RAVE RESTAURANT GROUP, INC. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Annual Report on Form 10-K and may contain certain forward-looking statements. See “Forward-Looking Statements.” Overview The Company 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 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 June 25, 2023 and June 26, 2022, Company-owned and franchised restaurants consisted of the following (in thousands, except unit data): Fiscal Year Ended June 25, 2023 (in thousands, except unit data) Pizza Inn Pie Five All Concepts Ending Units Retail Sales Ending Units Retail Sales Ending Units Retail Sales Domestic Franchised/Licensed 123 $ 100,361 27 $ 20,002 150 $ 120,363 Company-Owned – – – – – – Total Domestic Units 123 $ 100,361 27 $ 20,002 150 $ 120,363 International Franchised 34 – 34 The domestic units were located in 18 states predominately situated in the southern half of the United States. The international restaurants were located in eight foreign countries predominantly in the Middle East. The following table summarizes domestic comparable store retail sales for the Company. 52 Weeks Ended June 25, 2023 June 26, 2022 (in thousands) Pizza Inn Domestic Comparable Store Retail Sales $ 96,021 $ 86,253 Pie Five Domestic Comparable Store Retail Sales 19,173 18,184 Total Rave Comparable Store Retail Sales $ 115,194 $ 104,437 Basic net income per common share decreased $0.34 to net income of $0.11 per share for fiscal 2023 compared to a net income of $0.45 per share in the prior fiscal year. Diluted net income per common share decreased $0.35 to net income of $0.10 per share for fiscal 2023 compared to a net income of $0.45 per share in the prior fiscal year. Net income decreased $6.4 million to net income of $1.6 million for fiscal 2023 compared to a net income of $8.0 million for the prior fiscal year on revenues of $11.9 million for fiscal 2023 as compared to $10.7 million in fiscal 2022. 10 Index Adjusted EBITDA for the fiscal year ended June 25, 2023, decreased to $2.7 million compared to $2.8 million for the prior fiscal year. The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands): Fiscal Year Ended June 25, 2023 June 26, 2022 Net income $ 1,613 $ 8,022 Interest expense 1 61 Income taxes 537 (5,657 ) Depreciation and amortization 214 187 EBITDA $ 2,365 $ 2,613 Stock-based compensation expense 345 169 Severance — 53 Impairment of long-lived assets and other lease charges 5 6 Franchisee default and closed store revenue (13 ) (38 ) Closed and non-operating store costs — 3 Adjusted EBITDA $ 2,702 $ 2,806 Results of operations for the fiscal years 2023 and 2022 both included 52 weeks. 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 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, severely disrupted our business operations. Further, the COVID-19 pandemic precipitated significant job losses and a national economic downturn that impacted the demand for restaurant food service. Although most of our domestic restaurants continued to operate under these conditions, we have experienced temporary closures from time to time during the pandemic. During much of the COVID-19 pandemic, we experienced dramatically reduced aggregate in-store retail sales at Buffet Units and Pie Five Units, modestly offset by increased aggregate carry-out and delivery sales. The decreased aggregate retail sales correspondingly decreased supplier rebates and franchise royalties payable to the Company. In most cases, in-store dining has now resumed subject to seating capacity limitations, social distancing protocols, and/or enhanced cleaning and disinfecting practices. As a result, the adverse impacts of the COVID-19 pandemic have diminished in recent periods. Nonetheless, 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. Therefore, despite the official end of the pandemic, the ultimate impact of COVID-19 on our future results of operations and liquidity cannot presently be predicted. Pizza Inn Brand Summary The following tables summarize certain key indicators for the Pizza Inn franchised and licensed domestic restaurants that management believes are useful in evaluating performance. 52 Weeks Ended June 25, 2023 June 26, 2022 Pizza Inn Retail Sales - Total Domestic Units (in thousands, except unit data) Domestic Units Buffet Units - Franchised $ 94,836 $ 81,546 Delco/Express Units - Franchised 5,335 6,198 PIE Units - Licensed 190 233 Total Domestic Retail Sales $ 100,361 $ 87,977 Pizza Inn Comparable Store Retail Sales - Total Domestic $ 96,021 $ 86,253 Pizza Inn Average Units Open in Period Domestic Units Buffet Units - Franchised 75 71 Delco/Express Units - Franchised 44 51 PIE Units - Licensed 7 10 Total Domestic Units 126 132 Pizza Inn total domestic retail sales increased by $12.4 million, or 14.1% compared to the prior year. The increase in domestic retail sales was primarily the result of the diminished impact of COVID-19 and increased customer engagement. Pizza Inn domestic comparable store retail sales increased by $9.8 million, or 11.3%, for the same reason. 11 Index The following chart summarizes Pizza Inn restaurant activity for the fiscal year ended June 25, 2023: Fiscal Year Ended June 25, 2023 Beginning Units Opened Closed Ending Units Domestic Units: Buffet Units - Franchised 72 5 — 77 Delco/Express Units - Franchised 47 — 6 41 PIE Units - Licensed 9 — 4 5 Total Domestic Units 128 5 10 123 International Units (all types) 31 3 — 34 Total Units 159 8 10 157 The net decrease of five domestic units was primarily due to declines in Delco and PIE units. We believe that this trend of net domestic store closures is moderating and will reverse in future periods. The net increase of three international Pizza Inn units was due to new units in the Middle East and New Zealand. 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. 52 Weeks Ended June 25, 2023 June 26, 2022 (in thousands, except unit data) Pie Five Retail Sales - Total Units Domestic Units - Franchised $ 20,002 $ 20,311 Total Domestic Retail Sales $ 20,002 $ 20,311 Pie Five Comparable Store Retail Sales - Total $ 19,173 $ 18,184 Pie Five Average Units Open in Period Domestic Units - Franchised 29 32 Total Domestic Units 29 32 Pie Five domestic total retail sales decreased $0.3 million, or 1.5%, compared to the prior year and average units open in the period decreased to 29 from 32 the prior year. The decrease in domestic retail sales was primarily the result of lower store count. Comparable store retail sales increased by $1.0 million, or 5.4% during fiscal 2023 compared to the prior year. The improvement in comparable store retail sales was primarily the result of the diminished impact of COVID-19 and increased customer engagement. The following chart summarizes Pie Five restaurant activity for the fiscal year ended June 25, 2023: Fiscal Year Ended June 25, 2023 Beginning Units Opened Closed Ending Units Domestic - Franchised 31 — 4 27 Total Domestic Units 31 — 4 27 The net decrease of four Pie Five units during fiscal 2023 was primarily the result of the closure of poor-performing units. 12 Index Non-GAAP Financial Measures and Other Terms The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). However, the Company also presents and discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for planning and budgeting purposes. However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company’s GAAP financial statements. 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. 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-based compensation expense, severance, gain/loss on sale of assets, costs related to impairment and other lease charges, franchisee default and closed store revenue/expense, and closed and non-operating store costs. • “Retail sales” represents the restaurant sales reported by our franchisees and Company-owned restaurants, which may be segmented by brand or domestic/international locations. • “Comparable store retail sales” includes the retail sales for restaurants that have been open for at least 18 months as of the end of the reporting period. The sales results for a restaurant that was closed temporarily for remodeling or relocation within the same trade area are included in the calculation only for the days that the restaurant was open in both periods being compared. • “Store weeks” represent the total number of full weeks that specified restaurants were open during the period. • “Average units open” reflects the number of restaurants open during a reporting period weighted by the percentage of the weeks in a reporting period that each restaurant was open. • “Average weekly sales” for a specified period is calculated as total retail sales (excluding partial weeks) divided by store weeks in the period. • “Restaurant operating cash flow” represents the pre-tax income earned by Company-owned restaurants before (1) allocated marketing and advertising expenses, (2) depreciation and amortization, (3) impairment and other lease charges, and (4) non-operating store costs. • “Non-operating store costs” represent gain or loss on asset disposal, store closure expenses, lease termination expenses and expenses related to abandoned store sites. • “Franchisee default and closed store revenue/expense” represents the net of accelerated revenues and costs attributable to defaulted area development agreements and closed franchised stores. 13 Index 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 Fiscal Years ended June 25, 2023 and June 26, 2022 (in thousands): Pizza Inn Franchising Pie Five Franchising Company-Owned Stores Corporate Total Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 REVENUES: Franchise and license revenues $ 9,810 $ 8,535 $ 1,870 $ 1,950 $ — $ — $ — $ — $ 11,680 $ 10,485 Rental income — — — — — — 186 186 186 186 Interest income and other — — 23 17 — — — 4 23 21 Total revenues 9,810 8,535 1,893 1,967 — — 186 190 11,889 10,692 COSTS AND EXPENSES: Cost of sales — — — — — 1 — — — 1 General and administrative expenses — — — — — 2 5,490 5,444 5,490 5,446 Franchise expenses 3,059 2,313 897 971 — — — — 3,956 3,284 Impairment of long-lived assets and other lease charges — — — — — — 5 6 5 6 Bad debt expense — — — — — — 73 46 73 46 Interest expense — — — — — — 1 61 1 61 Depreciation and amortization expense — — — — — — 214 187 214 187 Total costs and expenses 3,059 2,313 897 971 — 3 5,783 5,744 9,739 9,031 OTHER INCOME: Employee retention credit — — — — — — — 704 — 704 Total other income — — — — — — — 704 — 704 INCOME/(LOSS) BEFORE TAXES $ 6,751 $ 6,222 $ 996 $ 996 $ — $ (3 ) $ (5,597 ) $ (4,850 ) $ 2,150 $ 2,365 Revenues: Revenues are derived from franchise royalties, franchise fees and supplier and distributer incentives, advertising funds, area development exclusivity fees and foreign master license fees, supplier convention funds, sublease rental income, interest and other income, 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 fiscal 2023 and fiscal 2022 were $11.9 million and $10.7 million, respectively. Pizza Inn Franchise and License Revenues Pizza Inn franchise revenues increased by $1.3 million to $9.8 million in fiscal 2023 compared to $8.5 million in fiscal 2022. The 14.9% increase was primarily the result of an increase in store count, effective marketing campaigns, and a reduction in the impact of COVID-19. Pie Five Franchise and License Revenues Pie Five franchise revenues decreased by $0.1 million to $1.9 million for fiscal 2023 compared to $2.0 million for fiscal 2022. The 4.1% decrease was primarily the result of lower store count. Restaurant Sales We had no restaurant sales, which consist of revenue generated by Company-owned restaurants, in fiscal 2023 or fiscal 2022 because we closed our single remaining Company-owned restaurant during the third quarter of fiscal 2020. Costs and Expenses: Cost of Sales Cost of sales primarily includes food and supply costs, labor costs, and lease costs directly related to Company-owned restaurant sales. These costs decreased to zero for fiscal 2023 compared to $1 thousand in fiscal 2022. The decrease was primarily the result of the closure of the remaining Company-owned stores during the third quarter of fiscal 2020 partially offset by ongoing lease costs directly related to closed Company-owned stores. General and Administrative Expenses Total general and administrative expenses increased to $5.5 million for fiscal 2023 compared to $5.4 million in the prior fiscal year. The $44 thousand, or 0.8%, increase in total general and administrative expenses was primarily the result of increased corporate expenses related to a decrease in miscellaneous income offset by a decrease in legal fees. 14 Index Franchise Expenses Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. Total franchise expenses increased $0.7 million to $4.0 million in fiscal 2023 from $3.3 million in the prior fiscal year. Pizza Inn franchise expenses increased $0.8 million to $3.1 million in fiscal 2023 compared to $2.3 million in the prior fiscal year primarily as a result of an increase in payroll and related, advertising, and travel costs. Pie Five franchise expenses decreased $0.1 million to $0.9 million in fiscal 2023 compared to $1.0 million in the prior fiscal year primarily as a result of lower store count. Impairment Expenses Impairment of long-lived assets and other lease charges were $5 thousand for fiscal 2023 compared to $6 thousand for fiscal 2022. Impairment of long-lived assets and other lease charges for Company-owned restaurants of zero in fiscal 2023 remained essentially unchanged from the prior year. 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. Bad debt expense increased by $27 thousand to $73 thousand in fiscal 2023 compared to $46 thousand in fiscal 2022 primarily related to collectability concerns on international accounts receivable. Interest Expense Interest expense decreased $60 thousand for fiscal 2023 to $1 thousand compared to $61 thousand in the prior year. Amortization and Depreciation Expense Amortization and depreciation expense increased $27 thousand to $214 thousand in fiscal 2023 compared to $187 thousand in fiscal 2022 primarily as a result of higher amortization of intangible assets. Other Income Other income represents non-recurring income that is not derived from the operations of the Company. The Company had a $0.7 million refundable employee retention tax credit during fiscal 2022 which was the result of governmental actions to mitigate the economic impacts of the COVID-19 pandemic. (See, “Liquidity and Capital Resources – Employee Retention Credit” below.) Management does not presently expect similar benefits to be available in subsequent periods. Provision for Income Tax For the year ended June 25, 2023, the Company recorded an income tax expense of $0.5 million. The federal and state tax expense was $0.4 million and $0.1 million, respectively. The Company utilized net operating losses to offset federal taxes. For the year ended June 26, 2022, the Company recorded an income tax benefit of $5.7 million including federal deferred tax benefit of $5.5 million and current/deferred state tax benefit of $0.2 million. As of June 25, 2023, the Company had federal net operating loss carryforwards totaling $21 million that are available to reduce future taxable income and will begin to expire in 2035. Under the Tax Cuts and Jobs Act, approximately $1.4 million of the loss carryforwards are limited to 80% and do not expire. Tax years that remain subject to examination by the IRS are the years ended June 28, 2020 through June 26, 2022. Tax years that remain subject to examination by state authorities are the years ended June 30, 2019 through June 26, 2022. 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 the 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. Based on this analysis, the Company reversed the full amount of the established valuation allowance as of June 26, 2022. There are no uncertain tax positions. Management’s position is that all relevant requirements are met and necessary returns have been filed, and therefore the tax positions taken on the tax returns would be sustained upon examination. Liquidity and Capital Resources Sources and Uses of Funds Our primary sources of liquidity are cash flows from operating activities, loan proceeds, and proceeds from the sale of securities. 15 Index Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, share based compensation, and changes in working capital. Cash provided by operations was $2.6 million in fiscal 2023 compared to cash provided by operations of $1.4 million in fiscal 2022. Cash flows from investing activities primarily reflect net proceeds from sale of assets and capital expenditures for the purchase of Company assets. Cash used in investing activities was $15 thousand in fiscal 2023 compared to cash provided by investing activities of $0.3 million in fiscal 2022. The $0.3 million decrease in cash provided by investing activities was primarily the result of decreased payments on notes receivable from prior sales of assets. Cash flows from financing activities generally reflect changes in the Company’s borrowings and securities activity during the period. Net cash used in financing activities was $5.0 million for the fiscal year ended June 25, 2023 compared to net cash used in financing activities of $2.3 million for the fiscal year June 26, 2022. The cash used in financing activities in fiscal 2023 was primarily the result of $5.0 million used to repurchase shares of the Company’s common stock. The cash used in financing activities in fiscal 2022 was primarily attributable to the retirement of all outstanding convertible notes, the repurchase of the Company’s common stock, and the repayment of a short term loan. Employee Retention Credit On December 27, 2020, the Consolidated Appropriations Act of 2021 (the “CAA”) was signed into law. The CAA expanded eligibility for an employee retention credit for companies impacted by the COVID-19 pandemic with fewer than five hundred employees and at least a twenty percent decline in gross receipts compared to the same quarter in 2019, to encourage retention of employees. This payroll tax credit was a refundable tax credit against certain federal employment taxes. For the fiscal year ended June 26, 2022, the Company recorded $0.7 million of other income for the employee retention credit. The Company has also benefitted from the CAA guidance to treat expenses associated with the PPP loan forgiveness as tax deductible. Convertible Notes On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes Due 2022 (“Notes”). Shareholders exercised subscription rights to purchase all 30,000 of the Notes at the par value of $100 per Note, resulting in gross offering proceeds to the Company of $3.0 million. The Notes bore interest at the rate of 4% per annum on the principal or par value of $100 per note, payable annually in arrears on February 15 of each year, commencing February 15, 2018. Interest was payable in cash or, at the Company’s discretion, in shares of Company common stock. The Notes were secured by a pledge of all outstanding equity securities of our two primary direct operating subsidiaries. During the fiscal year ended June 26, 2022, no Notes were converted to common shares. The Notes matured on February 15, 2022, at which time all principal and unpaid interest was paid in cash. Therefore, as of June 25, 2023 and June 26, 2022, there were no Notes outstanding. Liquidity We expect to fund continuing operations and planned capital expenditures for the next fiscal year primarily from cash on hand and operating cash flow. Based on budgeted and year-to-date cash flow information, we believe that we have sufficient liquidity to satisfy our cash requirements for the 2024 fiscal year and beyond. 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 Company bases its estimates on historical experience and various other assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates. The Company believes the following critical accounting policies require estimates about the effect of matters that are inherently uncertain, are susceptible to change, and therefore require subjective judgments. Changes in the estimates and judgments could significantly impact the Company’s results of operations and financial condition in future periods. Accounts receivable consist primarily of receivables generated from franchise royalties and supplier concessions. 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. 16 Index 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 and eventual disposition of the assets compared to their carrying value. If impairment is indicated, the carrying value of an impaired asset is reduced to its fair value, based on discounted estimated future cash flows. The Company recognized pre-tax, non-cash impairment charges of $5 thousand and $6 thousand during fiscal 2023 and 2022, respectively. The Company had $0.2 million in sublease income during fiscal 2023 and 2022. Franchise revenue consists of income from license fees, royalties, area development and foreign master license agreements, advertising fund revenues, supplier incentive and convention contribution revenues. Franchise fees, area development and foreign master license agreement fees are amortized into revenue on a straight-line basis over the term of the related contract agreement. Royalties and advertising fund revenues, which are based on a percentage of franchise retail sales, are recognized as income as retail sales occur. Supplier incentive revenues are recognized as earned, typically as the underlying commodities are shipped. The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for the 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. Based on this analysis, the Company reversed the full amount of the established valuation allowance as of June 26, 2022. 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 June 25, 2023 and June 26, 2022, 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. Leases The Company determines if an arrangement is a lease at inception of the arrangement. To the extent that it can be determined that an arrangement represents a lease, it is classified as either an operating lease or a finance lease. The Company does not currently have any finance leases. The Company capitalizes operating leases on the Consolidated Balance Sheets through a right of use asset and a corresponding lease liability. Right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Short-term leases that have an initial term of one year or less are not capitalized. The Company does not presently have any short-term leases. Operating lease right of use assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. In addition to the present value of lease payments, the operating lease right of use asset also includes any lease payments made to the lessor prior to lease commencement less any lease incentives and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required for a smaller reporting company.