 28, 2020

Unvested at December 27, 2020

Unvested at March 28, 2021

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).

(In thousands, except per share amounts)

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

Six Months Ended

Nine Months Ended

Net income available to common stockholders

Weighted average common shares

Net income per common share

Net income (loss) per common share

Weighted average common shares

2 unchanged sentences

Weighted average common shares outstanding

Net income per common share

For the three and six months ended December 27, 2020, options to purchase 206,750 shares of common stock at exercise prices from $2.71 to $13.11 were excluded from the computation of diluted EPS

because they were not in-the-money.

For the three and six months ended December 29, 2019, options to purchase 216,550 shares of common stock at exercise prices ranging from $2.71 to $13.11 were excluded from the computation of

diluted EPS because they were not in-the-money.

Net income (loss) per common share

For the three and nine months ended March 28, 2021, options to purchase 206,750 shares of common stock at exercise prices from

$2.71 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 29, 2020, options to purchase 216,550 shares of common stock at exercise prices ranging from $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 six months ended December 27, 2020, the Company recorded an income tax expense of $4 thousand, all of which was attributable to current state taxes.

For the nine months ended March 28, 2021 the Company recorded an income tax expense of $5 thousand, all of which is attributable to current state taxes.

The Company utilized net operating

losses to offset federal 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

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 December 27, 2020, the Company had established a full valuation allowance of $6.5 million against its deferred tax assets.

The Company will continue to review the need for an

adjustment to the valuation allowance.

Future sources of taxable

income are also considered in determining the amount of the recorded valuation allowance.

As of March 28, 2021 the Company had established a full valuation allowance of $6.5 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:

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.

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.

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

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.

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 six months ended December 27, 2020 and December 29, 2019 (in thousands):

months and nine months ended March 28, 2021 and March 29, 2020 (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

Net sales and operating revenues:

15 unchanged sentences

Corporate administration and other

Income before taxes

Income (loss) before taxes

Geographic information (revenues):

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements