What changed in this filing

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Item 1. Financial Statements

2022-02-04 compared with 2021-11-04 · 107 added, 99 removed, 319 unchanged (39% of the section changed)

1 unchanged sentence

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Three Months Ended

September 26 ,

September 27 ,

Six Months Ended

December 26 ,

December 27 ,

December 26 ,

December 27 ,

COSTS AND EXPENSES:

17 unchanged sentences

(In thousands , except share amounts)

September 26 ,

December 26 ,

CURRENT ASSETS

48 unchanged sentences

Balance, September 27, 2020

Issuance of Common Stock

Equity issue costs - ATM offering

Balance, December 27 , 2020

Treasury Stock

2 unchanged sentences

Balance, September 26, 2021

Stock compensation expense

Balance, December 26 , 2021

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands )

Three Months Ended

September 26 ,

September 27 ,

Six Months Ended

December 26 ,

December 27 ,

CASH FLOWS FROM OPERATING ACTIVITIES:

8 unchanged sentences

Changes in operating assets and liabilities:

Restricted cash

Accounts receivable

8 unchanged sentences

Deferred revenue

Cash used in operating activities

Cash provided by/(used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Purchase of property, plant and equipment

Cash provided by/(used in) investing activities

Cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of stock

Equity issuance costs - ATM offering

Short term loan, current

Cash used in financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash (used in)/provided by financing activities

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

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

7 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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”.

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

Units”), delivery/carry-out (“Delco Units”) and express (“Express Units”) restaurants under the trademark “Pizza Inn” and franchises fast casual pizza restaurants (“Pie Five Units”) under the trademarks “Pie Five Pizza Company” or “Pie Five”.

The Company also licenses Pizza Inn Express, or PIE, kiosks (“PIE Units”) under the trademark “Pizza Inn”.

The accompanying condensed consolidated financial statements of Rave Restaurant Group, Inc.

prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Certain information and footnote disclosures normally included in the financial statements have been omitted pursuant to such

rules and regulations.

The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K

for the fiscal year ended June 27, 2021.

have been prepared without audit pursuant

to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Certain information and footnote disclosures normally included in the financial statements have been omitted pursuant to such rules and regulations.

The unaudited

condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27,

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the

11 unchanged sentences

Fiscal Quarters

The three month periods ended September 26, 2021 and September 27, 2020 each contained 13 weeks.

The three and six month periods ended December 26, 2021 and December 27, 2020 each contained 13 weeks and 26 weeks, respectively.

Use of Management Estimates

17 unchanged sentences

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 twenty years .

which can range from five to 20

Fees received for renewal periods are amortized over the life of the renewal period.

3 unchanged sentences

development exclusivity fees that include rights to subfranchise are amortized as revenue over the term of the contract.

Advertising fund contributions for Pie Five and Pizza Inn franchised units represent contributions collected where we have control over the

activities of the fund.

Advertising fund contributions for Pie Five units represent contributions collected where we have control over the activities of the fund.

Contributions are based on a percentage of net retail sales.

The adoption of Topic 606 revised the determination of whether these arrangements are considered principal versus agent.

For Pie Five and Pizza Inn, we have

determined that we are the principal in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross basis in the Condensed Consolidated Statements of Income.

In general, we expect such

advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes.

Our obligation related to these funds is to develop and conduct

advertising activities.

Pie Five and Pizza Inn marketing fund contributions are billed and collected weekly.

Recognition of supplier convention funds is deferred until the obligations of the agreements are met and the event takes place.

For Pie Five, we have determined that we are the principal

in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross basis in the Condensed Consolidated Statements of Income.

In general, we expect such advertising fund contributions and

expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes.

Our obligation related to these funds is to develop and conduct advertising activities.

Pie Five marketing

fund contributions are billed and collected weekly.

Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place.

Rental Income

The Company also subleases some of its restaurant space to third parties.

The Company subleases some of its restaurant space to third parties.

The Company’s two subleases have terms that end in 2023 and 2025.

The sublease agreements are noncancelable through the end of the term and both parties have substantive rights to

terminate the lease when the term is complete.

Sublease agreements are not capitalized and are recorded as rental income in the period that rent is received.

The sublease agreements are noncancelable through the end of the term and both parties have substantive rights to terminate the

lease when the term is complete.

Sublease agreements are not capitalized and the amounts the Company receives are recorded as rental income in the period that rent is received.

Total revenues consist of the following (in thousands):

Three Months Ended

September 26,

September 27,

Franchise royalties

5 unchanged sentences

Rental income

Six Months Ended

Franchise royalties

Supplier and distributor incentive revenues

Franchise license fees

Area development fees and foreign master license fees

Advertising funds

Supplier convention funds

Rental income

Stock-Based Compensation

3 unchanged sentences

guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.

Compensation cost for restricted stock units (“RSUs”) is measured as an amount equal to the fair value of the RSUs on the date of grant and

Compensation cost for restricted stock units (“RSUs”) is measured as an amount equal to the fair value of the RSU’s on the date of grant and

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

21 unchanged sentences

terms of one to ten years .

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

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

The Company has concluded that its office agreement represents an operating lease with a lease term that equals the primary non-cancelable contract term.

Upon completion of the primary term, both parties have substantive rights to terminate

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

Restaurant Space Agreements

The Company rents restaurant space from third parties for its Company-owned restaurants.

Restaurant space agreements are typically

structured with non-cancelable terms of one to ten years .

The 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 lease.

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

As of December 26, 2021, the Company had no

Company-owned restaurants.

Historically, the Company has rented restaurant space from third parties for its Company-owned restaurants.

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

The 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 lease.

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.

2 unchanged sentences

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.

As of September 26, 2021, the Company had no

Company-owned restaurants.

Sublease agreements are not capitalized and the amounts the Company receives are recorded as rental income in the period that rent is received.

Information Technology Equipment

23 unchanged sentences

to short-term leases (that is, a lease that, at commencement, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise).

Accordingly, we

recognize lease payments related to our short-term leases in our condensed consolidated statement of income 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 condensed consolidated statement of income in the period in which the obligation for those payments is incurred.

The components of total lease expense for the three months ended September 26, 2021, t he

Accordingly, the

Company recognizes lease payments related to short-term leases in the condensed consolidated statement of income on a straight-line basis over the lease term which has not changed from prior recognition.

To the extent that there are

variable lease payments, the Company recognizes those payments in the accompanying condensed consolidated statement of income in the period in which the obligation for those payments is incurred.

The components of total lease expense for the six months ended December 26, 2021, t he

majority of which is included in general and administrative expense, are as follows (in thousands):

Three Months Ended

September 26, 2021

Six Months Ended

December 26, 2021

Operating lease cost

2 unchanged sentences

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

Three Months Ended

September 26, 2021

Six Months Ended

December 26, 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:

September 26, 2021

December 26, 2021

Weighted average remaining lease term

15 unchanged sentences

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

There were no stock purchases in the fiscal quarters ended September 26, 2021 or September 27, 2020.

There were no stock purchases in the fiscal quarters ended December 26, 2021 or December 27, 2020.

Note D - Commitments and Contingencies

5 unchanged sentences

Stock Options:

For the fiscal quarters ended September 26, 2021 and September 27, 2020, the Company did no t recognize any stock-based compensation expense related to stock options.

As of September 26, 2021, there was no unamortized stock-based compensation expense related to stock options.

For the fiscal quarters ended December 26, 2021 and December 27, 2020, the Company did no t recognize any stock-based compensation expense related to stock options.

As of December 26, 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:

Three Months Ended

September 26,

September 27,

Six Months Ended

Outstanding at beginning of year

3 unchanged sentences

Restricted Stock Units:

For the three months ended September 26, 2021 and September 27, 2020, the Company had stock-based compensation expense of $ 42 thousand and zero ,

For the three months ended December 26, 2021 and December 27, 2020, the Company had stock-based compensation expense of $ 43 thousand and zero ,

respectively, related to RSUs.

As of September 26, 2021, there was no unamortized stock-based compensation expense related to

A summary of the status of restricted stock units as of September 26, 2021, and changes during the three months then ended is presented

As of December 26, 2021, there was no unamortized stock-based compensation expense related to

A summary of the status of restricted stock units as of December 26, 2021, and changes during the six months then ended is presented

Unvested at June 27 , 2021

Unvested at September 26 ,

Unvested at December 26 ,

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):

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

September 26,

September 27,

Net income available to common shareholders

Six Months Ended

Net income available to common stockholders

Weighted average common shares

5 unchanged sentences

Net income per common share

For the three months ended September 26, 2021, options to purchase 166,750 shares of common stock at exercise prices from $ 3.11 to $ 13.11 were excluded from the computation of diluted EPS because they had an intrinsic value of zero .

three months ended September 27, 2020, options to purchase 206,750 shares of common stock at exercise prices ranging from $ 2.71 to $ 13.11 were excluded from

the computation of diluted EPS because they had an intrinsic value of zero .

For the three and six months ended December 26, 2021, options to purchase 166,750 shares of common stock at exercise prices from $ 3.11

to $ 13.11 were excluded from the computation of diluted EPS because their inclusion would have been anti-dilutive.

For the three and six months ended December 27, 2020, options to purchase 206,750

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 three months ended September 26, 2021, the Company recorded an income tax expense of $ 3 thousand, all of which is attributable to current state taxes.

For the three and six months ended December 26, 2021, the Company recorded an income tax expense of $ 4 thousand and $ 7 thousand,

respectively, all of which is attributable to current state taxes.

The Company utilized net operating losses to offset federal taxes.

4 unchanged sentences

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

As of September 26, 2021, the Company had established a full valuation allowance of $ 6.3 million against its deferred tax assets.

As of December 26, 2021, the Company had established a full valuation allowance of $ 6.2 million against its deferred tax assets.

The Company will continue to review the need for an adjustment to the valuation allowance.

5 unchanged sentences

These segments are a result of differences in the nature of the products and services sold.

Corporate administration costs, which include, but are not limited to, general accounting, human

resources, legal and credit and collections, are partially allocated to the three operating segments.

Other revenue consists of

non-recurring items.

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.

10 unchanged sentences

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 ended September 26, 2021 and September 27, 2020 (in thousands):

for the Company’s reportable segments as of the three months and six months ended December 26, 2021 and December 27, 2020 (in thousands):

Three Months Ended

September 26,

September 27,

Six Months Ended

Net sales and operating revenues:

1 unchanged sentence

Pie Five Franchising

Company-Owned Restaurants

Corporate administration and other

Consolidated revenues

Depreciation and amortization:

Pizza Inn Franchising

Pie Five Franchising

Company-Owned Restaurants

Depreciation and amortization expense:

Corporate administration and other

6 unchanged sentences

Income before taxes

Revenues by geography:

Geographic information (revenues):

United States

Foreign countries

Consolidated revenues

Note I - Subsequent Events

On November 1, 2021, the U.S.

District Court for the Eastern District of Texas entered judgment against the Company in the amount of $ 924 ,000 plus pre- and post-judgment interest and court costs on breach of contract claims asserted by the Company’s former Chief Executive

Officer, Scott Crane.

The Company intends to appeal the judgment to the Fifth Circuit Court of Appeals.

Consolidated total

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