What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2024-02-01 · 228 added, 205 removed, 564 unchanged (43% of the section changed)

5 unchanged sentences

Three Months Ended

Six Months Ended

December 24 ,

December 25 ,

December 24 ,

December 25 ,

Nine Months Ended

COSTS AND EXPENSES

2 unchanged sentences

Impairment of long-lived assets and other lease charges

Bad debt expense

Interest expense

Provision for credit losses

Interest (income) expense

Depreciation and amortization expense

1 unchanged sentence

INCOME BEFORE TAXES

Income tax benefit (expense)

Income tax expense

INCOME PER SHARE OF COMMON STOCK - BASIC

6 unchanged sentences

(In thousands , except share amounts)

December 24 ,

CURRENT ASSETS

Cash and cash equivalents

Accounts receivable, less allowance for bad debts of $ 23

Accounts receivable, less allowance for credit losses of $ 33

and $ 58 , respectively

49 unchanged sentences

Balance, December 25, 2022

Stock-based compensation expense

Balance, March 26, 2023

Treasury Stock

3 unchanged sentences

Stock-based compensation expense

Purchase of treasury stock

RSU vested and taxes paid on RSUs

Balance, December 24, 2023

Stock-based compensation expense

Balance, March 24, 2024

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands )

Six Months Ended

December 24 ,

December 25 ,

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Amortization of intangible assets definite-lived

Allowance for bad debts

Provision for credit losses

Deferred income tax

11 unchanged sentences

Payments received on notes receivable

Proceeds from sale of assets

Purchase of intangible assets definite-lived

6 unchanged sentences

Cash used in financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

4 unchanged sentences

RAVE RESTAURANT GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

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

24 unchanged sentences

Fiscal Quarters

The three and six month periods ended December 24, 2023 and December 25, 2022 each contained 13 weeks and 26 weeks, respectively.

The three and nine month periods ended March 24, 2024 and March 26, 2023 each contained 13 weeks and 39 weeks, respectively.

Use of Management Estimates

49 unchanged sentences

Three Months Ended

March 24, 2024

March 26, 2023

Franchise royalties

3 unchanged sentences

Advertising funds contributions

Supplier convention funds

Rental income

Six Months Ended

Nine Months Ended

March 24, 2024

March 26, 2023

Franchise royalties

6 unchanged sentences

Stock-Based Compensation

The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments.

The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on stock-based payments.

The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future.

66 unchanged sentences

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 and six months ended December 24, 2023 and December 25, 2022, the majority of which is

The components of total lease expense for the three and nine months ended March 24, 2024 and March 26, 2023, the majority of which is

included in general and administrative expense in the accompanying Condensed Consolidated Statements of Income, are as follows (in thousands ):

December 25 ,

December 24 ,

December 25 ,

Three Months Ended

Nine Months Ended

March 24, 2024

March 26 , 2023

March 24 , 2024

March 26 , 2023

Operating lease cost

2 unchanged sentences

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

December 25 , 2022

March 26 , 2023

Weighted average remaining lease term

13 unchanged sentences

For the three

and six months ended December 24, 2023, the Company recognized stock-based compensation expense related to stock options of zero

and nine months ended March 24, 2024, the Company recognized stock-based compensation expense related to stock options of zero

and zero , respectively.

For the three six months ended December 25, 2022, the Company recognized stock-based compensation

For the three and nine months ended March 26, 2023, the Company recognized stock-based compensation

expense related to stock options of $ 4 thousand and $ 11 thousand, respectively.

As of December 24, 2023, there was no

As of March 24, 2024, there was no

unamortized stock-based compensation expense related to stock options.

The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options:

Six Months Ended

Nine Months Ended

March 24, 2024

March 26, 2023

Outstanding at beginning of year

3 unchanged sentences

Restricted Stock Units:

For the three and six months ended December 24, 2023, the Company had stock-based compensation expense related to RSUs of $ 3 thousand and $ 82 thousand,

For the three and nine months ended March 24, 2024, the Company had stock-based compensation expense related to RSUs of $ 45 thousand and $ 127 thousand,

respectively.

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

For the three and nine months ended March 26, 2023, the Company had stock-based compensation expense related to RSUs of $ 82

thousand and $ 248 thousand, respectively.

As of December 24, 2023, there was $ 328 thousand unamortized stock-based compensation expense related to RSUs.

As of December 24, 2023 and December 25, 2022, the RSUs will be amortized during the next ten and 34 months, respectively.

A summary of the status

of restricted stock units as of December 24, 2023, and changes during the six months then ended is presented below:

Six Months Ended

December 25 ,

As of March 24, 2024, there was $ 283 thousand unamortized stock-based compensation expense related to RSUs.

As of March 24, 2024, the RSUs will be amortized during the next seven months .

A summary of the status of restricted stock units as of March 24, 2024 and March 26, 2023, and changes during the nine months then ended is presented

Nine Months Ended

March 24, 2024

March 26, 2023

Unvested at beginning of year

Forfeited/Canceled

Unvested at December 24, 2023

Unvested at March 24, 2024

Note E - Earnings per Share (EPS)

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

March 24, 2024

March 26, 2023

March 24, 2024

March 26, 2023

Net income available to common stockholders

5 unchanged sentences

Net income per common share

For the three and six months ended December 24, 2023, exercisable options to purchase 103,086 shares of common stock at exercise prices from $ 3.95 to $ 13.11 were excluded from the computation of diluted EPS because they

For the three and nine months ended March 24, 2024, exercisable options to purchase 103,086 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 24, 2023, zero and 90,625 RSUs were excluded from the computation of

For the three and nine months ended March 24, 2024, 65,625 and 156,250 RSUs were excluded from the computation of

diluted EPS because performance criteria is not probable at period end, respectively.

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

For the three and nine months ended March 26, 2023, 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 25, 2022, zero and zero RSUs were excluded from the computation of

For the three and nine months ended March 26, 2023, zero and zero RSUs were excluded from the computation of

diluted EPS because performance criteria is not probable at period end, respectively.

Note F - Income Taxes

three and six months ended December 24, 2023, the Company recorded an income tax benefit of $ 13 thousand and a tax expense

of $ 119 thousand, respectively.

For the 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 months ended December 24, 2023, the federal tax benefit was $ 23 thousand and the

state tax expense was $ 10 thousand.

For the six months ended December 24, 2023, the federal and state tax expense were $ 85 thousand and $ 34

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

Total income tax expense consists of the following (in thousands):

Three Months Ended

Federal tax expense

State tax expense

Total income tax expense

For the three and nine

months ended March 24, 2024, the Company recorded an income tax expense of $ thousand and $ thousand, respectively.

For the three and nine months ended March 26, 2023, the Company recorded an income tax expense of $ thousand and $

thousand, respectively.

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.

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.

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.

Note G - Segment Reporting

The Company has two

The Company has three

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 and (2) Pie Five Franchising.

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

(3) Corporate administration and other.

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.

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

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Summarized in the following tables are net operating revenues, depreciation and amortization expense, and income before taxes for the

Company’s reportable segments as of the three and six months ended December 24, 2023 and December 25, 2022 (in thousands):

Company’s reportable segments as of the three and nine months ended March 24, 2024 and March 26, 2023 (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

March 24, 2024

March 26, 2023

March 24, 2024

March 26, 2023

Net sales and operating revenues:

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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 25, 2023 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 25, 2023.

Report on Form 10-Q, our Annual Report on Form 10-K for the year ended June 25, 2023, together with our Quarterly Reports on Form 10-Q for the periods ended September 24, and December 24, 2023, 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 25, 2023, as well as our Quarterly Reports on Form 10-Q for the periods

ended September 24, and December 24, 2023.

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 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”), 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”) and ghost kitchens ("Pie Five Ghost Kitchen Units") under the trademarks “Pie Five Pizza Company” or

Units”), express (“Express Units”) restaurants and ghost kitchens ("Pizza Inn Ghost Kitchen Units") under the trademark “Pizza Inn” and franchises fast casual pizza restaurants (“Pie Five Units”) and ghost kitchens ("Pie Five Ghost Kitchen

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 24, 2023, franchised and licensed units consisted of the following:

Three Months Ended December 24, 2023

We facilitate food, equipment and supply distribution to our domestic

and international system of restaurants through agreements with third party distributors.

At March 24, 2024, franchised and licensed units consisted of the following:

Three Months Ended March 24, 2024

(in thousands, except unit data)

1 unchanged sentence

International Franchised

Six Months Ended December 24, 2023

Nine Months Ended March 24, 2024

(in thousands, except unit data)

3 unchanged sentences

The international units were located in seven foreign countries.

Basic net income per share increased $0.02 per share to $0.04 per share for the three months ended December 24, 2023, compared to the comparable period in the prior fiscal year.

The Company had net income of $0.6 million for the three months ended December 24, 2023 compared to net income of $0.3 million in the comparable period in the prior fiscal year, on revenues of $2.8 million for the three months ended December 24,

Basic net income per share increased $0.02 per share to $0.04 per share for the three months ended March 24, 2024, compared to the comparable period in the prior fiscal year.

Company had net income of $0.7 million for the three months ended March 24, 2024 compared to net income of $0.3 million in the comparable period in the prior fiscal year, on revenues of $3.0 million for the three months ended March 24, 2024

compared to $3.0 million in the comparable period in the prior fiscal year.

The decrease in revenue was primarily due to decreases in franchise royalties and supplier and distributor incentives impacted by decreased store count offset by

increased comparable store retail sales.

Basic net income per share increased $0.03 per share to $0.07 per share for the six months ended December 24, 2023, compared to the comparable period in the prior fiscal year.

Company had net income of $0.9 million for the six months ended December 24, 2023 compared to net income of $0.7 million in the comparable period in the prior fiscal year, on revenues of $5.9 million for the six months ended December 24, 2023

The stability in revenue was primarily due to increases in supplier and distributor incentives, offset by a decrease in domestic royalties.

Basic net income per share increased $0.05 per share to $0.11 per share for the nine months ended March 24, 2024, compared to the comparable period in the prior fiscal year.

Company had net income of $1.6 million for the nine months ended March 24, 2024 compared to net income of $1.0 million in the comparable period in the prior fiscal year, on revenues of $8.8 million for the nine months ended March 24, 2024

compared to $8.8 million in the comparable period in the prior fiscal year.

The stability in revenue was primarily due to increases in default and closed store revenues and franchise royalties, offset by a decrease in deferred marketing revenue.

The revenue was consistent primarily due to increases in international default and closed store revenues, offset by a decrease in international royalties.

COVID-19 Pandemic

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EBITDA and Adjusted EBITDA

Adjusted EBITDA for the fiscal quarter ended December 24, 2023 remained relatively stable at $0.6 million compared to the same period of the prior fiscal year.

Adjusted EBITDA remained relatively stable at $1.2 million compared to the same period of the prior fiscal year.

Adjusted EBITDA for the fiscal quarter ended March 24, 2024 increased $0.2 million compared to the same period of the prior fiscal year.

Year-to-date Adjusted EBITDA increased

$0.3 million compared to the same period of 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):

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Three Months Ended

Six Months Ended

Interest expense

Nine Months Ended

March 24, 2024

March 26, 2023

March 24, 2024

March 26, 2023

Interest (income) expense

Depreciation and amortization

2 unchanged sentences

Franchisee default and closed store revenue

Closed and non-operating store costs

Adjusted EBITDA

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

March 24, 2024

Pizza Inn Retail Sales - Total Domestic Units

1 unchanged sentence

(in thousands, except unit data)

Domestic Units

Buffet Units - Franchised

1 unchanged sentence

PIE Units - Licensed

Pizza Inn Ghost Kitchen Units - Franchised

Total Domestic Retail Sales

1 unchanged sentence

Pizza Inn Average Units Open in Period

Domestic Units

Buffet Units - Franchised

1 unchanged sentence

PIE Units - Licensed

Pizza Inn Ghost Kitchen Units - Franchised

Total Domestic Units

Pizza Inn total domestic retail sales increased by $1.9 million, or 8.1%, for the three months ended December 24, 2023 when compared to the same period of the prior year.

to the same fiscal quarter of the prior year, average Buffet Units open in the period increased from 72 to 75.

Comparable store retail sales increased by $1.6 million to $24.4 million for the three month period ended December 24, 2023 as compared

to the same period of the prior fiscal year.

For the three months ended December 24, 2023, the increase in domestic retail sales were primarily the result of the increase in Buffet Units, supplemented by an increase in comparable domestic store

retail sales.

Pizza Inn total domestic retail sales increased by $4.0 million, or 8.3%, for the six months ended December 24, 2023 when compared to the same period of the prior year.

to the same fiscal quarter of the prior year, average Buffet Units open in the period increased from 73 to 77.

Comparable store retail sales increased by $3.2 million to $49.0 million for the six month period ended December 24, 2023 as compared

to the same period of the prior fiscal year.

For the six months ended December 24, 2023, the increase in domestic retail sales were primarily the result of the increase in Buffet Units, supplemented by an increase in comparable domestic store

retail sales.

The following chart summarizes Pizza Inn restaurant activity for the three and six months ended December 24, 2023:

Three Months Ended December 24, 2023

Domestic Units

Pizza Inn total domestic retail sales increased by $0.2 million, or 0.9%, for the three months ended March 24, 2024 when compared to the same period of the prior year.

the same fiscal quarter of the prior year, average Buffet Units open in the period increased from 73 to 77.

Comparable store retail sales decreased by $0.5 million to $24.7 million for the three month period ended March 24, 2024 as compared to

the same period of the prior fiscal year.

For the three months ended March 24, 2024, the increase in domestic retail sales were primarily the result of the increase in Buffet Units, offset by a decrease in comparable domestic store retail sales.

Pizza Inn total domestic retail sales increased by $4.2 million, or 5.7%, for the nine months ended March 24, 2024 when compared to the same period of the prior year.

the same fiscal period of the prior year, average Buffet Units open in the period increased from 73 to 77.

Comparable store retail sales increased by $2.7 million to $73.7 million for the nine month period ended March 24, 2024 as compared to the

same period of the prior fiscal year.

For the nine months ended March 24, 2024, the increase in domestic retail sales were primarily the result of the increase in Buffet Units, supplemented by an increase in comparable domestic store retail

The following chart summarizes Pizza Inn restaurant activity for the three and nine months ended March 24, 2024:

Three Months Ended March 24, 2024

Buffet Units - Franchised

1 unchanged sentence

PIE Units - Licensed

Pizza Inn Ghost Kitchen Units - Franchised

Total Domestic Units

International Units (all types)

Six Months Ended December 24, 2023

Domestic Units

Nine Months Ended March 24, 2024

Buffet Units - Franchised

1 unchanged sentence

PIE Units - Licensed

Pizza Inn Ghost Kitchen Units - Franchised

Total Domestic Units

International Units (all types)

There was a net increase of one and a net decrease of 11 units in the total domestic Pizza Inn unit count during the three and six months ended December 24, 2023, respectively.

There were two and

two transfers in the total domestic Pizza Inn unit count during the three and six months ended December 24, 2023, respectively.

For the three and six months ended December 24, 2023, the number of international Pizza Inn units decreased by four

and 16 units, respectively.

There were zero and zero transfers in the total international Pizza Inn unit count during the three and six months ended December 24, 2023, respectively.

The Company believes the number of both domestic and

international Pizza Inn units will increase modestly in future periods.

There was a net decrease of eight and 19 units in the total domestic Pizza Inn unit count during the three and nine months ended March 24, 2024, respectively.

There were one and four transfers in

the total domestic Pizza Inn unit count during the three and nine months ended March 24, 2024, respectively.

For the three and nine months ended March 24, 2024, the number of international Pizza Inn units increased by three and decreased by 13

units, respectively.

There were zero transfers in the total international Pizza Inn unit count during the three and nine months ended March 24, 2024.

The Company believes the number of both domestic and international Pizza Inn units will increase

modestly in future periods.

Pie Five Brand Summary

1 unchanged sentence

Three Months Ended

Six Months Ended

December 24, 2023

December 25, 2022

December 24, 2023

December 25, 2022

Nine Months Ended

March 24, 2024

(in thousands, except unit data)

1 unchanged sentence

Pie Five Retail Sales - Total Units

Pie Five Units - Franchised

Pie Five Ghost Kitchen Units - Franchised

Total Domestic Retail Sales

1 unchanged sentence

Pie Five Average Units Open in Period

Pie Five Units - Franchised

Pie Five Ghost Kitchen Units - Franchised

Total Domestic Units

Pie Five total domestic retail sales decreased $0.6 million, or 11.4%, for the three months ended December 24, 2023 when compared to the same period of the prior year.

Pie Five total domestic retail sales decreased $1.2 million, or 24.3%, for the three months ended March 24, 2024 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 31 to 24.

Comparable store retail sales remained relatively stable at $4.3 million during the second quarter of fiscal 2024 compared to the same period of

Comparable store retail sales decreased by $0.3 million to $3.8 million during the third quarter of fiscal 2024 compared to the same period of

the prior year.

For the three months ended December 24, 2023, the decrease in domestic retail sales were primarily the result of the decrease in store count, offset by an increase in comparable store retail sales.

For the six months ended

December 24, 2023, the decrease in domestic retail sales were primarily the result of the decrease in store count, offset by a increase in comparable store retail sales.

The following chart summarizes Pie Five restaurant activity for the three and six months ended December 24, 2023:

Three Months Ended December 24, 2023

For the three months ended March 24, 2024, the decrease in domestic retail sales were primarily the result of the decrease in store count, supplemented by a decrease in comparable store retail sales.

For the nine months ended

March 24, 2024, the decrease in domestic retail sales were primarily the result of the decrease in store count, supplemented by a decrease in comparable store retail sales.

The following chart summarizes Pie Five restaurant activity for the three and nine months ended March 24, 2024:

Three Months Ended March 24, 2024

Pie Five Units - Franchised

Pie Five Ghost Kitchen Units - Franchised

Total Domestic Units

Six Months Ended December 24, 2023

Nine Months Ended March 24, 2024

Pie Five Units - Franchised

Pie Five Ghost Kitchen Units - Franchised

Total Domestic Units

There was a net decrease of two and three units in the total domestic Pie Five unit count during the three and six months ended December 24, 2023, respectively.

There was a net decrease of one and four units in the total domestic Pie Five unit count during the three and nine months ended March 24, 2024, respectively.

There was a net

increase of one and one Pie Five Ghost Kitchen Units during the three and six months ended December 24, 2023, respectively.

increase of zero and one Pie Five Ghost Kitchen Units during the three and nine months ended March 24, 2024, respectively.

We believe that Pie Five units will decrease modestly in future periods.

1 unchanged sentence

The Company defines its operating segments as Pizza Inn Franchising and Pie Five Franchising.

The following is additional business segment information for the three and six months

ended December 24, 2023 and December 25, 2022 (in thousands):

Three Months Ended December 24, 2023 and December 25, 2022

The following is additional business segment information for the three and nine

months ended March 24, 2024 and March 26, 2023 (in thousands):

Three Months Ended March 24, 2024 and March 26, 2023

Fiscal Quarter Ended

4 unchanged sentences

Rental income

Interest income and other

Total revenues

2 unchanged sentences

Franchise expenses

Bad debt expense

Provision for credit losses

Interest income

Depreciation and amortization expense

1 unchanged sentence

INCOME/(LOSS) BEFORE TAXES

Six Months Ended December 24, 2023 and December 25, 2022

Nine Months Ended March 24, 2024 and March 26, 2023

Fiscal Year-to-Date

4 unchanged sentences

Rental income

Interest income and other

Total revenues

3 unchanged sentences

Impairment of long-lived assets and other lease charges

Bad debt expense

Interest expense

Provision for credit losses

Interest (income) expense

Depreciation and amortization expense

2 unchanged sentences

Revenues are derived from franchise royalties, franchise fees and supplier and distributor 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 the three month period ended December 24, 2023 and for the same period of the prior fiscal year were $2.8 million and $2.9 million, respectively.

Total revenues for the six month period ended December 24, 2023 and for the same period of the prior fiscal year were $5.9 million and $5.9 million, respectively.

license fees, supplier convention funds, sublease rental income, and interest and other income.

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 24, 2024 and for the same period of the prior fiscal year were $3.0 million and $3.0 million, respectively.

Total revenues for the nine month period ended March 24, 2024 and for the same period of the prior fiscal year were $8.8 million and $8.8 million, respectively.

Pizza Inn Franchise and License

Pizza Inn franchise revenues decreased by $0.1 million to $2.3 million for the three month period ended December 24, 2023 as compared to the same period in the prior fiscal year.

The 3.4% decrease was driven by decreases in supplier incentives, offset by increases in domestic royalties.

Pizza Inn franchise revenues increased by $0.1 million to $4.9 million for the six month period ended December 24, 2023 as compared to

the same period in the prior fiscal year.

The 1.1% increase was driven by increases in domestic royalties and default and closed store revenues.

Pizza Inn franchise revenues remained relatively stable at $2.5 million for the three month period ended March 24, 2024 as compared to the same period in the prior fiscal year.

The 2.0% increase was driven by increases in supplier and distributor incentives, offset by decreases in domestic royalties.

Pizza Inn franchise revenues increased by $0.1 million to $7.4 million for the nine month period ended March 24, 2024 as

compared to the same period in the prior fiscal year.

The 1.4% increase was driven by increases in supplier and distributor incentives.

Pie Five Franchise and License

Pie Five franchise revenues decreased by $0.1 million to $0.4 million for the three month period ended December 24, 2023 as compared to the same period of the prior fiscal year.

The 6.9% decrease was driven by decreases in domestic royalties and advertising fund revenues, offset by increases in default and closed store revenues.

Pie Five franchise revenues decreased by $0.1 million to $0.9 million for the six month

period ended December 24, 2023 as compared to the same period of the prior fiscal year.

The 8.9% decrease was driven by decreases in domestic royalties, advertising fund revenues, and supplier and distributor incentives, offset by increases in

default and closed store revenues.

Pie Five franchise revenues decreased by $0.1 million to $0.4 million for the three month period ended March 24, 2024 as compared to the same period of the prior fiscal year.

5.6% decrease was driven by decreases in domestic royalties and advertising fund revenues, offset by increases in default and closed store revenues and supplier and distributor incentives.

Pie Five franchise revenues decreased by $0.1 million to

$1.3 million for the nine month period ended March 24, 2024 as compared to the same period of the prior fiscal year.

The 7.9% decrease was driven by decreases in domestic royalties and advertising fund revenues, offset by increases in default and

closed store revenues.

General and Administrative Expenses

Total general and administrative expenses decreased by $0.1 million to $1.3 million for the three month period ended December 24, 2023 as compared to the same period of the prior

The 7.7% decrease in total general and administrative expenses during the three month period was primarily the result of decreased corporate expenses.

Total general and administrative expenses decreased by $0.1 million to $2.7

million for the six month period ended December 24, 2023 as compared to the same period of the prior fiscal year.

The 4.9% decrease in total general and administrative expenses during the six month period was primarily the result of decreased

corporate expenses.

Total general and administrative expenses decreased by $0.2 million to $1.3 million for the three month period ended March 24, 2024 as compared to the same period of the prior

The 14.4% decrease in total general and administrative expenses during the three month period was primarily the result of decreased salaries.

Total general and administrative expenses decreased by $0.4 million to $3.9 million for the

nine month period ended March 24, 2024 as compared to the same period of the prior fiscal year.

The 8.2% decrease in total general and administrative expenses during the nine month period was primarily for the same reason.

Franchise Expenses

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Total franchise

expenses decreased by $0.02 million to $0.8 million for the three month period ended December 24, 2023 as compared to the same period of the prior fiscal year.

expenses decreased by $0.2 million to $0.8 million for the three month period ended March 24, 2024 as compared to the same period of the prior fiscal year.

The 15.8% decrease was primarily due to a decrease in advertising fees.

Total franchise

expenses decreased by $0.05 million to $2.0 million for the six month period ended December 24, 2023 as compared to the same period of the prior fiscal year.

expenses decreased by $0.2 million to $2.8 million for the nine month period ended March 24, 2024 as compared to the same period of the prior fiscal year.

The 6.8% decrease was primarily due to a decrease in advertising fees.

Impairment of Long-lived Assets and Other Lease Charges

Impairment of long-lived assets and other lease charges was zero for the three month period ended December 24, 2023 compared to zero for the same period of the prior fiscal year.

Impairment of long-lived assets and other lease charges was zero for the six month period ended December 24, 2023 compared to $5 thousand for the same period of the prior fiscal year.

The decrease was primarily due to impaired beverage equipment

in the prior period.

Bad Debt Expense

Impairment of long-lived assets and other lease charges was zero for the three month period ended March 24, 2024 compared to zero for the same period of the prior fiscal year.

Impairment of long-lived assets and other lease charges was zero for the nine month period ended March 24, 2024 compared to $5 thousand for the same period of the prior fiscal year.

The decrease was primarily due to impaired beverage equipment in

the prior period.

Provision for Credit Losses

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 December 24, 2023, bad debt expense was $10 thousand compared to bad debt expense of $5 thousand for the same period of the prior fiscal year.

Bad debt expense for the six month period ended December 24, 2023, increased by $26

thousand to $35 thousand compared to the same period of the prior fiscal year.

month period ended March 24, 2024, provision for credit losses was $11 thousand compared to provision for credit losses of $28 thousand for the same period of the prior fiscal year.

Provision for credit losses for the nine month period ended

March 24, 2024, increased by $9 thousand to $46 thousand compared to the same period of the prior fiscal year.

Interest Expense

Interest expense was zero for the three month period ended December 24, 2023 compared to the same period of the prior fiscal year.

Interest expense decreased by $1 thousand to

zero for the six month period ended December 24, 2023 compared to the same period of the prior fiscal year.

Interest expense was zero for the three and nine months ended March 24, 2024, compared to the same periods of the prior fiscal year.

Amortization and Depreciation Expense

Amortization and depreciation expense increased slightly for the three and six months ended December 24, 2023, compared to the same periods of the prior year.

Amortization and depreciation expense increased slightly for the three and nine months ended March 24, 2024, compared to the same periods of the prior year.

In both cases, the

increase was primarily the result of higher amortization of intangible assets.

increase was primarily the result of higher amortization of intangible assets from an increase in expenditures for developing a new prototype.

Provision for Income Taxes

For the three and six months ended December 24, 2023, the Company recorded an income tax benefit of $13 thousand and a tax expense of $119 thousand, respectively.

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

The decrease for the three and six months ended as of December 24, 2023 was primarily due

to a decrease in state taxes.

For the three months ended December 24, 2023, the federal tax benefit was $23 thousand and the state tax expense was $10 thousand.

months ended December 24, 2023, the federal and state tax expense were $85 thousand and $34 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.

Total income tax expense consists of the following (in thousands):

Three Months Ended

Nine Months Ended

Federal tax expense

State tax expense

Total income tax expense

For the three and nine months ended March 24, 2024, the Company recorded an income tax expense of $200 thousand and $319 thousand, respectively.

For the three and

nine months ended March 26, 2023, the Company recorded an income tax expense of $115 thousand and $347 thousand, respectively.

The increase for the three months ended as of March 24, 2024 was primarily due to a increase in federal

taxes, driven by higher taxable income.

The decrease for the nine months ended as of March 24, 2024 was primarily due to a decrease in state taxes and a discrete item recorded in the second quarter of fiscal

2024 related to the restricted stock issuances.

For the three and nine months ended March 24, 2024, the Company recorded a tax benefit related to RSUs issued of zero and $149 thousand, respectively.

For the three and nine

months ended March 26, 2023, the Company recorded a tax benefit related to RSUs issued of zero and zero, respectively.

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

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Liquidity and Capital Resources

During the six month period ended December 24, 2023, the Company's primary source of liquidity was proceeds from operating activities.

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 operating activities was $0.3 million for the six month period ended December 24, 2023 compared to cash provided by operating activities

of $0.8 million for the six month period ended December 25, 2022.

The primary driver of decreased operating cash flow during the six month period ended December 24, 2023 was increased collections of accounts receivable related to the employee

retention credit in the prior year.

During the nine month period ended March 24, 2024, the Company's primary source of liquidity was proceeds from operating activities.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes,

stock-based compensation, and changes in working capital.

Cash provided by operating activities was $1.3 million for the nine month period ended March 24, 2024 compared to cash provided by operating

activities of $1.2 million for the nine month period ended March 26, 2023.

The primary driver of increased operating cash flow during the nine month period ended March 24, 2024 was increased net income due to lower employee related expenses.

Cash flows from investing activities reflect net proceeds from the sale of assets and capital expenditures for the purchase of Company assets.

Cash used in investing activities

during the six month period ended December 24, 2023 was nil compared to cash used in investing activities of $0.1 million for the six months ended December 25, 2022.

during the nine month period ended March 24, 2024 was $0.05 million compared to cash used in investing activities of $0.1 million for the nine months ended March 26, 2023.

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

Net cash used in financing activities was $0.3

million for the six month period ended December 24, 2023 compared to net cash used in financing activities of $5.0 million for the six month period ended December 25, 2022.

Net cash used by financing activities for the six months ended December

million for the nine month period ended March 24, 2024 compared to net cash used in financing activities of $5.0 million for the nine month period ended March 26, 2023.

Net cash used by financing activities for the nine months ended March 24,

2024 was primarily attributable to taxes paid on vested RSUs.

Net cash used by financing activities for the six months ended December 25, 2022 was primarily attributable to repurchases of the Company's stock.

Net cash used by financing activities for the nine months ended March 26, 2023 was primarily attributable to repurchases of the Company's stock.

Management believes the cash on hand combined with net cash provided by operations will be sufficient to fund operations for the next 12 months and beyond.

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realized upon ultimate settlement.

As of December 24, 2023 and December 25, 2022, the Company had no uncertain tax positions.

As of March 24, 2024 and March 26, 2023, 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

4 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