What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2021-02-04 · 277 added, 264 removed, 193 unchanged (74% of the section changed)

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 28, 2020 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 28, 2020.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

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.

The following discussion should be read in conjunction with the consolidated f inancial 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 28, 2020 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 28, 2020.

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

Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”) operates and franchises pizza buffet (“Buffet Units”),

delivery/carry-out (“Delco 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”.

We facilitate food, equipment and supply distribution to our domestic and international system of restaurants through agreements with third

party distributors.

At December 27, 2020, Company-owned, franchised and licensed units consisted of the following:

Three Months Ended December 27, 2020

We facilitate food, equipment and supply distribution to our domestic and international system of restaurants through agreements

with third party distributors.

At March 28, 2021, Company-owned, franchised and licensed units consisted of the following:

Three Months Ended March 28, 2021

(in thousands, except unit data)

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International Franchised

Six Months Ending December 27, 2020

Nine Months Ending March 28, 2021

(in thousands, except unit data)

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International units are located in six foreign countries.

Basic net income per share increased $0.01 per share to $0.01 per share for the three months ended December 27, 2020, compared to the comparable period in the prior fiscal

The Company had net income of $102 thousand for the three months ended December 27, 2020 compared to net income of $14 thousand in the comparable period in the prior fiscal year, on revenues of $2.1 million for the three months ended December

27, 2020 compared to $2.8 million in the comparable period in the prior fiscal year.

The decline in revenue was primarily due to decreases in restaurant sales, franchise royalties and franchise license fees partially offset by an increase in

supplier convention funds.

The $0.1 million increase in net income for the three months ended December 27, 2020, compared to the comparable period of the prior year was the result of a $0.8 million decrease in expenses partially offset by the $0.7

million decrease in revenues.

Basic net income per share declined $0.01 per share to $0.01 per share for the six months ended December 27, 2020, compared to the comparable period in the prior fiscal year.

The Company had net income of $0.2 million for the six months ended December 27, 2020 compared to net income of $0.3 million in the comparable period in the prior fiscal year, on revenues of $4.0 million for the six months ended December 29, 2019

compared to $5.7 million in the comparable period in the prior fiscal year.

The decline in revenue was primarily due to decreases in restaurant sales, franchise royalties, supplier convention funds and franchise license fees.

The $0.1 million

decrease in net income for the six months ended December 27, 2020 compared to the comparable period of the prior year was primarily the result of the $1.7 million decrease in revenue partially offset by a $1.6 million decrease in expenses.

Basic net income per share increased $0.32 per share to $0.02 per share for the three months ended March 28, 2021, compared to the

comparable period in the prior fiscal year.

The Company had net income of $0.4 million for the three months ended March 28, 2021 compared to a net loss of $4.5 million in the comparable period in the prior fiscal year, on revenues of $2.2

million for the three months ended March 28, 2021 compared to $2.7 million in the comparable period in the prior fiscal year.

The decline in revenue was primarily due to decreases in restaurant sales, franchise royalties, supplier and

distributer incentives and franchise license fees.

The $4.9 million increase in net income for the three months ended March 28, 2021, compared to the comparable period of the prior year was primarily the result of a $1.4 million decrease in

expenses and a $4.1 million addition to the reserve against deferred taxes in the prior year partially offset by the $0.5 million decrease in revenues.

Basic net income per share increased $0.31 per share to $0.03 per share for the nine months ended March 28, 2021, compared to the

comparable period in the prior fiscal year.

The Company had net income of $0.6 million for the nine months ended March 28, 2021 compared to net loss of $4.3 million in the comparable period in the prior fiscal year, on revenues of $6.2

million for the nine months ended March 28, 2021 compared to $8.4 million in the comparable period in the prior fiscal year.

The decline in revenue was primarily due to decreases in restaurant sales, franchise royalties, supplier convention

funds and franchise license fees.

The $4.9 million increase in net income for the nine months ended March 28, 2021 compared to the comparable period of the prior year was primarily the result of a $3.0 million decrease in expenses and a $4.1

million addition to the reserve against deferred taxes in the prior year offset by the $2.2 million decrease in revenues.

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.

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

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

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

(See, “Liquidity and Capital Resources--PPP Loan,” below.) 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

During the fourth quarter of fiscal 2020, we participated in a government-sponsored loan program.

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.

We expect 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.

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

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

Any of these 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.

Adjusted EBITDA

Adjusted EBITDA for the fiscal quarter ended December 27, 2020, increased $0.2 million compared to the same period of the prior fiscal year.

Year-to-date Adjusted EBITDA

remained steady compared to the same period of the prior fiscal year.

Adjusted EBITDA for the fiscal quarter ended March 28, 2021, increased $0.4 million compared to the same period of the prior fiscal

Year-to-date Adjusted EBITDA increased $0.4 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):

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Three Months Ended

Six Months Ended

Nine Months Ended

Net income (loss)

Interest expense

Depreciation and amortization

Stock compensation expense

Gain on sale of assets

Stock compensation expense (income)

(Gain) loss on sale of assets

Impairment of long-lived assets and other lease charges

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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.

The following tables summarize certain key indicators for the Pizza Inn franchised and licensed domestic units that management believes are useful in evaluating

Three Months Ended

Six Months Ended

Nine Months Ended

Pizza Inn Retail Sales - Total Domestic Units

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Total Domestic Units

Total Pizza Inn domestic retail sales decreased $5.1 million, or 24.6%, for the three months ended December 27, 2020 when compared to the same period of the prior year.

Inn domestic comparable store retail sales decreased by $3.5 million, or 18.4%, for the three months ended December 27, 2020 when compared to the same period of the prior year.

Total Pizza Inn domestic retail sales decreased $10.7 million, or 25.1%, for the six months ended December 27, 2020 when compared to the same period of the prior year.

Inn domestic comparable store retail sales decreased by $7.8 million, or 20.0%, for the six months ended December 27, 2020 when compared to the same period of the prior year.

The following chart summarizes Pizza Inn unit activity for the three and six months ended December 27, 2020:

Three Months Ended December 27, 2020

Total Pizza Inn domestic retail sales decreased $2.4 million, or 11.9%, for the three mo nths ended March 28, 2021 when

compared to the same period of the prior year.

Pizza Inn domestic comparable store retail sales decreased by $0.5 million, or 3.1%, for the three months ended March 28, 2021 when compared to the same period of the prior year.

Total Pizza Inn domestic retail sales decreased $13.1 million, or 20.9%, for the nine months ended March 28, 2021 when compared to

the same period of the prior year.

Pizza Inn domestic comparable store retail sales decreased by $8.4 million, or 14.8%, for the nine months ended March 28, 2021 when compared to the same period of the prior year.

The following chart summarizes Pizza Inn unit activity for the three and nine months ended March 28, 2021:

Three Months Ended March 28, 2021

Domestic Units

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International Units (all types)

Six Months Ended December 27, 2020

Nine Months Ended March 28, 2021

Domestic Units

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International Units (all types)

There was a net decrease of four domestic Pizza Inn units during the three months ended December 27, 2020 and a net decrease of nine units in the total domestic Pizza Inn unit count during the six

months ended December 27, 2020.

During the second quarter of fiscal 2021, the number of international Pizza Inn units remained the same while the number of international Pizza Inn units decreased by six in the six months ended December 27, 2020.

We believe the modest net closure of Pizza Inn units will continue in the near term and eventually reverse in future periods.

We expect international units to increase moderately in future periods.

There was a net decrease of five domestic Pizza Inn units during the three months ended March 28, 2021 and a net decrease of fifteen units

in the total domestic Pizza Inn unit count during the nine months ended March 28, 2021.

During the third quarter of fiscal 2021, the number of international Pizza Inn units increased by one unit while the number of international Pizza Inn

units decreased by five in the nine months ended March 28, 2021.

We believe the modest net closure of domestic Pizza Inn units will continue in the near term and eventually reverse in future periods.

We expect 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.

The following tables summarize certain key indicators for the Pie Five franchised and Company-owned restaurants that management believes are useful in evaluating

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except unit data)

9 unchanged sentences

Total Domestic Units

Pie Five system-wide retail sales decreased $3.2 million, or 42.1%, for the three months ended December 27, 2020 when compared to the same period of the prior year.

the same fiscal quarter of the prior year, average units open in the period decreased from 54 to 37.

Comparable store retail sales decreased by $0.7 million, or 15.5%, during the second quarter of fiscal 2021 compared to the same period of the

Pie Five system-wide retail sales decreased $7.5 million, or 45.8%, for the six month period ended December 27, 2020 when compared to the same period of the prior year.

Pie Five system-wide retail sales decreased $1.5 million, or 27.0%, for the three months end ed March 28, 2021 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 43 to 35.

Comparable store retail sales remained relatively stable during the third

quarter of fiscal 2021 compared to the same period of the prior year.

Pie Five system-wide retail sales decreased $9.0 million, or 41.1%, for the nine month period ended March 28, 2021

when compared to the same period of the prior year.

Year-to-date fiscal 2021 compared to year-to-date of the prior year, average units open in the period decreased from 50 to 42.

Comparable store retail sales decreased by $2.0 million, or 19.6%, during the six month period ended December 27, 2020

compared to the same period of the prior fiscal year.

The following chart summarizes Pie Five Unit activity for the three and six months ended December 27, 2020:

Three Months Ended December 27, 2020

Comparable store retail sales decreased $2.0 million, or

14.2%, during the nine month period ended March 28, 2021 compa red to the same period of the prior fiscal year.

The following chart summarizes Pie Five Unit activity for the three and nine months ended March 28, 2021:

Three Months Ended March 28, 2021

Domestic - Franchised

1 unchanged sentence

Total Domestic Units

Six Months Ended December 27, 2020

Nine Months Ended March 28, 2021

Domestic - Franchised

1 unchanged sentence

Total Domestic Units

The net decreases of Pie Five units during the three and six months ended December 27, 2020 were primarily the result of the COVID-19 pandemic.

We believe the modest net

closure of Pie Five units will continue in the near term and eventually reverse in future periods.

The net decreases of Pie Five units during the three an d nine months ended March 28, 2021 were primarily the

result of the COVID-19 pandemic.

We believe the modest net closure of Pie Five units will continue in the near term and eventually reverse in future periods.

Pie Five - Company-Owned Restaurants

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except store weeks and average data)

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Restaurant operating cash flow

Average weekly sales for Company-owned Pie Five Units decreased $7.4 million, or 100%, to zero for the three months ended December 27, 2020 compared to the same period of the

prior fiscal year.

Company-owned Pie Five restaurant operating cash flow increased $49 thousand to zero during the second quarter of fiscal 2021 compared to the same period of the prior year.

Loss before taxes for Company-owned Pie Five stores

decreased $0.2 million for the three months ended December 27, 2020 compared to the same period of the prior year.

The increased restaurant operating cash flow and decreased pre-tax loss were primarily the result of the closure of all remaining

Company-owned stores during the third quarter of fiscal 2020.

Average weekly sales for Company-owned Pie Five Units decreased $7.8 million, or 100%, to zero for the six months ended December 27, 2020 compared to the same period of the

prior fiscal year.

Company-owned Pie Five restaurant operating cash flow increased $83 thousand to zero during the six month period ended December 27, 2020 compared to the same period of prior year.

Loss before taxes for Company-owned Pie Five

stores decreased $0.3 million for the six months ended December 27, 2020 compared to the same period of the prior year.

The increased restaurant operating cash flow and decreased pre-tax loss were primarily the results of the closure of all

remaining Company-owned stores during the third quarter of fiscal 2020.

Average weekly sales for Company-owned Pie Five Units decreased $9.0 million, or 100%, to zero for the three months ended March 28,

2021 compared to the same period of the prior fiscal year.

Company-owned Pie Five restaurant operating cash flow increased $115 thousand to a loss of $1 thousand during the third quarter of fiscal 2021 compared to the same period of the prior

Loss before taxes for Company-owned Pie Five stores decreased $0.4 million for the three months ended March 28, 2021 compared to the same period of the prior year.

The increased restaurant operating cash flow and decreased pre-tax loss

were the result of the closure of all remaining Company-owned stores during the third quarter of fiscal 2020.

Average weekly sales for Company-owned Pie Five Units decreased $8.1 million, or 100%, to zero for the nine months ended March 28,

2021 compared to the same period of the prior fiscal year.

Company-owned Pie Five restaurant operating cash flow increased $0.2 million to a loss of $1 thousand during the nine month period ended March 28, 2021 compared to the same period of

Loss before taxes for Company-owned Pie Five stores decreased $0.6 million for the nine months ended March 28, 2021 compared to the same period of the prior year.

The increased restaurant operating cash flow and decreased pre-tax

loss were the result of the closure of all remaining Company-owned stores during the third quarter of fiscal 2020.

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, 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.

We consider 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 our industry.

We consider 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 our industry.

We believe that EBITDA is helpful to investors in evaluating our results of operations without the impact of expenses affected by financing methods, accounting methods and the tax environment.

We believe that Adjusted

EBITDA provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period.

We believe 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.

that Adjusted EBITDA provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period.

We believe 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.

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.

1 unchanged sentence

“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.

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.

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

Three Months Ended December 27, 2020

The Company defines its operating segments a s Pizza Inn Franchising, Pie Five Franchising and Company-Owned

The following is additional business segment information for the three and nine months ended March 28, 2021 and March 29, 2020 (in thousands):

Three Months Ended March 28, 2021 and March 29, 2020

Company-Owned

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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 (recovery)

Interest expense

2 unchanged sentences

INCOME/(LOSS) BEFORE TAXES

Six Months Ended December 27, 2020

Nine Months Ended March 28, 2021 and March 29, 2020

Company-Owned

13 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 (recovery)

Interest expense

2 unchanged sentences

INCOME/(LOSS) BEFORE TAXES

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 December 27, 2020 and for the same period in the prior fiscal year were $2.1 million and $2.8 million, respectively.

decrease in total revenues was driven by a reduction in Pie Five franchise and license revenues and lower sales from Company-owned restaurants.

Total revenues for the six month period ended December 27, 2020 and for the same period in the prior fiscal year were $4.0 million and $5.7 million, respectively.

in total revenues was driven by a reduction in Pizza Inn and Pie Five franchise and license revenues, as well as lower sales from Company-owned restaurants.

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 conve ntion 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 28, 2021 and for the same period in the prior fiscal year were $2.2 million

and $2.7 million, respectively.

The decrease in total revenues was driven by a reduction in Pizza Inn and Pie Five franchise and license revenues and zero sales from Company-owned restaurants.

Total revenues for the nine month period ended March 28, 2021 and for the same period in the prior fiscal year were $6.2 million and

$8.4 million, respectively.

The decrease in total revenues was driven by a reduction in Pizza Inn and Pie Five franchise and license revenues, as well as zero sales from Company-owned restaurants.

Pizza Inn Franchise Revenues

Pizza Inn franchise and license revenues remained relatively stable at $1.6 million for the three month periods ended December 27, 2020 and December 29, 2019.

franchise and license revenues decreased to $3.0 million for the six month period ended December 27, 2020 from $3.5 million for the same period of the prior fiscal year.

Pizza Inn franchise and license revenues decreased by $0.2 million to $1.7 million for the three month period ended March 28, 2021

compared to the same period of the prior year.

Pizza Inn franchise and license revenues decreased to $4.7 million for the nine month period ended March 28, 2021 from $5.5 million for the same period of the prior fiscal year.

Pie Five Franchise Revenues

Pie Five franchise and license revenues decreased by $0.6 million to $0.4 million for the three month period ended December

27, 2020 compared to the same period of the prior fiscal year.

The decrease was primarily driven by decreases in supplier incentives, domestic royalties and brand advertising fund revenues due to fewer

retail stores.

Pie Five franchise and license revenues decreased to $0.9 million for the six month period ended December 27, 2020 compared to $1.9 million for the same period in the prior fiscal year for the same reason.

Pie Five franchise and license revenues decreased by $0.2 million to $0.4 million for the three month period ended March 28, 2021 compared to the same period of the prior fiscal year.

The decrease was

primarily driven by decreases in supplier incentives, domestic royalties and brand advertising fund revenues due to fewer retail stores.

Pie Five franchise and license revenues decreased to $1.3 million for the nine month period ended March 28, 2021 compared to $2.5 million for the same period in the prior fiscal year for the same reason.

Restaurant Sales

Restaurant sales, which consist of revenue generated by Company-owned restaurants, decreased $0.1 million to zero for the fiscal quarter ended December 27, 2020 compared to the

fiscal quarter ended December 29, 2019.

In the six month period ended December 27, 2020, restaurant sales decreased to zero from $0.2 million in sales for the same period of the prior fiscal year.

In both cases, the decreases were primarily due to

closure of all remaining Company-owned stores during the third quarter of fiscal 2020.

Restaurant sales, which consist of revenue generated by Company-owned restaurants, decreased $36 thousand to zero for the fiscal

quarter ended March 28, 2021 compared to the fiscal quarter ended March 29, 2020.

In the nine month period ended March 28, 2021, restaurant sales decreased to zero from $0.2 million in sales for the same period of the prior fiscal year.

both cases, the decreases were due to closure of all remaining Company-owned stores during the third quarter of fiscal 2020.

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 $40 thousand to $75 thousand for the three month period ended December 27, 2020 compared to $115 thousand in the three month period ended December 29, 2019.

For the six month period ended December 27, 2020, total cost of sales decreased

$96 thousand to $153 thousand compared to $249 thousand in the same period of the prior fiscal year.

The decreases in costs of sales in both three and six month periods reflect the closure of all remaining Company-owned restaurants during the third

quarter of fiscal 2020.

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 $28 thousand to $76 thousand for the three month period ended March 28, 2021 compared to $104 thousand in the three month period ended March 29, 2020.

For the nine month period ended March 28,

2021, total cost of sales decreased $124 thousand to $229 thousand compared to $353 thousand in the same period of the prior fiscal year.

The decreases in costs of sales in both three and nine month periods reflect the closure of all

remaining Company-owned restaurants during the third quarter of fiscal 2020.

General and Administrative Expenses

Total general and administrative expenses decreased $0.4 million to $1.2 million for the three month period ended December 27, 2020 compared to $1.6 million for the same period

of the prior fiscal year.

Total general and administrative expenses decreased to $2.3 million for the six month period ended December 27, 2020 compared to $2.9 million for the six month period ended December 29, 2019.

The decreases in general and

administrative expenses during both the three and six month periods were primarily the result of decreased corporate expenses in response to the COVID-19 pandemic.

Total general and administrative expenses decreased $0.4 million to $1.3 million for the three month period ended March 28, 2021

compared to $1.7 million for the same period of the prior fiscal year.

Total general and administrative expenses decreased to $3.5 million for the nine month period ended March 28, 2021 compared to $4.5 million for the nine month period ended

March 29, 2020.

The decreases in general and administrative expenses during both the three and nine month periods were primarily the result of decreased corporate expenses in response to the COVID-19 pandemic.

Franchise Expenses

Franchise expenses include general and administrative expenses directly related to the continuing service of domestic and international franchises.

Franchise expenses decreased

to $0.6 million for the three month period ended December 27, 2020 compared to $0.8 million for the same period of the prior fiscal year.

Franchise expenses decreased to $1.2 million for the six month period ended December 27, 2020 compared to $1.7

million for the six month period ended December 29, 2019.

In both cases, the decreases were primarily due to a reduction in employees supporting franchisees, fewer closed store expenses, and lower convention expense.

Gain on Sale of Assets

Gain on sale of assets remained zero for both the second quarter of fiscal 2021 and the same period of fiscal 2020.

There was sale of assets less than $1 thousand for the

six months ended December 27, 2020 compared to a gain on sale of assets of $11 thousand for the comparable prior year period.

Franchise expenses include general and administrative expenses directly related to the continuing service of domestic and

international franchises.

Franchise expenses decreased to $0.6 million for the three month period ended March 28, 2021 compared to $0.9 million for the same period of the prior fiscal year.

Franchise expenses decreased to $1.8 million for the

nine month period ended March 28, 2021 compared to $2.6 million for the nine month period ended March 29, 2020.

In both cases, the decreases were primarily due to a reduction in employees supporting franchisees, fewer closed store expenses,

and lower convention expense.

Loss (Gain) on Sale of Assets

Gain on sale of assets of $156 t housand for the third quarter of fiscal 2021 compared to a loss of $18 thousand for

the same period of fiscal 2020.

Gain on sale of assets of $156 thousand for the nine months ended March 28, 2021 compared to a loss on sale of assets of $7 thousand for the

comparable prior year period.

Impairment of Long-lived Assets and Other Lease Charges

Impairment of long-lived assets and other lease charges was $4 thousand for the three month period ended December 27, 2020 compared to $0.2 million for the same period in the

prior fiscal year.

Impairment of long-lived assets and other lease charges was $21 thousand for the six month period ended December 27, 2020 compared to $0.3 million for the same period of the prior fiscal year.

For the three and six month periods

ended December 27, 2020, these 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.

expense for the three and six month period ended December 27, 2020, increased $52 thousand and $87 thousand, respectively, as compared to the comparable periods in the prior fiscal year.

Impairment of long-lived assets and other lease charges was zero for the three month period ended March 28, 2021 compared to $0.5

million for the same period in the prior fiscal year.

Impairment of long-lived assets and other lease charges was $21 thousand for the nine month period ended March 28, 2021 compared to $0.8 million for the same period of the prior fiscal

For the three and nine month periods ended March 28, 2021, these charges related to lease termination expenses.

Bad Debt Expense (Recovery)

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 28, 2021, bad debt recovery was $97 thousand compared to the bad debt expense of $11 thousand for the same period in the prior fiscal year.

Bad debt expense for the nine

month period ended March 28, 2021, decreased $21 thousand compared to the comparable period in the prior fiscal year.

Interest Expense

Interest expense remained relatively stable for the three and six month periods ended December 27, 2020 compared to the same fiscal periods of the prior year.

Interest expense remained relatively stable for the three and nine month periods ended March 28, 2021 compared to the same fiscal

periods of the prior year.

Depreciation and Amortization Expense

Depreciation and amortization expense declined slightly for the three and six months ended December 27, 2020, compared to the same periods of the prior year.

In both cases,

the decrease was primarily the result of the closure of all remaining Company-owned Pie Five Units during the third quarter of fiscal 2020.

Depreciation and amortization expense declined slightly for the three and nine months ended March 28, 2021, compared to the same

periods of the prior year.

In both cases, the decrease was primarily the result of the closure of all remaining Company-owned Pie Five Units during the third quarter of fiscal 2020.

Provision for Income Tax

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.

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 strategies.

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.

Liquidity and Capital Resources

During the six month period ended December 27, 2020, our primary source of liquidity was from sales of our common stock.

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 used by operating activities was $0.3 million for the six month period ended December 27, 2020 compared to cash used of $0.4 million for

the six month period ended December 29, 2019.

The primary drivers of slightly improved operating cash flow during the six month period ended December 27, 2020 were reduced payments for settlement of operating leases and lower deferred revenues.

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 six month period ended December 27, 2020 was zero as a result of capital expenditures of $26 thousand being completely offset by $26 thousand in payments received on notes receivable.

Cash flows provided by investing

activities was $61 thousand for the six months ended December 29, 2019.

During the nine month period ended March 28, 2021, our primary source of liquidity was from sales of our common stock.

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 used by operating activities was $0.4

million for the nine month period ended March 28, 2021 compared to cash used of $0.8 million for the nine month period ended March 29, 2020.

The primary drivers of increased operating cash flow during

the nine month period ended March 28, 2021 were reduced payments for settlement of operating leases and lower deferred revenues.

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 28, 2021 was $11 thousand attributable to payments received on notes receivable from fixed asset sales of $40 thousand being partially offset by

the purchase of property, plant and equipment of $29 thousand.

Cash flows provided by investing activities was $64 thousand for the nine months ended March 29, 2020.

Cash flows from financing activities generally reflect changes in the Company’s stock and debt activity during the period.

Net cash flow provided by financing activities was

$3.6 million for the six month period ended December 27, 2020 compared to $1 thousand cash flow used by financing activities for the six month period ended December 29, 2019.

Cash flows from financing activities for the six months ended December

27, 2020 were primarily attributable to proceeds from sale of stock partially offset by equity issuance costs.

Although we have taken aggressive measures to control expenses, we expect significantly reduced cash flow from operations during the remainder of fiscal 2021 as a result of the

flow provided by financing activities was $3.6 million for the nine month period ended March 28, 2021 compared to $10 thousand for the nine month period ended March 29, 2020.

Cash flows from financing activities for the nine months ended

March 28, 2021 were primarily attributable to proceeds from sale of stock partially offset by equity issuance costs.

Although we have taken aggressive measures to control expenses, we expect reduced cash flow from operations during the remainder of fiscal 2021 as a result of the

COVID-19 pandemic.

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Riley FBR, Inc.

Riley FBR”) pursuant to which the Company may

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”) 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 has been 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 December 27, 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 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 March 28, 2021 , 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 bear 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,

On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes due 2022

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 bear 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 is payable in cash or, at the Company’s discretion, in shares of Company common stock.

The Notes mature on February 15, 2022, at which time all principal and unpaid interest will be payable in cash or, at the Company’s discretion, in

shares of Company common stock.

The Notes mature on February 15, 2022, at which time all principal and unpaid interest

will be payable in cash or, at the Company’s discretion, in shares of Company common stock.

The Notes are secured by a pledge of all outstanding equity securities of our two primary direct operating subsidiaries.

Noteholders may convert their notes to common stock as of the 15th day of any calendar month, unless the Company sooner elects to redeem the notes.

The conversion price is $2.00 per

share of common stock.

Noteholders may convert their notes to common stock as of the 15th day of any calendar month, unless the Company sooner elects to

redeem the notes.

The conversion price is $2.00 per share of common stock.

Accrued interest will be paid through the effective date of the conversion in cash or, at the Company’s sole discretion, in shares of Company common stock.

During the six month period ended December 27, 2020, no Notes were converted to common shares.

As of December 27, 2020, $1.6 million in par value of the Notes were outstanding.

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.

(the “Lender”) pursuant to the

Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S.

During the nine month period ended March 28, 2021, no Notes were converted to common shares.

As of March 28, 2021, $1.6 million in

par value of the Notes were outstanding.

On April 13, 2020, the Company received the proceeds from a loan in the am ount of $0.7 million (the “PPP Loan”)

from JPMorgan Chase Bank, N.A.

(the “Lender”) pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S.

Small Business Administration (“SBA”).

The PPP Loan is unsecured by the Company and is guaranteed by the

All or a portion of the PPP Loan may be forgiven by the SBA upon application by the Company accompanied by documentation of expenditures in accordance with SBA requirements under the PPP.

In the event all or any portion of the PPP Loan is

forgiven, the amount forgiven will be applied to outstanding principal.

The PPP Loan is unsecured by the Company and is guaranteed by the SBA.

All or a portion of the PPP Loan may be forgiven by the SBA upon application by the Company accompanied by documentation of expenditures in accordance with SBA

requirements under the PPP.

In the event all or any portion of the PPP Loan is forgiven, the amount forgiven will be applied to outstanding principal.

The PPP Loan matures on April 10, 2022 and bears interest at a rate of 0.98% per annum.

No payment is due until a forgiveness decision

is received from the SBA.

We presently expect to receive a forgiveness decision in the second half of fiscal 2021.

Any amounts not forgiven are payable in equal monthly installments of principal and interest as necessary to fully amortize the

outstanding principal balance by the maturity date.

No payment is due until a forgiveness decision is received from the SBA.

We presently expect to receive a forgiveness decision in the fourth quarter of fiscal 2021.

Any amounts not forgiven are payable in

equal monthly installments of principal and interest as necessary to fully amortize the outstanding principal balance by the maturity date.

We may prepay the PPP Loan at any time prior to the maturity with no repayment penalties.

The PPP Loan is evidenced by a promissory note dated April 10, 2020, which contains various certifications

and agreements related to the PPP, as well customary default and other provisions.

is evidenced by a promissory note dated April 10, 2020, which contains various certifications and agreements related to the PPP, as well customary default and other provisions.

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 our reported amounts of assets,

liabilities, revenues, expenses and related disclosure of contingent liabilities.

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect our 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.

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.

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 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.

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.

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.

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.

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”

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 December 27, 2020 and December 29, 2019, 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.

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 settle ment.

As of March 28, 2021 and March 29, 2020, the C ompany 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

Quantitative and Qualitative Disclosures About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis