What changed in this filing

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Item 1. Financial Statements

2023-02-02 compared with 2022-11-03 · 138 added, 97 removed, 327 unchanged (42% of the section changed)

1 unchanged sentence

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED

STATEMENTS OF INCOME

(In thousands, except per share amounts)

Three Months Ended

September 25 ,

September 26 ,

Six Months Ended

December 25 ,

December 26 ,

December 25 ,

December 26 ,

COSTS AND EXPENSES:

16 unchanged sentences

(In thousands , except share amounts)

September 25 ,

December 25 ,

CURRENT ASSETS

3 unchanged sentences

Notes receivable, current

Property held for sale

Deferred contract charges, current

Prepaid expenses and other

Prepaid expenses and other current assets

Total current assets

12 unchanged sentences

Operating lease liability, current

Short term loan, current

Short term loan

Deferred revenues, current

20 unchanged sentences

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF

SHAREHOLDERS’

(In thousands)

3 unchanged sentences

Balance, September 26, 2021

Stock-based compensation expense

Balance, December 26, 2021

Treasury Stock

Retained Earnings

Balance, June 26, 2022

2 unchanged sentences

Balance, September 25, 2022

Stock-based compensation expense

Purchase of treasury stock

Balance, December 25, 2022

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands )

Three Months Ended

September 25 ,

September 26 ,

Six Months Ended

December 25 ,

December 26 ,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Adjustments to reconcile net income to cash provided by operating activities:

Impairment of long-lived assets and other lease charges

5 unchanged sentences

Allowance for bad debts

Deferred income tax

Changes in operating assets and liabilities:

7 unchanged sentences

Deferred revenues

Cash provided by/(used in) operating activities

Cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

4 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of stock

Short term loan, current

Purchase of treasury stock

Payments on short term loan

Cash (used in) financing activities

Net (decrease)/increase in cash and cash equivalents

Net (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

6 unchanged sentences

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”.

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

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

We facilitate food, equipment and supply

distribution to our domestic and international system of restaurants through agreements with third party distributors.

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

third party distributors.

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

have been prepared without

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

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

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 26, 2022.

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 26, 2022.

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

12 unchanged sentences

Fiscal Quarters

The three month periods ended September 25, 2022 and September 26, 2021 each contained 13 weeks.

The three and six month periods ended December 25, 2022 and December 26, 2021 each contained 13 weeks and 26 weeks, respectively.

Use of Management Estimates

18 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 20 years .

which can range from five to 20

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

18 unchanged sentences

Three Months Ended

September 25,

September 26,

Franchise royalties

3 unchanged sentences

Advertising funds contributions

Rental income

Six Months Ended

Franchise royalties

Supplier and distributor incentive revenues

Franchise license fees

Area development exclusivity fees and foreign master license fees

Advertising funds contributions

Supplier convention funds

5 unchanged sentences

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

stock units (“RSUs”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions.

Compensation cost for RSUs is measured as an amount equal to the

fair value of the RSUs 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.

Restricted stock units (“RSUs”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements,

performance criteria and other terms and conditions.

Compensation cost for RSUs is measured as an amount equal to the fair value of the RSUs on the date of grant and is expensed over the vesting period if achievement of the performance

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

Note B - Leases

29 unchanged sentences

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.

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.

1 unchanged sentence

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.

As of September 25,

As of December 25,

2022 , the Company had no Company-owned

27 unchanged sentences

To the extent that there

are variable lease payments, we recognize those payments in our income statements in the period in which the obligation for those payments is incurred.

The components of total lease expense for the three months ended September 25, 2022, the majority of which is included in general and administrative expense in the accompanying Condensed Consolidated Statements of

are variable lease payments, we recognize those payments in our Condensed Consolidated Statements of Income the period in which the obligation for those payments is incurred.

The components of total lease expense for the six months ended December 25, 2022, the majority of which is included in general and administrative expense in the accompanying Condensed Consolidated Statements of

Income, are as follows (in thousands):

Three Months Ended

September 25, 2022

Six Months Ended

December 25, 2022

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 25, 2022

Six Months Ended

December 25, 2022

Cash paid for amounts included in the measurement of lease liabilities

Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:

September 25, 2022

December 25, 2022

Weighted average remaining lease term

9 unchanged sentences

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.

On June 28, 2022, 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 5,000,000 shares to a total of 8,016,000 shares.

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

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.

On June 28, 2022, 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 5,000,000 shares to a total of 8,016,000 shares.

The 2007 Stock Purchase Plan does not have an

expiration date.

The following table furnishes

information for purchases made pursuant to the 2007 Stock Purchase Plan during the first quarter of fiscal 2023:

information for purchases made pursuant to the 2007 Stock Purchase Plan during fiscal 2023:

Average Price

8 unchanged sentences

Under the Plan

July 27, 2022 - July 31, 2022

June 27, 2022 - July 31, 2022

August 1, 2022 - August 28, 2022

August 29, 2022 - September 25, 2022

September 26, 2022 - October 30, 2022

October 31, 2022 - November 27, 2022

November 28, 2022 - December 25, 2022

The Company’s

2 unchanged sentences

common stock other than pursuant to the 2007 Stock Purchase Plan or other publicly announced plans or programs.

21, 2022, the Company entered into a Stock Purchase Agreement with Hallmark Financial Services, Inc.

(“Hallmark”) pursuant to which the Company purchased from certain direct or indirect subsidiaries of Hallmark an aggregate of 2,246,086 shares of the Company’s common stock at a price of $ 1.60 per share, resulting in an aggregate purchase price of $ 3,593,738 .

The price per share represented the average closing price of the Company’s common stock on the Nasdaq Capital Market for the preceding 15

trading days.

The transaction was approved by the Audit Committee of the Company, which consists of all of the independent directors of the Company.

The Chairman of the Company, Mark E.

Schwarz, who is also the Executive Chairman and

Chief Executive Officer of Hallmark, recused himself from all deliberations with respect to the Stock Purchase Agreement with Hallmark.

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.

On January 6,

2020, the Company’s former Chief Executive Officer, Scott Crane, filed suit in the U.S.

District Court for the Eastern District of Texas alleging various claims in connection with the Company’s termination of his employment in July 2019.

In general, the suit asserted that the Company terminated Mr.

Crane for the purpose of depriving him of certain equity compensation that would otherwise have become due to him on October 15, 2019.

The case proceeded to a jury trial, which

resulted in a verdict in favor of Crane on his breach of contract claim.

On February 9, 2022, the Court entered a $ 1.9 million

judgment against the Company inclusive of attorney fees, court costs and pre-judgment interest.

The Company has filed an appeal of the judgment to the Fifth Circuit Court of Appeals.

The Company is subject to other 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 September 25, 2022 and September 26, 2021, the Company recognized stock-based compensation expense related to stock options of $ 4 thousand and zero , respectively.

As of September 25, 2022, there was $ 11 thousand unamortized stock-based compensation expense related to stock options.

For the three

and six months ended December 25, 2022, the Company recognized stock-based compensation expense related to stock options of $ 4 thousand and $ 8 thousand, respectively.

For the three and six

months ended December 26, 2021, the Company recognized stock-based compensation expense related to stock options of zero and zero , respectively.

As of December 25, 2022, there was $ 8 thousand 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 25,

September 26,

Six Months Ended

Outstanding at beginning of year

3 unchanged sentences

Restricted Stock Units:

For the three months ended September 25, 2022 and September 26, 2021, the Company had stock-based compensation expense of $ 82 thousand and $ 42 thousand,

For the three and six months ended December 25, 2022, the Company had stock-based compensation expense of $ 82 thousand and $ 165 thousand,

respectively, related to RSUs.

As of September 25, 2022, there was no unamortized stock-based compensation expense related to

A summary of the status of restricted stock units as of September 25, 2022, and changes during the three months then ended is presented

For the three and six months ended December 26, 2021, the Company had stock-based compensation expense of $ 42

thousand and $ 85 thousand, respectively, related to RSUs.

As of December 25, 2022, there was $ 412 thousand unamortized stock-based compensation expense related to RSUs.

A summary of the status of restricted stock units as of December 25, 2022, and changes during the six months then ended is presented

Unvested at June 26 , 2022

Unvested at September 25 ,

Unvested at December 25 ,

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 25,

September 26,

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 25, 2022, exercisable options to purchase

111,750 shares of common stock at exercise prices from $ 3.95 to $ 13.11 were excluded from the computation of

diluted EPS because they had an intrinsic value of zero .

For the three months ended September 26, 2021, exercisable options to purchase 166,750 shares of common stock at exercise prices

ranging from $ 3.11 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 25, 2022, exercisable options to purchase

111,750 shares of common stock at exercise prices from $ 3.95 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, exercisable options to purchase 166,750 shares of common stock at exercise prices ranging from $ 3.11 to $ 13.11 were excluded from the computation of diluted EPS because they had

an intrinsic value of zero .

Note G - Income Taxes

For the three months ended September 25, 2022, the Company recorded an income tax expense of $ 92 thousand, most of which is attributable to current state taxes.

three and six months ended December 25, 2022, the Company recorded an income tax expense of $ 140 thousand and $ 232 thousand, respectively.

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

respectively.

For the three months ended December 25, 2022, the federal and state tax expense were $ 100 thousand and $ 40 thousand, respectively.

For the six months ended December 25, 2022, the federal and state tax expense were $ 182 thousand and $ 50

thousand, respectively.

The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable

5 unchanged sentences

reportable operating segments as determined by management using the “management approach” as defined by ASC 280 Disclosures about Segments of an Enterprise and Related Information:

(1) Pizza Inn

Franchising, (2) Pie Five Franchising and (3) Company-Owned Restaurants.

(1) Pizza Inn Franchising, (2) Pie Five Franchising and

(3) Company-Owned Restaurants.

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

Corporate administration costs, which include, but are not limited to,

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

Other revenue consists of nonrecurring 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 nonrecurring

The Pizza Inn and Pie Five Franchising segments establish franchisees, licensees and territorial rights.

Revenue for these segments are derived from franchise royalties, franchise 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

Revenue for these segments are

derived from franchise royalties, franchise fees, sale of area development and foreign master license rights, incentive payments from third party suppliers and distributors, advertising funds, and supplier convention funds.

these segments include equipment, furniture and fixtures.

The Company-Owned Restaurants segment includes sales and operating results for all Company-owned restaurants.

Assets for this segment include equipment, furniture and fixtures for the

Company-owned restaurants.

As of September 25, 2022, the Company did not operate any Company-owned restaurants.

Corporate administration and other 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 for this segment

include equipment, furniture and fixtures for the Company-owned restaurants.

As of December 25, 2022, the Company did not operate any Company-owned restaurants.

Corporate administration and other 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 tables are net sales and operating revenues, depreciation and amortization expense, income from continuing operations before taxes, capital expenditures and assets for the Company’s reportable segments as of the three months

ended September 25, 2022 and September 26, 2021 (in thousands):

Summarized in the following tables are net sales and operating revenues, depreciation and amortization expense, income from continuing

operations before taxes, capital expenditures and assets for the Company’s reportable segments as of the three and six months ended December 25, 2022 and December 26, 2021 (in thousands):

Three Months Ended

September 25,

September 26,

Six Months Ended

Net sales and operating revenues:

7 unchanged sentences

Depreciation and amortization

Income/(loss) before taxes:

Income before taxes:

Pizza Inn Franchising

2 unchanged sentences

Corporate administration and other

Income/(loss) before taxes

Income 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